S.Harris/NPG
NEWS & ANALYSIS
Momentum builds around new antibiotic business models The Innovative Medicines Initiative’s DRIVE‑AB project joins the fray of task forces working to reinvigorate interest in antibiotics by developing reimbursement models that delink revenue from sales volume. Asher Mullard When Roche and Sanofi recently returned to antibiotic research, infectious-disease experts hoped that the darkest days of disinvestment in the area might be behind them. Months later, however, AstraZeneca, a stalwart in this field, announced that it was considering selling or spinning off its anti-infective unit. While fears of antibiotic resistance continue to rise, the prospects for much needed new medications remain fraught. “It’s the economics of antibiotics that now need to be addressed,” says David Shlaes, an anti-infectives consultant who has worked for Wyeth, Idenix Pharmaceuticals and Novexel. Although scientific and regulatory challenges persist, he says, key advances have been made on these fronts in recent years. But when it comes to economics, drug developers have yet to figure out how to contend with the availability
of cheap generics and with the disincentive to use new agents to keep resistance to a minimum. “At the end of the day, there is no way around the fact that we will have to pay for new antibiotics. We need to get payers in the room, make them sit down and make them commit to what they will and won’t do.” The European Innovative Medicines Initiative (IMI’s) DRIVE‑AB project — which launched this October — could catalyse this conversation, generating and testing new reimbursement models. “We don’t want to just have another lament where everybody says ‘this is a problem, isn’t it a shame, wouldn’t it be great to solve it’,” says Judith Hackett, a project coordinator at DRIVE‑AB and Global Payer Evidence Director at AstraZeneca. Instead, they will engage stakeholders and get buy-ins to adopt a reimbursement model that delinks revenue from drug sales. “We want to involve [stakeholders] upfront and
NATURE REVIEWS | DRUG DISCOVERY
say ‘we’re going to go down this path together’,” she explains. Whereas the IMI typically focuses on European stakeholders, DRIVE‑AB will also reach out to US stakeholders. DRIVE‑AB — which will also look at the responsible use and valuation of antibiotics — will draw on the conclusions and momentum of the task forces that have come before it, including one forthcoming report from the think tank Chatham House and another from The US President’s Council of Advisors on Science and Technology (PCAST). Kevin Outterson, Professor of Health Law at the Boston University School of Law, USA, believes that new models could be in place soon. “No one has ever seen this much political mobilization and public awareness of this issue,” says Outterson, Chair of the Chatham House Working Group and a consultant on DRIVE‑AB. “All of the key stakeholders are talking.” VOLUME 13 | O CTOBER 2014 | 711
© 2014 Macmillan Publishers Limited. All rights reserved
N E W S & A N A LY S I S Mending a broken pipeline Industry has been abandoning antibiotic research and development (R&D) over the past decade largely because it offers a poor and uncertain return, especially when compared with therapeutic areas like oncology, inflammation and diabetes. Although a handful of companies have persevered — including three firms who have received US Food and Drug Administration (FDA) approvals for antibiotics this year (BOX 1) — the pipeline is drying up (FIG. 1). In a report commissioned by the FDA, Outterson and colleagues recently found that governments need to create on average around US$1 billion-worth of incentives per antibiotic to level the field. Outterson and colleagues first chose an expected net present value (eNPV) of around $100 million as a “somewhat arbitrary” but useful go–no-go threshold for a company at the start of preclinical development. They then back-calculated the needed incentives by showing that antibiotics fall far below this threshold, with eNPV at this stage ranging from $37 million for community-acquired bacterial pneumonia to –$4 million for hospital-acquired or ventilator-associated bacterial pneumonia. “My personal opinion is that we need a menu of incentives across the life cycle,” says Outterson. ‘Push’ incentives, like increased US National Institutes of Health basic research funding and tax credits, could offset
some of the costs of R&D. But ‘pull’ incentives are also critical to guarantee a market at the end of the development process. The €9‑million DRIVE‑AB project takes the work on pull mechanisms to the next level. “A lot of the work they will be doing is identifying the right stakeholders, engaging with those stakeholders, understanding what the barriers are for a new economic model and then proposing the most feasible model,” says Angela Wittelsberger, Scientific Officer at the IMI. “I’d like to see true creativity in this,” adds Hackett. “We need to truly examine different possibilities and different analogues in different industries and come up with what will work, as opposed to cobbling together an old solution.” The group will focus in particular on ways to delink revenues from sales volume. “We want you to develop this antibiotic, and then we want it to sit on the shelf, and then we want everybody to be thrilled that it is sitting on the shelf,” she says. In the absence of delinkage, pharmaceutical companies have to push the use of their new pills to achieve profitability, putting them at odds with infectious-disease experts, who emphasize the need to keep use of new agents to a minimum. This conflict translates into uncertainty over revenues for industry, and fuels fears of resistance — and the need to repeat the drug-finding process again and again — for the rest of the community.
