Broken Economic Incentives Require New Business Models for Antibiotics, Says CDC Antimicrobial Resistance Working Group Member

February 4, 2014

By Kurt R. Karst –      

In a new paper published by The Petrie-Flom Center for Health Law Policy, BioTechnology, and BioEthics at Harvard Law School, and presented at a February 3, 2014 Health Law Workshop, Kevin Outterson, a Professor of Law at Boston University and member of the U.S. Centers for Disease Control and Prevention’s Antimicrobial Resistance Working Group, says that the current environment in which “antibiotics are mismanaged in a haphazard fashion” has to change, and that “antbiotic delinkage” might be the answer.  In doing so, Prof. Outterson says that recent initiatives to incentivize the development of new antibiotics, such as the Generating Antibiotics Incentives Now Act (“GAIN Act”) and the Limited Population Antibacterial Drug (“LPAD”) pathway, as reflected in the Antibiotic Development to Advance Patient Treatment Act of 2013 (see our previous post here) are inadequate to address the growing problem of antibiotic resistance.  The GAIN Act “fails to focus the incentive exclusively on the highest quality antibiotics and antifungals.  If the GAIN Act triggers a large number of new antibiotic introductions, it might unfortunately lead to greater evolutionary pressures and therefore resistance,” writes Prof. Outterson.

In his 28-page paper titled “New Business Models for Sustainable Antibiotics,” which comes from an October 2013 roundtable meeting on the subject of “Aligning Incentives for Antibiotic Development and Use with Public Health Needs,” Prof. Outterson says that antibiotics are different from other types of products, and therefore, must be viewed and addressed differently.  After describing two overarching paradigms – the “dominant paradigm” under which there is effectively an “arms race between drugs and bugs,” and the “ecological paradigm” under which antibiotic effectiveness is treated “as a precious common pool resource, akin to fisheries or any other exhaustible resource” – Prof. Outterson goes on to explain that because antibiotics are “rivalry” instead of “non-rivalry,” models incorporating the concept of “antibiotic delinkage” need to be further explored and discussed:

Unlike physical goods or land, knowledge can be shared without diminishing the original source.  This characteristic (known as “nonrivalry”) is a key means by which unrestricted knowledge benefits society.  But it is weakened in the case of antibiotics due to resistance.  Each dose potentially diminishes the effectiveness of the next, effectively destroying the usefulness of both the knowledge and the resulting product (rivalry).  The fundamental reworking of patent law theory to account for this fact and to design alternative means to meet the same end are underway, most prominently in the concept of antibiotic delinkage.

Under traditional “linkage,” sales volumes and price determine the return on investment for a drug.  Due to resistance, maximizing sales volumes of antibiotics is not in the interest of global public health.  Delinkage removes the link between the funding of antibiotic R&D and sales volumes.  Under delinkage, companies will be paid for antibiotic R&D and innovation on some other basis. . . .  Delinkage seeks to solve three problems simultaneously: (1) inadequate market incentives for companies to invest in antibiotic R&D; (2) inadequate market incentive to protect these valuable resources from overuse and premature resistance; and (3) inadequate market incentives to ensure global access to life-saving antibiotics.

So, what are the various “antibiotic delinkage” models?  There are many – and nine of which are discussed in the paper, not including some hybrd models: (1) Payer Licenses; (2) Rewarding Antibiotic Development and Responsible Stewardship (RADARS); (3) GlaxoSmithKline’s model under which “drugs are provided at marginal cost to payers (and perhaps lower to consumers at the point of care) with all company profits deriving from a very significant government-funded income stream”; (4) Patent Buy-out Prize Funds; (5) Strategic Antibiotic Reserve (SAR); (6) Antibiotic Health Impact Fund (aHIF); (7) Antibiotic Innovation Funding Mechanism (AIFM); (8) a Drug Discovery Platform for Sourcing Novel Classes of Antibiotics as Public Goods (Public Goods); and (9) “Delinkage Plus” under which “providers and payers are given additional incentives and held responsible for conservation while the drug companies focus on bringing drugs to market under one of the delinkage models discussed above.”  Each model is summarized in tables around the end of the paper.

Because, according to Prof. Outterson, “[d]elinkage requires a clean break from revenues based on sales volumes,” traditional incentives for drug product development are not delinkage.  These include so-called “push incentives” such as tax credits and grants, and so-called “pull incentives” such as patent and non-patent exclusivities, priority review vouchers, and fast-tracking/streamlining clinical trials (see our previous post here).  Nevertheless, “[e]ach of these ideas could be modified to include delinkage,” writes Prof. Outterson.  For example, the LPAD pathway could be modified into an “LPAD Plus” pathway that includes “antibiotic conservation commitments by the company, distribution at marginal cost, and a very significant registration prize paid by the government.”  Of course, changes to the current linkage system in which new antibiotics are developed would be a significant change in direction for the drug industry.  But that shift in thinking and approach is what Prof. Outterson says needs to be further explored and pursued.