The puzzle of antibiotic innovation

Cross-posted from Health Affairs Blog

Dame Sally Davies, the Chief Medical Officer of England, warns that we are approaching an antibiotic apocalypse. A former chief economist at Goldman Sachs estimates that unless dramatic action is taken now, antimicrobial resistance could kill 50 million people a year and cause $100 trillion in cumulative economic damages. In the US, dire warnings have issued from the CDC, the President’s Council of Advisors on Science and Technology, and the President himself through an Executive Order on Combating Antibiotic-Resistant Bacteria in September 2014 (summary here). The President’s new budget asks for $1.2 billion to be spent on antibiotic resistance.

But last week, the science press breathlessly celebrated the discovery of a new antibiotic, teixobactin, cultured from soil samples collected in a grassy field in Maine (the study was published in Nature). Crisis over?

Not so fast. Teixobactin has only been studied in mouse models, not humans. The point estimate failure rate for antibiotics from early discovery stage to actual drug approval for humans is 97% (only 3% survive) (see the ERG Study for the US Government, page 3-9). After approval, most antibiotics fail in the marketplace for commercial and safety reasons; antibiotics suffer market withdrawals at triple the rate of all other drugs (JLME).

The Price-Volume Model

But let’s assume that teixobactin makes it through 5-10 years of clinical trials and is approved by the FDA with great fanfare. Hundreds of millions will have been invested in these clinical trials. How will the company see a profit on their investment? A recent study conducted by the Eastern Research Group for the US Government suggests the company will lose money, even on a “successful” antibiotic.

Under the existing “price-volume” model, drug companies make money by selling drugs, either with high prices, high volumes, or both. The October 2014 Health Affairs issue on specialty drugs highlighted many examples, including the new drugs for Hepatitis C.

For antibiotics, the price-volume model is broken. For excellent clinical reasons, new antibiotics are adopted very slowly. Hospital stewardship programs rightly control the use of new drugs to delay resistance. This is good news for patients, but terrible news for the companies trying to sell an innovative new antibiotic. Imagine if the new iPhone 6 could not be sold until all of the existing iPhone models were completely exhausted first.

Due to the threat of resistance, antibiotic innovation cannot be based on high volume of sales. As Scott Podolsky notes in his new book The Antibiotic Era, the US overmarketed antibiotics in the 1950s and 1960s, leading to the crisis today.

Looking Beyond High Prices

High prices are also not a likely solution, as antibiotics are more substitutable than many drug classes and many generic antibiotics remain effective competitors. Higher prices would also give companies an incentive to overmarket, while worsening access to these drugs for millions of patients around the world who need effective antibiotics. For all the concern about future deaths from resistance, it is clear that more people die today from susceptible bacterial infections than resistant ones, meaning that improving access will save more lives.

In an article published in this month’s Innovation issue of Health Affairs, my colleagues and I lay out alternatives to the price-volume model for antibiotic innovation. Fixing the business model is urgent if we want antibiotics to make it out of the lab and into the patients who need them.


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