Box 1 | The ABSSSI exception The US Food and Drug Administration has approved three new antibiotics for acute bacterial skin and skin-structure infections (ABSSSIs) this year, giving the green light to Durata Therapeutics’ dalbavancin, Cubist’s tedizolid and The Medicines Company’s oritavancin. Although these approvals do not assuage concerns for the coming of a post-antibiotic world — not just because the approved therapies have all been slowly winding their way through the clinic for years — they show how a few companies still hope to turn a profit with the traditional approach of ‘price times volume’. Durata launched its dalbavancin in July. Whereas clinicians currently use low-cost and effective antibiotics like vancomycin to treat ABSSSI in an in‑patient setting, Durata hopes that the long half-life of their drug will enable a new model of care. Because doctors administer dalbavancin just once weekly, they can dose patients once in the emergency room and then again as an outpatient a week later. “There is a subset of ABSSSI patients who today go into the hospital, and the goal of a drug like ours would be to avoid that hospitalization,” says John Shannon, Chief Commercial Officer of Durata. Framed this way, the firm can compare dalbavancin, with a price tag of around US$3,000 for a first dose, against the estimated $8,000 it costs to admit a patient to a hospital, rather than against the few hundred dollars that a course of vancomycin would cost. It’s still not an easy sell. “Hospitals are interested, and they are working on the process and the procedure of how to do this, but we really are changing medical practice and that is going to take some effort and time,” says Shannon. “But if we can get those involved — whether they are hospital administrators or the payers — to understand the value of these products, as opposed to the silo mentality of a pharmacy department that maybe only looks at the cost of the drug, that’s where we can demonstrate the value proposition.” Cubist, whose tedizolid is orally available, and The Medicines Company are targeting the same market. Other antibiotics and bacterial indications may be amenable to the same reimbursement strategy. Durata, for example, is already exploring a similar role for dalbavancin in the treatment of community-acquired pneumonia and osteomyelitis.
712 | O CTOBER 2014 | VOLUME 13
Delinkage can take many forms. A prize fund, for example, could buy out the relevant patents and then distribute the drugs. A report by Outterson for Chatham House notes that “the size of these prizes would have to be very significant, in the range of $500 million to more than $2 billion at first registration of an outstanding drug”. Alternatively, successful firms might sell licences to payers for newly registered drugs in exchange for an upfront lump sum or annual payments. Jorge Mestre‑Ferrandiz, an economist at the Office of Health Economics (OHE) think tank in the UK, and others, have proposed a two-part tariff made up of a guaranteed payment upon approval plus fees to cover the marginal costs of production for each unit that is used. “We would need to think carefully about what kind of unit price you are thinking of, though,” adds Mestre‑Ferrandiz. “If you have a very high price, then you still face the problem of an outbreak that could blow the budget of local providers. But you don’t want the price so low that the medication is basically free to give, because then it will be used all the time.” Mestre‑Ferrandiz and his colleagues at the OHE are crunching numbers to determine potential upfront payments and unit prices. “Delinkage means a lot of different things to different people,” says Outterson. “But you see companies like GlaxoSmithKline and AstraZeneca saying this is a serious idea that they think is the only way to go forward”. Delinkage also has clear advantages over another regularly proposed reimbursement model: the orphan- and oncology-pricing model, where drug developers make up for low sales volumes by charging high prices. Gilead’s sofosbuvir for the treatment of hepatitis C virus infection provides a case study, with a 12-week course of treatment costing around $84,000 in the United States. But, the high-cost model fails to address antibiotic stewardship needs. It would also blow the budget of local healthcare systems if a susceptible-bacteria outbreak strikes. And, Outterson points out, 300,000 children under the age of 5 already die each year from drug-susceptible bacterial infections as a result of a lack of access to approved antibiotics. While the western world frets about a post-antibiotic world, he explains, many people still live in a pre-antibiotic world. High prices for new agents only exacerbate this problem. “This is the reason why raising prices sky-high cannot be a solution for antibiotics,” he says. Mark Woolhouse, an infectious-disease epidemiologist at the University of Edinburgh, UK, cautions against too narrow a focus on www.nature.com/reviews/drugdisc
© 2014 Macmillan Publishers Limited. All rights reserved
N E W S & A N A LY S I S actually talking about is still business as usual; we will continue to rely on [antibiotics] to control microbial infection forever.” Unless we develop complementary therapeutic tools like vaccines and infection-prevention and control technologies, he says, resistance inevitably evolves, forcing the community back to square one. “There has to be a parallel effort to fund R&D into alternatives. That is barely happening at the moment.”
