David's New Book

Monday, February 29, 2016

What if . . . ?

First, I need to apologize to my readers.  I took almost the entire month of February off to escape the New England winter – hence the lag in blogs. I promise to make it up to you in the next few weeks.

There have been a number of developments in clinical trial design issues and, at the same time there is a continuing failure to develop novel trial designs as well.  I’ll discuss this in my next blog.

Today, I want to speculate on incentives for antibiotic research and development. As I have mentioned, I recently joined the Drive AB effort to help design effective incentives.  The Drive AB effort is very well described on their website. The purpose of the Drive AB effort as they clearly state is to “develop new economic models to incentivise antibiotic discovery and development activities while safeguarding the efficacy of antibiotics by researching and advocating their appropriate use.” On the surface, this sounds simple – but as most of us know – achieving this will be incredibly challenging.

As I have been thinking about incentives, a single question keeps popping into my thoughts. Who, exactly, are we incentivizing? I think the incentives required will differ depending on the answer to this question. The Drive AB private partners are large pharma companies.  The first stakeholder meeting of Drive AB focused on European small to medium sized enterprises. (My view is that these companies and investors are far less numerous and experienced than those found in the US, by the way).  But the concerns of large pharma are entirely different than those of small pharma. Lets try and dissect this out a little.

Large pharmaceutical companies are mostly worried about a return on their investment in antibiotic R&D. Because of the high risk of such research, high margins are required for any successful products to provide a reasonable return.  In today’s markets, these high margins have been impossible to achieve with antibiotics – which partially explains the abandonment of the area by most large companies.  For these companies, a large incentive that provides for a rapid return such as the incentives discussed in the O’Neill report is best.  So called “push” incentives where upfront costs are defrayed by funding for research and development are also helpful since this ultimately reduces the amount of money required during sales in the marketplace in order to provide a return.

The situation for small companies may be somewhat different.  Here, push incentives are probably even more important as this reduces the amount of money that must be raised from investors (like VCs). Other advantages like tax breaks will also be more important for the small company than the large one. But, when it comes to marketing, we come to another fork in the road. Some small companies like Theravance, The Medicines Company and Allergan are willing to or even prefer marketing the antibiotics themselves. For them, more push and somewhat less pull (post-market) incentives would probably work well. Other small companies are funded by investors, especially VCs, who strongly prefer an acquisition as an exit.  While this can occur via a small company like The Medicines Company, VC investors more often target large pharma companies.  This then takes us back to incentives for large pharma and to the following question.

If a large incentive paid at the time of approval were to be made available for new antibiotics active against resistant pathogens, particularly on the large pharma side, what would be the result?

1.     Would Astra-Zeneca re-start their antibiotic discovery effort?  Would they be less likely to jettison their antibiotic development and sales group?
2.     Would the commercial and development group at Novartis be more welcoming to new antibiotics?
3.     Would companies on the edge like Pfizer and J&J jump at the opportunity to re-engage in antibiotic R&D?
4.     Would companies who abandoned antibiotic R&D over a decade ago like Lilly, BMS, Bayer, Abbott etc. be convinced to get back in the game?

I would like to get answers to these questions before we go ahead and design proposed incentives. What about you?