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We Need Antibiotics. They’re Not Profitable To Make. Who Pays?

Within the slow-brewing crisis of antibiotic resistance—which according to the Centers for Disease Control and Prevention kills 23,000 Americans each year—there are a lot of failures: of health care personnel who prescribe drugs when they should not; of patients who take drugs badly and encourage resistance to develop; of the drugs themselves, which no longer work against bacteria with toughened defenses. But an important and little-discussed part of the problem is that, once resistance undermines the action of some antibiotics, there are few other drugs to resort to.

If you accept that the antibiotic era began with the first uses of penicillin in 1943, then we had about 65 years of easy access to a pipeline of antibiotics that delivered reliable new cures when resistance made older drugs unreliable. And then, fairly suddenly, we didn’t. About 2000, numerous companies withdrew from antibiotic manufacturing, and the number of new antibiotics in development dropped from dozens to three.

declining antibiotic approvals by the FDA, by year. from idsociety.org; original here
declining antibiotic approvals by the FDA, by year. from idsociety.org; original here

That decision not to make antibiotics actually makes sense. Antibiotics are taken for relatively short courses, unlike cancer or heart-disease drugs, and they are sold for relatively low prices, compared for instance to cancer drugs. Moreover, resistance begins to develop as soon as antibiotics are used—unless a new antibiotic is considered so precious that it is instead reserved for the most last-resort cases. (In that case, it stimulates neither resistance nor income.) For all those reasons, not making antibiotics is a rational choice for a private company that answers to shareholders and analysts, even if that choice deprives the wider world of a wider good.

Thus, getting pharma manufacturers back into antibiotic development is considered a crucial step in combatting resistance. The Infectious Diseases Society of America identified it as a key policy issue more than 10 years ago. It’s been the subject of two separate pieces of legislation, the GAIN Act of 2012 and the ADAPT Act of 2013. And just what incentives should be offered to companies to bring them back to the market is a matter of intense debate, captured in this issue brief by the Center for Disease Dynamics, Economics and Policy and this Chatham House analysis by Kevin Outterson of Boston University. Researchers have proposed price hikes, patent extensions, prizes, up-front payments, and a variety of other incentives to persuade companies to make antibiotics again.

The necessity of new drugs and the puzzle of how to get anyone to produce them has now been taken up by the Review on Antimicrobial Resistance, a two-year project commissioned by the British government and headed by Jim O’Neill, an economist and former chairman of Goldman Sachs Asset Management. The project has previously analyzed the global financial impact of resistance and the crucial need for more research investment (my posts about those reports are here and here), and now turns to the problem of the antibiotic pipeline.

For anyone interested in why the antibiotics market has broken down, the report’s analysis provides a great short course. For instance, it pinpoints the mismatch between R&D investment and recouped costs, as in this graphic:

Antibiotic development's slow return on investment. Courtesy the Review on Antimicrobial Resistance; original here.
Antibiotic development’s slow return on investment. Courtesy the Review on Antimicrobial Resistance; original here.

To counter grave multi-drug resistant threats, the report estimates that we need 15 new antibiotics over 10 years, of which four would have to be truly new formulas (two broad-spectrum, or capable of attacking a number of bacteria, and two narrow-spectrum), while the remainder could be incremental improvements on existing formulas. It estimates the effort would require between $16 billion and $37 billion over that decade—huge amounts, but as the report points out, the global market for antibiotics now earns $40 billion every year, while resistance costs just the United States $20 billion per year in excess healthcare costs.

The report recommends those funds—gathered from a mix of governments and companies—be spent in three ways: to support early-stage research with a “global innovation fund”; smooth the past from bench to product with middle-stage research partnerships; and guarantee a market for the drugs that result, by buying them from the companies via substantial up-front payments separate from any earnings the new drugs might produce.

That last proposal, which falls in a category of incentive known as “delinkages,” is bold, and likely to be controversial. The authors write:

Given the difficulty in significantly curtailing use while there is an incentive for drug companies to sell more drugs, and in the face of weak market incentives for private companies to undertake research into areas that society needs but that are not profitable, we believe that a successful intervention must partially or fully ‘de-link’ profit from sales. This means that one or several lump sums would be paid to the developer regardless of how many courses of drugs are sold.

The payments, they predict, could be up to $2 billion at a time.

If that made you suck in your breath, you’re not alone. In a post, antibiotics consultant and former pharma executive Dr. David Shlaes (whose book Antibiotics: The Perfect Storm is an extended analysis of this market failure) applauds the first two measures and dismisses the third as a nonstarter. He writes that no government or nongovernmental body would be willing to take it on :

O’Neill suggests a global buyer provide somewhere in the range of $1-3 billion as an upfront payment for an appropriate new antibiotic.  The global buyer, by such a purchase, would immediately provide a significant return on investment to the company that developed the antibiotic.  The buyer would then distribute the drug according to demand and need and would monitor usage… The obvious problem with this is to try and designate such a global buyer who could actually coordinate distribution and use on a global scale. The only entities I know who come close to this are pharmaceutical companies…  Governments are notoriously useless here to say nothing of WHO or the UN or the EU.

…the report is a good one in terms of the monetary figures proposed. [I]n terms of practical implementation, we seem to still be in Neverland.

Delinkages have received support from other analysts—but the key question, as Shlaes smartly points out, is who would actually write the check. Out of the large economies, the US and UK have shown the most policy interest in antibiotic resistance, and the most willingness to at least begin to combat it. But the UK has just elected a fiscally conservative government, and the US has an all-consuming election season beginning far too soon. It’s worth hoping that significant spending might be undertaken for this crucial public need. But it’s an open question whether it will.

11 thoughts on “We Need Antibiotics. They’re Not Profitable To Make. Who Pays?