New antibiotic drug approvals
30 25 20 15 10 5 0
1980s
1990s
2000s
Decade
Figure 1 | The number of systemic antibiotic approvals declined steadily from 1980 Reviews Drug Discovery to 2009. Data Nature from J. Law Med.|Ethics 41, 688–696; 2013.
antibiotics as an ultimate solution, however. “There is absolutely no doubt at all that new antibiotics are highly desirable. But, if we think about it in the longer term, what we are
Imminent implementation? DRIVE‑AB has 3 years to thoroughly test proposed delinkage models against various legal, regulatory and payer requirements. Hackett expects, however, that some governments could start implementing their own solutions even before DRIVE‑AB wraps up. In the UK, ex-Goldman Sachs’ economist Jim O’Neill is working, at the behest of the British Prime Minister, to level the economic hurdles to antibiotic development. His initial
NATURE REVIEWS | DRUG DISCOVERY
findings are due next year. Authorities in Sweden and The Netherlands could also move soon, says Hackett. Different governments can even implement different solutions, adds Outterson. If countries can at least all agree to contribute a certain amount of funding — perhaps based on their antimicrobial expenditure — to encourage antibiotic R&D, infection prevention and antibiotic stewardship, then the specifics of any action plans can differ from country to country. “As long as they all follow a general framework, they would be coordinated enough to address the problem globally while allowing each country to adapt to their local laws, the way they pay for drugs, and so on”, he says. “We’re not at any final agreement yet, and it’s hard to know what will happen,” he cautions. “But we have an extraordinary opportunity this next year to make a lot of progress to solving this issue.”
VOLUME 13 | O CTOBER 2014 | 713 © 2014 Macmillan Publishers Limited. All rights reserved
NEWS & ANALYSIS
Momentum builds around new antibiotic business models The Innovative Medicines Initiative’s DRIVE‑AB project joins the fray of task forces working to reinvigorate interest in antibiotics by developing reimbursement models that delink revenue from sales volume. Asher Mullard When Roche and Sanofi recently returned to antibiotic research, infectious-disease experts hoped that the darkest days of disinvestment in the area might be behind them. Months later, however, AstraZeneca, a stalwart in this field, announced that it was considering selling or spinning off its anti-infective unit. While fears of antibiotic resistance continue to rise, the prospects for much needed new medications remain fraught. “It’s the economics of antibiotics that now need to be addressed,” says David Shlaes, an anti-infectives consultant who has worked for Wyeth, Idenix Pharmaceuticals and Novexel. Although scientific and regulatory challenges persist, he says, key advances have been made on these fronts in recent years. But when it comes to economics, drug developers have yet to figure out how to contend with the availability
of cheap generics and with the disincentive to use new agents to keep resistance to a minimum. “At the end of the day, there is no way around the fact that we will have to pay for new antibiotics. We need to get payers in the room, make them sit down and make them commit to what they will and won’t do.” The European Innovative Medicines Initiative (IMI’s) DRIVE‑AB project — which launched this October — could catalyse this conversation, generating and testing new reimbursement models. “We don’t want to just have another lament where everybody says ‘this is a problem, isn’t it a shame, wouldn’t it be great to solve it’,” says Judith Hackett, a project coordinator at DRIVE‑AB and Global Payer Evidence Director at AstraZeneca. Instead, they will engage stakeholders and get buy-ins to adopt a reimbursement model that delinks revenue from drug sales. “We want to involve [stakeholders] upfront and
NATURE REVIEWS | DRUG DISCOVERY
say ‘we’re going to go down this path together’,” she explains. Whereas the IMI typically focuses on European stakeholders, DRIVE‑AB will also reach out to US stakeholders. DRIVE‑AB — which will also look at the responsible use and valuation of antibiotics — will draw on the conclusions and momentum of the task forces that have come before it, including one forthcoming report from the think tank Chatham House and another from The US President’s Council of Advisors on Science and Technology (PCAST). Kevin Outterson, Professor of Health Law at the Boston University School of Law, USA, believes that new models could be in place soon. “No one has ever seen this much political mobilization and public awareness of this issue,” says Outterson, Chair of the Chatham House Working Group and a consultant on DRIVE‑AB. “All of the key stakeholders are talking.” VOLUME 13 | O CTOBER 2014 | 711
© 2014 Macmillan Publishers Limited. All rights reserved
