We will continue our discussion of the Pasteur Act as proposed by Senators Bennet and Young. Today I discuss the bill with two biotech CEOs, Chris Burns of Venatorx and Evan Loh of Paratek. Venatorx has a new antibiotic in phase 3 trials and Paratek won approval of their Nuzyra in 2018. Both expressed their appreciation to the Senators for bringing Pasteur forward.
To remind you, a summary of the bill is here and the full bill (as it stands) is here. As I noted in the last blog, the Pasteur Act proposes a subscription plan not dissimilar to what is being implemented in the UK and Sweden. The plan will purchase a specified number of doses (or the rights to such) at some price over a multi-year period. The total commitment proposed over up to 10 years is not less than $750 million and not more than $3 billion! The proposal only covers federally funded programs such as Medicare, Medicaid, VA, etc. There is a statement that encourages HHS to encourage participation by private payers . . .The bill is planned to assure sponsors that they will have guaranteed income in the absence of marketing – a delinkage between sales volume and revenues.
Everyone agrees with Chris Burns that waiting for market forces to increase investment and antibiotic R&D is futile. Both CEOs agreed (as do I) that Pasteur does not provide enough specifics for industry to judge how it will affect commercialization of their new antibiotics. They both offered a number of key questions and concerns.
Pasteur does not address the need for hospitals to place the new drugs on formulary and to stock at least a small number of doses. Recognizing that the majority of US hospitals are under 200 beds and that these hospitals are often in dire financial straits, the payment required to stock drug may be too much of a burden. (The same would be true for the DISARM Act by the way).
Chris Burns noted that since the entire subscription contract is with the sponsor, the list of pharmaceutical middlemen with their various price mark-ups is not affected. Evan Loh noted that in DISARM, by contrast, pricing is defined by the drug’s Average Sale Price or ASP.
Chris Burns is looking for more clarity as to whether the subscription is for an actual number of courses of therapy (per year or per award period) or is more for a guarantee that the drug will be commercially and federally available in the distribution chain. He believes it is the latter. In that case, he accepts that if the government makes the annual subscription payments, it wants a “credit” back when it effectively pays a second time through normal distribution (e.g. through Medicare or Medicaid reimbursement).
He also pointed out that DISARM might work better IF one can achieve reasonable peak year sales because of the proposed reimbursement. He also notes that DISARM will work better (obviously) for those sponsors whose products might not qualify for the Pasteur subscription based on the proposed committee or panel to make these choices. Evan Loh suggested that this committee plan was, in fact, too opaque and would prefer that all QIDP products approved over the last five years be offered such a subscription automatically. I agree with both CEOs that the panel who makes this decision as to which products are deserving is too vague and will not encourage investors. We need a much more transparent process such as designating top CDC and/or WHO priorities that are already well defined as criteria which might obviate the need for a panel. FDA could make this determination.
Evan Loh, as one might guess, strongly prefers DISARM. His company has carried out interviews with key pharmacists who suggest that a promise of reimbursement would lead to a clear increase in positive formulary decisions for Nuzyra.
Evan views Pasteur as complementary to DISARM depending on eligibility and process. The bill proposes transition measures that might be attractive but more clarity required. For example, according to Evan, Pasteur should provide for a transition contract for all recent QIDPs in the range of $250 million. This will immediately help save small biotechs from bankruptcy at the moment of commercialization. Evan suggests excluding big pharma (that we would need to define) from these transition grants. He further suggests that there be a post-acceptance review at some point such as is proposed in DISARM. Above all, Pasteur must avoid the creation of impossible hurdles. It is clear to both CEOs that investors still lack confidence and it is not clear to them that either of these Acts, should they become law, will provide that confidence until data shows that they can provide for successful commercialization of needed new antibiotics.
I asked both CEOs about alternatives to DISARM and Pasteur. Both agreed that contracts for addition to the US strategic stockpile would be viable IF there were enough funds to make a large purchase comparable to the sums anticipated by Pasteur – something that does not appear to be the case currently.
I specifically proposed a Hybrid Market Entry Award of ~$2 billion provided over the first five years post approval of a new antibiotic addressing CDC’s high priority pathogens. In this case the sponsor would be limited to charging a low (to be defined) price during those first five years. After that period, the sponsor would be allowed to gradually increase the price over the life of exclusivity of the product. The idea would be to provide a motivation for generic manufacturers to enter the marketplace after the end of branded exclusivity. Chris Burns thought that this would work much better than Pasteur, but noted that it is much less politically palatable. Evan Loh was skeptical that a sponsor would be able to increase prices enough to achieve the stated goal.
Evan suggested a small, initial government investment that would be enough to get the sponsor to profitability after 2-3 years. At that point the government could charge the sponsor a royalty such that the originating fund could become evergreen. Personally, I am skeptical that this would work in the absence of many more patients with resistant infections.
Conclusions: There are too many questions around key aspects of Pasteur for industry to have confidence that it would work as intended according to both the CEOs I interviewed. However, both CEOs look forward to more development of the concept.
I am grateful to both Evan Loh and Chris Burns for spending the time with me to help clarify industry concerns around recently proposed government aid for the suffering antibiotic R&D community.