As we’ve discussed previously, Europe should have an easier
time funding new business models for antibiotics. They already have the structures in place,
given their socialized system, to provide insurance payments or market entry
rewards (for background – see this blog).
But here in the US – the only model we know is – pay a high price.
There are a number of problems with this US price-based
model. First, it is not at all clear that it will work for antibiotics. The test
currently being carried out by Allergan has not yet been an overwhelming
success. I would like to explore various ways that we in the US could approach
new business models for antibiotics and how we could fund such approaches.
First, though, perhaps we could dispense with ideas that
won’t work. The first of those is an
extension of patent exclusivity on the new antibiotic. This has already been accomplished with the GAIN
Act. OK – if there are only a few years left on its patent life, such an
extension might be of interest. But
otherwise, the out years are so heavily discounted for inflation as to be
meaningless. This explains the lack of success of the GAIN Act in terms of
financial incentives are concerned.
The most clear-cut model to me is to simply provide a large
government purchase of the new antibiotic, a market entry reward or payments
along the lines of the insurance model.
All of these could be implemented by a targeted increase in budget for
BARDA. The big question is – how would we pay for this. The funds would come
from tax revenues. To avoid increasing
the deficit, we could tax high-earners and corporations just a little
more. We’re talking about several
billion dollars in additional monies per year – not so much given the size of
the US budget ($3.9 trillion in 2015).
This would be the most progressive approach and will probably be shunned
by our current and near-future government.
If we tied the new money for antibiotic market entry rewards to allowing
Medicare to negotiate drug prices for seniors, the savings would more than pay
for new antibiotics. Again – this is
unlikely to see the light of day in congress.
Another approach is to tax pharmaceuticals per se. Its
regressive since it would be like a sales tax.
Even if we just charged corporations this tax based on their sales, it
would be a pass-through to the consumer. The US pharmaceutical market in the US
in 2015 was $425 Billion. To get $4
billion per year to fund new antibiotics via a market entry reward, we could
charge a 1% tax on every prescription sold. To make it more fair, we could add
nutritional supplements to the list of taxed items. That would add an
additional $37 billion to the total making our requirement less than 1% in tax.
My personal favorite would be to pay for the entire expense
of a market entry reward or bulk purchase via a tax on only nutritional supplements.
This would mean an 11% tax on these items. These products do not have to go
through a testing phase like drugs and they can only be pursued for safety
concerns if there is evidence that something bad has already happened. They
probably don’t really work, they may be mislabeled and they may contain
poison. Lets tax them and bring down
their use while funding new antibiotics at the same time! What could be wrong with that? What are the
odds?
The approach that is being discussed currently is that of so
called patent vouchers. We used to call
this wild card patent exclusivity. A somewhat similar incentive is used today
to incentivize industry to study drugs in pediatric patients and the incentive
has been shown to work. No surprise
here. The way this works is – if you
study a drug in pediatrics and get an approval for a clinical indication for
your drug in pediatric patients, you get a voucher good for a priority review
of the new drug of your choice. This can
accelerate the time to market for that new drug and could be worth billions of
dollars. In the patent voucher, upon
approval of your new antibiotic active against key resistant pathogens, you
receive a voucher for an additional 6 months exclusivity on another drug in
your portfolio of your choice. Your new
antibiotic might sell say $20 million in its first year, but an extra six
months on your $4 billion blockbuster before it goes generic is worth $2
billion. Not bad. When we raised this
back in 2004-5, it was dead on arrival in congress. The generics industry hated it, consumers
hated it and congress hated it. Have
things changed? I’m not so sure. 
Its time, however, for us to take our heads out of the sand
and do something concrete to prevent the antibiotic crisis that will surely
catch up to us if we continue our current course of dithering. 
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