The President’s Council of Advisors on Science and
Technology (PCAST) issued a report
last fall. This report recognized the clear threat of antibiotic resistant
infections to the public health of the US and for populations around the world.
The advisors made a large series of recommendations for dealing with the
problem. These included increase in
surveillance capabilities, improved regulatory pathways, improvements in our
ability to carry out clinical trials in seriously ill patients with resistant
infections and solutions for the market failure of antibiotic R&D. The
market failure is related to the fact that the industry does not believe that
they will be able to achieve an appropriate return on investment for their
research and development dollars in new antibiotics for resistant infections. This week, the President released his budget
request for dealing with antibiotic resistance.
In this blog, I want to explore two facets of the PCAST
report and the President’s budget (as far as I understand it). The first is the
industry view that they will never achieve a return on investment for
antibiotics targeting very limited populations – those with highly resistant
infections. This belief is based on two pillars of logic. (1) Antibiotics have traditionally been low
priced commodities within a generally saturated and satisfied market. High
priced drugs in this environment will simply not be used regardless of their
potential utility. (2) The numbers of patients available for treatment with
these antibiotics are so small, that even very high prices ($20,000 per course
of therapy) will not be sufficient to provide the required return on
investment.
First – a disclaimer.
I am not a commercial or marketing expert – but I have spent a lot of
time with these experts and a little of their knowledge has rubbed off. So take
the following with an appropriate grain of salt. In order to come up with their
conclusion (1) above, companies carry out interviews with payers – in this
case, frequently, pharmacy managers.
They are already burdened with high-priced oncology drugs. The physicians in their hospitals are already
dealing with resistant infections with toxic drugs that are less expensive and
that might not work very well – but as pharmacy managers – do they see the
downsides of this practice within their own budgets? I think not. So their natural response to a
$20,000 hypothetical antibiotic is a seizure of panic. Physicians are also
interviewed – but in my view they are notoriously ignorant when it comes to pricing
considerations. In the hospital where I work, the physicians have no idea how
much the antibiotic they are ordering costs.
Furthermore, the byzantine billing system results in charges for an
antibiotic that are completely unrelated to the cost in any case. So why speak
to physicians? Because they influence
formulary decisions in hospitals. So when asked, physicians do pick a price
point at which they think that the antibiotic would not be justified. But, of course, they have no idea whether
that is true or not. They require
education since it has clearly been shown
that for certain resistant infections prices up to $50,000 per course of
therapy can easily be justified. My conclusion for the commercial groups of
companies that reject the idea of high-priced antibiotics is that they should
rethink.
On assumption (2) above, one need only look at a real
commercial expert’s evaluation of a hypothetical antibiotic for resistant
Acinetobacter infections. This analysis
was only for US patients. If I expand it
to the world, assuming conservatively the same percentage of highly resistant
infections, I can easily double the number of patients. Therefore, at only $5,000 per course of
therapy, capturing 50% of the potential market, my peak year sales will be $500
million. At $10,000 per course of
therapy assuming 25% market penetration I maintain that peak year sales figure.
This kind of analysis should be attractive to large and small pharma alike.
I would argue, that if pharmaceutical companies would have
some guts and push these therapies forward at risk, they would be rewarded. But
guts are not to be found in today’s big pharma. Cubist, one of the gutsiest pharmaceutical
companies, has just been gobbled by a less courageous large company, Merck. Will this make things better or worse?
This brings me to Obama’s budget and the PCAST report. President Obama has called for an additional $650
million for both Biomedical
Advanced Research and Development Authority (BARDA) and the NIH. BARDA is the
HHS group that has been funding antibiotic R&D within industry – providing
a so-called push incentive. Here the
idea is to decrease the investment required to get needed antibiotics to market
thereby increasing, by definition, the return.
The PCAST report called for an $800 million increase in the investment in BARDA alone
for both push incentives and for so-called pull incentives. The latter incentive would be some sort of
guaranteed market for the first few years of commercialization of a new
antibiotic for resistant infections.
Again – this is designed to provide an immediate uptick to the company’s
return on investment. The investments championed in the PCAST report would do
the trick. Those in the President’s
budget fall short.
Of course, it doesn’t matter since funding any of this would
require a congress willing to invest in the health of the American public – and
we still don’t have one of those.
No comments:
Post a Comment