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The Peculiar Economics of Developing New Antibiotics
HughPickens.com writes Every year at least two million people are infected with bacteria that can't be wiped out with antibiotics but the number of F.D.A.-approved antibiotics has decreased steadily in the past two decades. Now.Ezekiel J. Emanuel writes at the NYT that the problem with the development of new antibiotics is profitability. "There's no profit in it, and therefore the research has dried up, but meanwhile bacterial resistance has increased inexorably and there's still a lot of inappropriate use of antibiotics out there," says Ken Harvey. Unlike drugs for cholesterol or high blood pressure, or insulin for diabetes, which are taken every day for life, antibiotics tend to be given for a short time so profits have to be made on brief usage. "Even though antibiotics are lifesaving, they do not command a premium price in the marketplace," says Emanuel. "As a society we seem willing to pay $100,000 or more for cancer drugs that cure no one and at best add weeks or a few months to life. We are willing to pay tens of thousands of dollars for knee surgery that, at best, improves function but is not lifesaving. So why won't we pay $10,000 for a lifesaving antibiotic?"
Emanuel says that we need to use prize money as an incentive. "What if the United States government — maybe in cooperation with the European Union and Japan — offered a $2 billion prize to the first five companies or academic centers that develop and get regulatory approval for a new class of antibiotics?" Because it costs at least $1 billion to develop a new drug, the prize money could provide a 100 percent return — even before sales. "From the government perspective, such a prize would be highly efficient: no payment for research that fizzles. Researchers win only with an approved product. Even if they generated just one new antibiotic class per year, the $2-billion-per-year payment would be a reasonable investment for a problem that costs the health care system $20 billion per year." Unless payers and governments are willing to provide favorable pricing for such a drug, the big companies are going to focus their R&D investments in areas like cancer, depression, and heart disease where the return-on-investments are much higher.
Emanuel says that we need to use prize money as an incentive. "What if the United States government — maybe in cooperation with the European Union and Japan — offered a $2 billion prize to the first five companies or academic centers that develop and get regulatory approval for a new class of antibiotics?" Because it costs at least $1 billion to develop a new drug, the prize money could provide a 100 percent return — even before sales. "From the government perspective, such a prize would be highly efficient: no payment for research that fizzles. Researchers win only with an approved product. Even if they generated just one new antibiotic class per year, the $2-billion-per-year payment would be a reasonable investment for a problem that costs the health care system $20 billion per year." Unless payers and governments are willing to provide favorable pricing for such a drug, the big companies are going to focus their R&D investments in areas like cancer, depression, and heart disease where the return-on-investments are much higher.
The problem is structural. The problem is American capitalism. Medicine should not be a profit-driven industry.
You think the US Government itself couldn't set up an R&D arm to develop that same drug for less than a 1000% profit? Socialism is the ONLY answer to the problem of access to medicine.
Congress might fund NIH, if they could agree on anything, including whether to have Coke or Pepsi in the Senate Dining Room.
the immediate beneficiaries would be medical insurance companies, but the short-term is all they think about. if they say NO! now, they don't have to say NO! a thousand times, ten thousand times, when somebody is rotting out from infection by the minute and a doctor tries to prescribe a new $10,000 antibiotic.
if we had single-payer insurance, and ponied up along with the other developed nations, all of which are single-payer, a share of the prize, we might get someplace. I like the idea, but not its chances.
if this is supposed to be a new economy, how come they still want my old fashioned money?
If antibiotic development wanes long enough, eventually some rich people will be threatened by new infections for which there are no cures.
Once that happens, antibiotic development will instantly become a top priority for governance and major industry players.
I have HIV, more funding goes into 1 years worth of funding for my university sports team than has gone into HIV cure R&D funding over the past 5 years COMBINED.
Big pharma don't want to make you better, they want your money.
Why cure something when you can keep it under "control" and earn 100x more?
Why help more people more often and improve quality of life, when you can help less people and earn more?
Antibiotics are profitable, even new ones. They're just not obscenely profitable compared to barely useful hair pills and boner pills.
It's too easy now for them to make money hand over fist for drugs that turn out to not even be helpful. It's killed their incentive to do something useful for a fair profit.
In fact the free market is most probably the culprit with overusage of antibiotic for cattle and chicken rising. In this case though, public research should be here the solution. Yes sometimes the free market is not the solution, but rather public pooled resource, call it socialist or whatnot. Just like you would not want to have fire service be private, sometimes some research area need to be public too.
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Differential pricing is a consequence of income disparity. Our lifestyles are only possible because people in poorer countries are can produce our bananas and electronics at stupidly low prices. If the USA attempted to ban differential pricing, they would be shutting a hell of a lot of people out of the drugs market -- cheap drugs in Africa are profitable in a tokenistic sense -- they are profitable precisely because the costs are already offset in rich countries. If they had a choice between selling only at African prices or only at American ones, they'd stick to American ones, as that's where the profit lies.
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I don't have a billion bucks lying around to TRY to produce an antibiotic with! I doubt I could get someone to invest a billion in something that is probably more than 50% likely to fail to get $2B.
Who would go for this prize when there are actual WINNING investments to put $1B into?
The lack of new antibiotics is a perfect example of market failure. They're not particularly profitable, and if they WERE, as someone pointed out, ($1000 per pill) people would only take 5 of their 10 pills until they were feeling better and sell the last 5 on the black market.
No, the market is NOT the solution here. Direct government support of antibiotic development is what is needed. Sure, pick the best developers, but governnent funds the development, and then the PUBLIC reaps the benefit of a PUBLICLY owned antibiotic, which does NOT have to be fed to animals in order to generate enough volume to make a profit for the company that invested to develop it!
--PeterM