N E W S & A N A LY S I S Mending a broken pipeline Industry has been abandoning antibiotic research and development (R&D) over the past decade largely because it offers a poor and uncertain return, especially when compared with therapeutic areas like oncology, inflammation and diabetes. Although a handful of companies have persevered — including three firms who have received US Food and Drug Administration (FDA) approvals for antibiotics this year (BOX 1) — the pipeline is drying up (FIG. 1). In a report commissioned by the FDA, Outterson and colleagues recently found that governments need to create on average around US$1 billion-worth of incentives per antibiotic to level the field. Outterson and colleagues first chose an expected net present value (eNPV) of around $100 million as a “somewhat arbitrary” but useful go–no-go threshold for a company at the start of preclinical development. They then back-calculated the needed incentives by showing that antibiotics fall far below this threshold, with eNPV at this stage ranging from $37 million for community-acquired bacterial pneumonia to –$4 million for hospital-acquired or ventilator-associated bacterial pneumonia. “My personal opinion is that we need a menu of incentives across the life cycle,” says Outterson. ‘Push’ incentives, like increased US National Institutes of Health basic research funding and tax credits, could offset
some of the costs of R&D. But ‘pull’ incentives are also critical to guarantee a market at the end of the development process. The €9‑million DRIVE‑AB project takes the work on pull mechanisms to the next level. “A lot of the work they will be doing is identifying the right stakeholders, engaging with those stakeholders, understanding what the barriers are for a new economic model and then proposing the most feasible model,” says Angela Wittelsberger, Scientific Officer at the IMI. “I’d like to see true creativity in this,” adds Hackett. “We need to truly examine different possibilities and different analogues in different industries and come up with what will work, as opposed to cobbling together an old solution.” The group will focus in particular on ways to delink revenues from sales volume. “We want you to develop this antibiotic, and then we want it to sit on the shelf, and then we want everybody to be thrilled that it is sitting on the shelf,” she says. In the absence of delinkage, pharmaceutical companies have to push the use of their new pills to achieve profitability, putting them at odds with infectious-disease experts, who emphasize the need to keep use of new agents to a minimum. This conflict translates into uncertainty over revenues for industry, and fuels fears of resistance — and the need to repeat the drug-finding process again and again — for the rest of the community.
Box 1 | The ABSSSI exception The US Food and Drug Administration has approved three new antibiotics for acute bacterial skin and skin-structure infections (ABSSSIs) this year, giving the green light to Durata Therapeutics’ dalbavancin, Cubist’s tedizolid and The Medicines Company’s oritavancin. Although these approvals do not assuage concerns for the coming of a post-antibiotic world — not just because the approved therapies have all been slowly winding their way through the clinic for years — they show how a few companies still hope to turn a profit with the traditional approach of ‘price times volume’. Durata launched its dalbavancin in July. Whereas clinicians currently use low-cost and effective antibiotics like vancomycin to treat ABSSSI in an in‑patient setting, Durata hopes that the long half-life of their drug will enable a new model of care. Because doctors administer dalbavancin just once weekly, they can dose patients once in the emergency room and then again as an outpatient a week later. “There is a subset of ABSSSI patients who today go into the hospital, and the goal of a drug like ours would be to avoid that hospitalization,” says John Shannon, Chief Commercial Officer of Durata. Framed this way, the firm can compare dalbavancin, with a price tag of around US$3,000 for a first dose, against the estimated $8,000 it costs to admit a patient to a hospital, rather than against the few hundred dollars that a course of vancomycin would cost. It’s still not an easy sell. “Hospitals are interested, and they are working on the process and the procedure of how to do this, but we really are changing medical practice and that is going to take some effort and time,” says Shannon. “But if we can get those involved — whether they are hospital administrators or the payers — to understand the value of these products, as opposed to the silo mentality of a pharmacy department that maybe only looks at the cost of the drug, that’s where we can demonstrate the value proposition.” Cubist, whose tedizolid is orally available, and The Medicines Company are targeting the same market. Other antibiotics and bacterial indications may be amenable to the same reimbursement strategy. Durata, for example, is already exploring a similar role for dalbavancin in the treatment of community-acquired pneumonia and osteomyelitis.