  1. Open Source Drug Discovery (OSDD) is a health care programme of the Council of Scientific and Industrial Research (CSIR), Government of India, to fight infectious diseases in the developing world. It was launched on 15 September 2008 as an international consortium with partnership from a number of research institutes, universities, private sectors and scientific organisations in India. It aims to accelerate drug development and provide accessible healthcare system for neglected tropical diseases.[1] Its primary goal is to develop new drugs for tuberculosis and malaria, the two leading infectious diseases. It has about 7,500 registered participants from 130 different countries. Dr Sarala Balachandran is the current project director and scientist at CSIR

  2. This is so needed, and of such a general and widespread benefit, that I do not understand why the Government doesn’t just do it in-house.

  3. Hyper-egg technology uses avian antibodies (from hen eggs) to fight bacterial infections in the gut (enteric disease). One brand has a vet biologic registration for disease prevention in swine, and their current developments are for E.coli and C.Diff in humans. Because it is using natural passive immunity, Hyper-egg products do not contribute to resistance. While the scope is limited to enteric disease, hyper-eggs are better than antibiotics for what they were designed to do.

  4. Defense Advanced Research Projects Agency
    The Pathogen Predators Program of DARPA would represent a significant departure from conventional antibacterial therapies that rely on small molecule antibiotics. While antibiotics have been remarkably effective in the past, their widespread use has led to the emergence of antibiotic-resistant bacterial infections that are difficult or impossible to treat. In vitro studies have shown that predators such as Bdellovibrio bacteriovorus and Micavibrio aeruginosavorus can prey upon more than one hundred different human pathogens and will also prey on multi-drug resistant bacteria.

    The Pathogen Predators program will answer three fundamental questions about bacterial predators:

    1) Are predators toxic to recipient (host) organisms?
    2) Against what pathogens (prey) are predators effective?
    3) Can pathogens develop resistance to predation?

    This list [of bacteria that could be killed by predator bacteria] includes NIAID (National Institute of Allergy and Infectious Diseases) Category A and B threats to national security:

    NIAID Category A and B
    Yersinia pestis (i.e. plague)
    Francisella tularensis (i.e. tularemia)
    Brucella species
    Coxiella burnetii (i.e. Q fever)
    Rickettsia prowazekii (i.e. typhus)
    Burkholderia mallei (i.e. glanders)
    Burkholderia pseudomallei (i.e. melioidosis)

  5. Instead of paying millions upfront to Pharma in order to provide medicines that may or may not work, spend the same amount by funding research universities , hospitals and encourage research wings for organizations that come face to face with the repercussions of drug resistance, like Doctors without Borders pe. Establish medical trial transparency so results from all drug trials whether or not successful can be available for study. That would be a start..

  6. I have had wretched experience with MRSA which consumed my life for 2 years. It was originally contained in my spine (after a disc surgery gone bad) but began spreading to other areas. After 4 operations to scrape the diseased bone on my spine and two pubic bone to navel abdominal surgeries, I weighed about 80 lbs and was hooked constantly to an IV machine. Airlifted to the Mayo Clinic, yada yada. Lost my job, lost my home, the works. Finally (FINALLY) a neurosurgeon highly recommended took a look at things and prescribed a strange drug, an old one for tuberculosis patients, believe it or not. I was cured. He fused my spine and inserted a metal cage, but my back will never be the same, the lower 7 inches is the width of a pencil after so many parings. Still, all in all, I’m grateful to Dr Glenn Minster who took the reins and DID something for me! I say this to affirm my hopes in a solution for all people who have the bad luck to contact MRSA.

  7. Chryssanthi, the problem with that approach is that universities and hospitals are not set up to do drug development. Universities do basic research, i.e. discovering new targets. Teams are small, usually under ten people. The amount of time and money it takes to move a drug from “Hey, this molecule disrupts E. coli cellular membranes” through Phase III testing on five or so thousand patients, including toxicity and long-term observation would take an entire university of workers, not just a research group or even an entire bio department.

  8. An additional concern is the balance being struck by Antibiotic Stewardship committees at health care facilities. They (very rightfully) reserve new drugs for high-risk patients or those with confirmed resistant infections. By limiting the use of the new drugs, they hope to limit generation of new resistant strains. However that further limits the potential sales volume for a new drug.

    Then there’s the burden of conventional clinical trial designs, which don’t balance safety/efficacy data very well for the special case of antibiotic drugs. S. 185 (the PATH Act) hopes to create an alternative clinical trials pathway for antibiotics, but thus far it appears to have little hope of making it out of committee.

    MM: Thanks for reminding me of the PATH Act; I knew there was a piece of legislation that had slipped my mind.

  9. Increasingly I am feeling that antibiotic development needs to move to a model akin to defense contracting. Bids are solicited for the delivery of a particular product which is then controlled by the Pentagon.

    Antibiotics are a particular case that the market is not going to easily find a solution to. As pointed out, any truly novel antibiotics should really be used as sparingly as possible (from a biological perspective anyway). It’s easy to see why commercial entities (eg pharma) don’t find this attractive.

    I think Shlaes too easily dismisses European healthcare systems, which is understandable coming from somebody so deeply embedded in the private American model. I think it is entirely plausible that such a grouping of public European health providers could supply the cash for this fund.

    The real question is whether the US is prepared to be left behind due to rigidly sticking to free market dogma.

    MM: thanks Tim for visiting and for the EU perspective!

  10. Big Pharma males plenty of money, if the government allowed tacx write off for specific slush fund to specifically fund bacterial research they would line up for the chance to make more money money money. On the science side bacteriophages is a developed science because of the Soviet Union and this research could be jump started to make up for the greed of the Pharma companies.

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