David's New Book

Thursday, December 31, 2009

Hope and skepticism for 2010.

I have been reviewing recent efforts in Europe to deal with the antibiotic conundrum. I am astonished that Europe is so far ahead of the US in their thinking and that the European effort is being led by Sweden, which has some of the lowest antibiotic resistance rates in the world. Having lived there several years, I find Europe amazing. because it is such a huge bureaucracy of such disparate cultures, languages and even alphabets. It is hard for me to imagine that such an organization can function.

It is clear that Europe recognizes that there is an ongoing need for new antibiotics active against key resistant pathogens. They estimated that 25,000 European patients died from an infection caused by such organisms and that these infections led to 2.5 million additional hospital days and additional in hospital costs of 900 million Euro ($13.5 million) per year. Overall, the additional costs to society of these infections was estimated at 1.5 billion Euro ($2.25 billion) per year. In their report, it was clearly stated that these figures almost certainly represent an underestimate since all costs, such as those attributed to intensive care for example, could not be taken into account in their model.

The various reports also examined the numbers of antibiotics in various stages of development. Suffice it so say that there are precious few, especially when looking at those active against resistant gram negative pathogens.

In proposing various solutions, the European reports examined the approach of the EMEA to antibiotics. Here, there could have been a great deal more detailed analysis and thinking in proposing ways forward. The EMEA is currently considering new guidance on developing antibiotics, and from my view, it is more of the same.

But perhaps the most important contribution to European (and global) thinking came from Policies and incentives for promoting innovation in antibiotic research, commissioned by the Swedish Government and written by Professor Elias Mossialos and his co-workers at the London School of Economics and Political Science. Their basic suggestion is to use a combined “push-pull” mechanism. In one embodiment of such an incentive, Europe would essentially take on some proportion of the development costs for a compound thus reducing or eliminating the risk for the company depending on the amount provided. This, in their model, is equivalent to purchasing an option to buy quantities of the antibiotic should it be approved by an appropriate regulatory body and should it meet preset criteria such as activity against resistant pathogens (which would in turn require more precise definition). This would be the “push” part of the mechanism. If the antibiotic were to be approved, Europe would then be obligated to purchase a set amount, I presume in terms of courses of therapy, at some set price. This would be the “pull” portion. The attractiveness of this model to industry would largely depend on the size of the “pull.”

Many companies use a calculation of the presumed Net Present Value (NPV) of a product to decide whether or not it is worth pursuing. It is because of this calculation that many companies have abandoned antibiotics since the ultimate sales do not provide much value above and beyond the costs of development. In the calculation of NPV for a product, upfront expenses like those for late stage clinical development and the early marketing expense for launching the product count heavily. At the same time, later earnings are discounted for inflation. So companies are always looking for products that provide for high, early sales – “a steep revenue curve.” The European approach is attractive when viewed this way. The “option” on the product will relieve a portion (hopefully a large portion) of the upfront expenses for late stage clinical development. The “pull” would bolster the early portion of the sales curve. Thus the push-pull approach, if both components were large enough, would have a substantial effect on the overall NPV for the product.

The European Council has now recommended that the European Commission implement these or similar proposals to ensure a pipeline of new antibiotics. They gave them a time frame of two years(!!). I am both skeptical and hopeful at the same time.