712 | O CTOBER 2014 | VOLUME 13
Delinkage can take many forms. A prize fund, for example, could buy out the relevant patents and then distribute the drugs. A report by Outterson for Chatham House notes that “the size of these prizes would have to be very significant, in the range of $500 million to more than $2 billion at first registration of an outstanding drug”. Alternatively, successful firms might sell licences to payers for newly registered drugs in exchange for an upfront lump sum or annual payments. Jorge Mestre‑Ferrandiz, an economist at the Office of Health Economics (OHE) think tank in the UK, and others, have proposed a two-part tariff made up of a guaranteed payment upon approval plus fees to cover the marginal costs of production for each unit that is used. “We would need to think carefully about what kind of unit price you are thinking of, though,” adds Mestre‑Ferrandiz. “If you have a very high price, then you still face the problem of an outbreak that could blow the budget of local providers. But you don’t want the price so low that the medication is basically free to give, because then it will be used all the time.” Mestre‑Ferrandiz and his colleagues at the OHE are crunching numbers to determine potential upfront payments and unit prices. “Delinkage means a lot of different things to different people,” says Outterson. “But you see companies like GlaxoSmithKline and AstraZeneca saying this is a serious idea that they think is the only way to go forward”. Delinkage also has clear advantages over another regularly proposed reimbursement model: the orphan- and oncology-pricing model, where drug developers make up for low sales volumes by charging high prices. Gilead’s sofosbuvir for the treatment of hepatitis C virus infection provides a case study, with a 12-week course of treatment costing around $84,000 in the United States. But, the high-cost model fails to address antibiotic stewardship needs. It would also blow the budget of local healthcare systems if a susceptible-bacteria outbreak strikes. And, Outterson points out, 300,000 children under the age of 5 already die each year from drug-susceptible bacterial infections as a result of a lack of access to approved antibiotics. While the western world frets about a post-antibiotic world, he explains, many people still live in a pre-antibiotic world. High prices for new agents only exacerbate this problem. “This is the reason why raising prices sky-high cannot be a solution for antibiotics,” he says. Mark Woolhouse, an infectious-disease epidemiologist at the University of Edinburgh, UK, cautions against too narrow a focus on www.nature.com/reviews/drugdisc
© 2014 Macmillan Publishers Limited. All rights reserved
N E W S & A N A LY S I S actually talking about is still business as usual; we will continue to rely on [antibiotics] to control microbial infection forever.” Unless we develop complementary therapeutic tools like vaccines and infection-prevention and control technologies, he says, resistance inevitably evolves, forcing the community back to square one. “There has to be a parallel effort to fund R&D into alternatives. That is barely happening at the moment.”
New antibiotic drug approvals
30 25 20 15 10 5 0
1980s
1990s
2000s
Decade
Figure 1 | The number of systemic antibiotic approvals declined steadily from 1980 Reviews Drug Discovery to 2009. Data Nature from J. Law Med.|Ethics 41, 688–696; 2013.
antibiotics as an ultimate solution, however. “There is absolutely no doubt at all that new antibiotics are highly desirable. But, if we think about it in the longer term, what we are
Imminent implementation? DRIVE‑AB has 3 years to thoroughly test proposed delinkage models against various legal, regulatory and payer requirements. Hackett expects, however, that some governments could start implementing their own solutions even before DRIVE‑AB wraps up. In the UK, ex-Goldman Sachs’ economist Jim O’Neill is working, at the behest of the British Prime Minister, to level the economic hurdles to antibiotic development. His initial
NATURE REVIEWS | DRUG DISCOVERY
findings are due next year. Authorities in Sweden and The Netherlands could also move soon, says Hackett. Different governments can even implement different solutions, adds Outterson. If countries can at least all agree to contribute a certain amount of funding — perhaps based on their antimicrobial expenditure — to encourage antibiotic R&D, infection prevention and antibiotic stewardship, then the specifics of any action plans can differ from country to country. “As long as they all follow a general framework, they would be coordinated enough to address the problem globally while allowing each country to adapt to their local laws, the way they pay for drugs, and so on”, he says. “We’re not at any final agreement yet, and it’s hard to know what will happen,” he cautions. “But we have an extraordinary opportunity this next year to make a lot of progress to solving this issue.”
VOLUME 13 | O CTOBER 2014 | 713 © 2014 Macmillan Publishers Limited. All rights reserved
