What does an antibiotic cost to develop? What is it worth? How to afford it?

Dear All (long, wonkish note alert!):

Today we have a 3-part discussion of cost and value with this summary 3-part message: Developing antibiotics is expensive, Not having antibiotics is even more expensive, and We have to solve this!

First, what does it cost to bring a new antibiotic to market? To start us off, we have this paper that just appeared in JAMA (link): Wouters OJ, McKee M, Luyten J. Estimated Research and Development Investment Needed to Bring a New Medicine to Market, 2009-2018. JAMA. 2020;323(9):844-53.

In brief, Wouters et al. analyzed public data on R&D spend for new drugs (including biologics) approved by FDA between 2009 and 2018. They were able to obtain complete data on 63 of 355 agents approved during that time and report that the median and mean capitalized R&D cost to bring a drug to market were $985m and $1336m, respectively. For the 5 new antibiotics included in this analysis (eravacycline, oritavancin, fidaxomicin, omadacycline, and ceftolozane-tazobactam), the median and mean costs were $1260m and $1297m.

And, that’s just to get to approval! As we discussed at the 3 Sep 2019 ASM-ESCMID Bootcamp on post-approval economics (link to a newsletter providing an annotated tour of these presentations), you then need something in the range of another $250-$500m over the first 5 years on market to (i) address post-approval commitments and (ii) maintain a supply chain.

Putting it all together, the ~$1.3b to get to approval plus the ~$0.4b post-approval ($1.7b in total) is the break-even cost for the program from Phase 1 to 5 years post-approval (and I’m glossing over issues of time value of money). And, let me emphasize that this cost doesn’t include any additional studies: further work to generate data in other high medical need indications (e.g., nosocomial pneumonia) would be yet additional cost.

If you now look at typical sales for recently approved antibiotics (link to a newsletter analyzing Alan Carr’s Jan 2020 market review), average annual sales are < $50m. There is simply no way to dig out of a $1.7b hole with revenue of $50m/year. The availability of non-dilutive public funding (e.g., push funding from CARB-X, BARDA, Novo REPAIR, etc.) could help shrink the hole, but the math is still challenging.

Second, what’s an antibiotic worth? How much should we plan to pay? We’ve had a variety of conversations on this point and let me point you to a very recent one that was sparked by a paper in CID by Rome & Kesselheim. Here are the papers you need. Papers 1-3 are the recent debate; 4-8 are relevant background papers:

1. (link) Rome BN, Kesselheim AS. Transferrable Market Exclusivity Extensions to Promote Antibiotic Development: An Economic Analysis. Clin Infect Dis. 2019.
2. (link) Boucher HW, File TM, Fowler VG, Jezek A, Rex JH, Outterson K. Antibiotic Development Incentives That Reflect Societal Value of Antibiotics. Clinical Infectious Diseases. 2020.
3. (link) Rome BN, Kesselheim AS. Reply to Boucher, et al. Clinical Infectious Diseases. 2020.
4. (link) Sertkaya A, Eyraud J, Birkenbach A, Franz C, Ackerley N, Overton V, et al. Analytical framework for examining the value of antibacterial products. Report to US DHHS. United States Department of Health and Human Services. 2014.
5. (link) Rothery C, Woods B, Schmitt L, Claxton K, Palmer S, Sculpher M. Framework for Value Assessment of New Antimicrobials. 2018.
6. (link) Outterson K, Rex JH. Evaluating for-profit public benefit corporations as an additional structure for antibiotic development and commercialization. Translational Research. 2020. This paper includes a discussion of the ideas of STEDI; there is also a 10-minute YouTube video that talks through STEDI.
7. (link) Outterson K, McDonnell A. Funding Antibiotic Innovation With Vouchers: Recommendations On How To Strengthen A Flawed Incentive Policy. Health Aff (Millwood). 2016;35(5):784-90.
8. (link) Outterson K, Samora JB, Keller-Cuda K. Will longer antimicrobial patents improve global public health? Lancet Infect Dis. 2007;7(8):559-66.

Kicking off this second part of our conversation, paper #1 analyzes the cost of paying for new antibiotics using the idea of transferable exclusivity vouchers (TEV) that is suggested by the Re-Valuing Antimicrobial Products (REVAMP) Act introduced in US House of Representatives in 2018. As brief context in case you’ve not run into this idea, a TEV is the idea that the inventor of a new antibiotic receives the right to extend the sales exclusivity period for another drug that does have sales … simplistically, you could think of the second drug as suddenly having a longer patent life.

Rome & Kesselheim analyzed the impact of TEVs would have had on the 10 drugs approved during 2007-2016 that either did (or would have) been eligible for the QIDP (Qualified Infectious Diseases Product) designation that has often been used a standard measure of an interesting new antibiotic. Assuming the TEV was applied to produce maximal value from a second drug that was close to generic entry, the incremental cost to public/private payers of this extended exclusivity would have been $4.5b, a cost that the authors argue may be too expensive.

Responding to that (paper #2), Boucher et al. (and note that I am part of the et al.), use data from paper #4 (Sertkaya et al.) to estimate the societal value of having these antibiotics. Societal values have been discussed in various ways with the work in the UK by Rothery et al. (paper #5) being the most comprehensive summary to date. Societal values could be thought of as the fire extinguisher value of the antibiotic and Rothery identifies 5 such attributes: Spectrum, Transmission, Enablement, Diversity, and Insurance (and in paper #6, Kevin Outterson and I note that you can convert this to the acronym STEDI). And finally, papers #7 and #8 discuss ways that some of the deficiencies of TEVs could be managed.

So, and back to paper #2, Boucher et al. argue that the $4.5b in incremental cost from the TEV would have yielded $29b in societal value, a 644% return. In response, Rome & Kesselheim (paper #3) point out flaws in the value argument, most notably that half of the approved antibiotics were for initially skin infections, an area where we are currently well served with adequate drugs. That’s true, but you have to start somewhere, and it takes time to explore the full potential of any given drug.

To pull it all together, these are substantial values but also substantial sums. If you accept that notion that at least some of the new antibiotics are worth buying on a fire extinguisher basis, we come to the question of how might we pay for even a few new fire extinguishers? On this topic, we come at last to this paper and its accompanying editorial:

• (link) Årdal C, Lacotte Y, and Ploy M-C, on behalf of the European Union Joint Action on Antimicrobial Resistance Healthcare-Associated Infections (EU-JAMRAI). Financing pull mechanisms for antibiotic-related innovation: Opportunities for Europe. Clinical Infectious Diseases. 2020.
• (link) Shlaes DM. Can Europe Pull It Together? Clinical Infectious Diseases. 2020.

If you’ve worked your way through all the material on R&D cost and then on antibiotic value, you’ll find that Årdal et al. offers a very helpful recapitulation and summary of those debates in its introduction. The authors then survey such options as DRG (Diagnosis-Related Group) carve-outs, TEVs, stewardship taxes, and a “pay or play” tax on the pharmaceutical industry. Each of the approaches has strengths and weaknesses and the authors note that the models are being reviewed at length in a EU-JAMRAI project (link).

Whew … lots to consider! As I said at the top, the summary is the 3-part message: Developing antibiotics is expensive, Not having antibiotics is even more expensive, and We have to solve this!

And that’s enough for today!

All best wishes, –jr

John H. Rex, MD | Chief Medical Officer, F2G Ltd. | Operating Partner, Advent Life Sciences. Follow me on Twitter: @JohnRex_NewAbx. See past newsletters and subscribe for the future: https://amr.solutions/blog/. All opinions are my own.