Market-entry rewards seen as good option for getting new antibiotics

A system in which drug companies would win sizable government payments for bringing new antibacterial drugs to market may be the best of various possible ways to encourage the development of such products by boosting their profitability, according to a new report from the Transatlantic Task Force on Antimicrobial Resistance (TATFAR).

The report, published yesterday in Clinical Infectious Diseases, looks at six "pull" incentives for promoting the development of new antibacterial drugs in the face of rising antimicrobial resistance worldwide. Pull incentives are those that aim to ensure that a drug, if it reaches the market, will be profitable.

"Push" incentives, in contrast, are those that lower the cost of development. A previous TATFAR report said experts agree that a mixture of push and pull incentives for antimicrobial development is needed.

The new report observes that, for the most part, governments have offered only push incentives so far. The one exception is the US Generating Antibiotic Incentives Now (GAIN) Act, which grants drug companies an extra 5 years of patent protection (exclusivity) for new antibiotics. Five antibiotics have received additional market exclusivity under that law, but none of them has a novel mechanism of action, the report says.

The report was written by five authors from Norway, the European Commission, and the US Department of Health and Human Services. TATFAR, consisting of the United States, European Union, Norway, and Canada, coordinates intergovernmental action an antimicrobial resistance.

Six approaches reviewed

The document reviews six proposed pull incentives: "higher reimbursement," "diagnosis confirmation," "market entry rewards—fully delinked," "market entry rewards—market priced," "tradable exclusivity vouchers," and "options market."

The approach that looks the most promising to the authors is market-entry rewards—market priced, which is a modified version of market-entry rewards—fully delinked. Both of these aim to address the dilemma that "antibiotics are the only class of drugs whose use limits their utility," since use leads to bacterial resistance.

"Since the return on investment for a new antibiotic is currently directly proportional to the volume sold, the market model for antibiotics is not aligned with public health objectives," the report observes. Therefore the "fully delinked" reward system would try to disconnect the revenue generated by a new antibiotic from the volume sold. This would be done by providing a series of payments intended to ensure a predictable return on investment for a product that satisfies public health priorities.

In this model, the government payments would be the main revenue stream for the drug, which would be sold at a predetermined price. But the high cost of this approach would be a major challenge, as it is estimated at $1 billion to $2.5 billion per drug, spread over a number of years, the report says. One possible source of the money would be a tax on generic antibiotics prescribed to outpatients, which would offer the extra advantage of discouraging inappropriate use of the drugs.

The "market priced" variation on the market rewards plan would provide smaller annual government payments, totaling about $500 million per drug, which would supplement the revenue from sales, according to the report.

"The primary advantage of this economic incentive is its low level of secondary disruptive effects, meaning that the market consequences of this incentive are relatively low, particularly when compared to other incentives, like fully delinked market entry rewards or the tradable exclusivity vouchers," the authors said.

Pluses and minuses

The other four reviewed approaches involve varying degrees of complexity and balances of pluses and minuses. For example, the higher reimbursement approach would involve raising the price of drugs to a level commensurate with their public health value. This might have a positive effect on conservation or stewardship, but at the risk of reducing access to the medications for those lacking health insurance, the authors observe.

For another example, in the "diagnosis confirmation" model, antibiotics would be sold at one price when used empirically and at a higher price after confirmation of the diagnosis. In practice, the price would be based on the duration of treatment.

The report says this approach has a few advantages but several disadvantages. It relies on the traditional business model that ties revenues to the amount of a drug sold, and its dependence on diagnostic capabilities and durations "ensures a high degree of complexity in execution and an assumption that an accurate and precise diagnostic is available."

Tradable exclusivity vouchers would be awards granted to drug companies when they gain approval of a novel antibiotic meeting certain criteria. A voucher would allow the owner to extend the exclusivity period of any drug in its portfolio or sell the voucher to another company. Thus a company could use the voucher to extend exclusivity for its most profitable drug.

This model would offer a "powerful incentive," but it would be an inefficient way to promote innovation, the authors wrote. "The incentive to increase antibacterial drug development would be funded by the purchasers of the drug whose monopoly period is extended. This could represent a disproportional level of subsidizing one area of health care at the expense of another."

In conclusion, the report says that many of the approaches discussed would probably have secondary disruptive effects that would affect patient access.

"The balance of promoting and rewarding innovation while ensuring patient access and aligning stewardship and public health objectives is necessary in the design of any successful pull incentive," the authors said. "The incentive that appears able to capture those elements reasonably well while concurrently minimizing secondary disruptive effects is the market entry reward market-priced model."

Ardal C, Rottingen JA, Opalska A, et al. Pull incentives for antibacterial drug development: an analysis by the Trans-Atlantic Task Force on Antimicrobial Resistance. Clin Infect Dis 2017 (published online Jun 7) [Abstract]

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