David's New Book

Thursday, December 13, 2018

Why is this so hard?

The budget (FY 2017) for the Center for Medicare and Medicaid Services (CMS) was $1 trillion – with a T. In this budget, we pay top price for drugs including $100,00 cancer drugs. CMS would also pay for expensive antibiotics if hospitals would only stock them so they would be available to their physicians and patients. If this is true, why is it so hard to come up with a $2 billion dollar investment as a pull incentive to encourage antibiotic R&D? I don’t get it. 

Of course I see some minor issues here.  An incentive that is given as part of a contract with a pharmaceutical company might seem like a price negotiation – and that is forbidden by law (why???) at CMS. But FDA Commissioner Scott Gottlieb has proposed that CMS simply buy, upfront, a large supply of a new antibiotic fulfilling CDC’s priorities thus guaranteeing a market for any company succeeding in getting such a drug approved. This would work and seems within CMS’s authority.  Would they even need additional budget to cover this given their already existing budget figure? What is stopping this from happening?  I see no evidence of follow-up by CMS.

Other pull incentives would almost certainly require legislation. My current understanding is that the REVAMP bill proposing a transferable exclusivity voucher (conveyance) will not progress because of bipartisan agreement that exclusivity should not be commoditized. This is unfortunate since this would have been a valuable approach – although the bill would have required significant revision to put in place a few guardrails such that we were not spending many billions unnecessarily. 

A simple market entry award providing a payment of up to $2 billion over several years as part of a contractual arrangement with a company achieving approval of a priority antibiotic would work.  In one version of this model, the price the company could charge for the antibiotic would be capped throughout its marketed life.  In a second version (hybrid model) the price cap would be gradually lifted to provide incentive for the company to continue to be active in supporting the new antibiotic but also to encourage the entry of generics at the end of exclusivity for the new drug. I prefer the hybrid model here.  Again, these would require legislation with the HHS being the recipient of the funding. 

Since antibiotic sales are global, the cost of these pull incentives could be offset by similar incentives implemented by other countries. In any legislation or policy the secretary of HHS could be required to track such incentives offered around the world and use those to offset the US contribution.  So we’re talking about figure that will certainly be less than $2 billion per new and desperately needed antibiotic. In FY 2017 the US federal government spent almost $4 trillion (with a T). Discretionary spending was about $1.1 trillion.  So – again – why is this so hard?




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