Pharmaceuticals Public Policy

How much money should governments spend to incentivize the development of new antibiotics?

As the number of infections that are anti-biotic resistant grows, we need to have more novel antibiotics in our arsenal. The problem is that many antibiotics are not commercially viable. For instance, if a new antibiotic is marginally better than the existing one, few payers will be willing to cover this cost. However, if new bacteria become resistant to the standard of care antibiotic, then the novel antibiotic would be highly valued. In short, antibiotics have a very high option value.

There have been a number of approaches to try to incentivize new R&D on antibiotics, including various prizes and subscription models.

The most prominent examples of antibacterial subscriptions are the pilot program created in 2019 by the National Health Service England (the UK pilot)14,15 and the Pioneering Antibiotic Subscriptions to End Upsurging Resistance (PASTEUR) Act, which was reintroduced in 2021 in the US Congress.16 In a subscription, the company is paid an annual subscription amount and agrees to provide as much of the antibacterial as is needed by the subscriber at no additional cost. As with earlier proposals to offer prizes for successful antibacterial R&D,17–20 one key question is the appropriate size of the pull incentive

A key question is how large these incentives should be. Some previous literature have proposed the following amounts:

  • Department of Health and Human Services. Push and pull incentives should be $919m (2012 USD) for a single indication. (Sertkaya et al. 2014)
  • Review on Antimicrobial Resistance (AMR Review): Market entry rewards should be $800m to $1.3 billion USD, plus an additional $400m per year in research grants. (O’Neill 2016)
  • German Federal Ministry of Health’s Global Union for Antibiotics Research and Development report. $1 billion global launch reward–similar to a market entry award–plus $400 million in push incentives per year. Half of the $400m would go to preclinical research and the other half to clinical research. (Bundesministerium für Gesundheit 2011)
  • DRIVE-AB. The acronym stands for “Driving reinvestment in research and development for antibiotics and advocating their responsible use”; DRIVE-AB was a consortium of academics and industry experts. It was funded by the European Commission’s Innovative Medicines Initiative. DRIVE-AB recommended a $1 billion global market entry reward (pull), plus $800m in research funding (push) and ideally peak year sales of >$1 billion would lead to 18 new antibacterial medications over 3 decades. (Årdal et al. 2018; Okhravi et al. 2018)
  • World Health Organization (WHO) report. This report largely averages the estimates from previous reports. (Breyer et al. 2020; WHO 2020)

A paper by Outterson (2021) in Health Affairs published today aimed to update these estimates. He creates a net present value (NPV) calculation which depends on development cost (i.e., cost, duration and probability of success for any phase in the drug development process); revenues and expenses after antimicrobial approval; and the discount rate. The authors models different approaches to reach the NPV: based on global peak year sales (GPYS); based on a market entry reward paid in one year (MER1); based on subscription paid over ten years (SUB10); of based on the acquisition of a Phase II-ready asset (AQ). Using these approaches, Outterson finds that:

The partially delinked market entry reward required for an asset acquired at the initiation of Phase II was $1.6 billion (best estimate), with the upper and lower-bound estimates being $2.6 billion and $900 million, respectively (MER1 + ACQ). For a fully delinked subscription, the results are $3.1 billion (best estimate), with the upper and lower bounds being $4.8 billion and $2.2 billion, respectively.

The level of global peak year sales (GPYS) required for profitable antibiotic R&D is $1.9 billion (range: $1.6–$3.8 billion), which is a significantly higher sales amount than that achieved by any recent antibacterial. Only two antibacterials launched since 2000 have achieved $1 billion in peak sales: linezolid (Zyvox), with $1.353 billion in 2015 (launched in April 2000), and daptomycin (Cubicin), with $1.312 billion in 2016 (launched in November 2003)…

The partially delinked global market entry reward required (MER1) is $2.2 billion (best estimate), with lower- and upper-bound estimates of $1.5 billion and $4.8 billion, respectively…

The fully delinked global subscription required over the course of ten years (SUB10) is $4.2 billion (best estimate), with lower- and upper-bound estimates of $3.3 billion and $8.9 billion, respectively

The authors find that subscriptions are more expensive because (i) subscriptions are delinked from actual volumes and thus manufacturers must make the drugs without potentially any compensation (beyond the subscription); and (ii) payments are pushed into the future and thus additional funds must be found to compensate for the reduced time-cost of revenues received in the future. They also find that push incentives alone are typically insufficient to bring new antimicrobials to market.

The article is interesting throughout and do read the whole article here.

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