David's New Book

Wednesday, July 13, 2011

Europe Strikes Again!

EU member statesImage via Wikipedia

The recent report of fully resistant strains of gonorrhea just adds fuel to the need for incentives to develop new antibiotics.  Once again, Europe takes the lead.  In another report apparently complementary to the previous work commissioned from the London School of Economics (LSE) on antibiotic resistance, the Office of Health Economics (OHE) specifies the kind and size of incentives necessary to stimulate antibiotic discovery and development for Europe.  This analysis was apparently commissioned by GSK and is meant to provide additional considerations for the Council of the European Union which is taksed with making a decision based on the previous conference,  “Innovative Incentives for Effective Antibacterials”.  The conclusions of that conference were adopted by the Council and that body must come up with proposals for stimulating antibiotic research and discovery by the end of this year.  The major proposal from the LSE was to use a combination of push and pull type incentives to stimulate antibiotic research and development.  The push would involve support for R&D – in my view phase III is the most important target here. The pull would involve some sort of guaranteed market or payment system upon approval of an antibiotic that meets specific criteria for being active against key resistant pathogens.

The OHE report attempts to specify the type and to quantify the amount of incentives that might be required.  They target the NPV calculation by noting that, as part of a worldwide market, if Europe could provide an NPV of around 147 million (~$200 million), this would be sufficient.  In their analysis, the look carefully at exclusivity extensions for the antibiotic per se and conclude that this would add little additional value to the product (hence no improvement in NPV).  I presume this is because of the effect of accumulating inflation on the later years of sales. I like this since I have been saying it for years.  They also note that providing a “transferable” patent exclusivity extension or the so-called wild-card extension where in exchange for marketing a needed antibiotic a company like Pfizer could get an additional period of exclusivity for Lipitor, a >$10 billion product. The OHE notes that there is much opposition to such a proposal (to put it mildly!) partly because it inappropriately shifts the cost burden to sick patients needing medication. They seem to favor a guaranteed market paid out over several years.  The problem is that if one were to rely only on such a pull mechanism, the guarantee would have to be on the order of €1-1.5 billion. The other pull mechanism that would work would be to triple the price of such new antibiotics compared to today’s antibiotics.  This would, I guess, be difficult for a number of the EU member states to swallow.

This is where the push comes in.  Here is where this report gets fuzzy.  The OHE discusses a public development project or public private partnership for drug development.  But they state that it would not be appropriate to fund phase III.  This I don’t understand since funding earlier phases removes too little risk and still leaves small companies and academics without a way forward other than the pubic markets and large company partnerships – both of which are rapidly going the way of the Dodo bird. As I have frequently noted, the push must involve funding partially or fully phase III trials.  But – if one does this, the size of the guaranteed market can be reduced substantially since much of the upfront expense will have been removed from the NPV calculation. 

Once again, Europe is very far ahead of us in its thinking on incentives for antibiotics. They realize that such funding is a win-win for everyone including for member states in terms of future savings realized through the ability to adequately treat infections caused by resistant pathogens. What Europe must keep clearly in mind, however, is that there must be a clear regulatory pathway available for the development of antibiotics for indications where they are needed.  Right now, in the US, for pneumonia, that does not exist. We are still awaiting the result of European regulatory deliberations on new guidance for the development of antibiotics.  But without a regulatory path forward, the road is blocked regardless of the incentives offered.

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