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.
Search for "Orphan Drugs." Governments pump extra money into drugs that otherwise would not be worth making.
"Transparent" is a shit show that trades on every stereotype going. A man in drag is NOT a transsexual.
Okay, that bottle of antibiotics is $10,000. Now make sure you take every pill so resistance doesn't have a chance to take hold. Wait, you're just taking them until you're better and then selling them to people on the street?
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?
Because it costs at least $1 billion to develop a new drug
The problem with those numbers is that it costs a billion to even get your drug to the point where it might be accepted by the FDA. This means that you're asking companies to pony up a billion dollars and hope that their drug works and hope it's first to market. How many people would buy a 1 dollar lottery ticket if they knew their was less than a 10% chance that they might win the grand prize of 2 dollars.
This is an area where I can sympathize with these companies, we're asking them to fix problems that we largely have brought on to ourselves by popping a pill anytime we get a tickle in the back of our throats thinking we just got Ebola. This abuse is part of the reason we're hitting such a wall.
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?
rather than depend upon the market to satisfy the costs of R&D, just put a bounty on drug discovery. it's cheaper for society
especially in the usa, where a new life saving drug can cost thousands a month. and even if you have insurance, that cost is being passed onto the rest of us. such that government paying a single huge bounty (to the actual discoverer and their university research dept, rather than some suit), paid for via taxes, would actually be cheaper for each of us
but there's always these hordes of morons who see taxes and government services as the ultimate evil. these fools seem to have no problem paying way more for lower quality, like american healthcare. just because it's not from the government? obviously single payer universal healthcare, without rent seeking insurance parasites, is far superior to the joke system in the USA. the ACA is a baby step in the right direction, we need to go a lot further
compare the usa to our social and economic peers in terms of quality of healthcare, and cost of healthcare, and we are getting a worse product for 10-100x the cost. all because "HURRR DURRR GUBMINT EVIL"
intellectual property law is philosophically incoherent. it is your moral duty to ignore it or sabotage it
Pharma only wants continuous income streams. Even if the prize money were more than 200% return it's not a cash cow that pharma can sell to their stock holders to demonstrate earnings for the next 6 quarters. How about not stupidly funding them via poorly negotiated medicare/aid contracts and then taking the savings and dumping it into beefing up academic labs?
The main point where multiresistencies are created is animals. When we give them antibiotics in order to enable "storing" them even denser, we enlarge the contact between patogen and antibiotics by a huge factor.
Our greed for cheap meat has brought us to the point where we destroy our own hardly-won victories against illnesses. And, the current system unfortunately even rewards you if you apply your antibiotics for animals -- by giving you money.
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.
Once an alternative approval process with sufficent credibility gets going, the story will change very fast.
Sent from my ASR33 using ASCII
"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?"
No wonder Canadian health care is so cheap.
We can't make any decision until we see past the government/Medical bureaucracy and get complete audit of those "costs".
The Medical Industry is completely opaque when it comes to costs. They are shifted from one area of the business to another, they are obfuscated by accounting gimmicks, government regulations, and insurance practices. Of course that's all par for the course. But before you make policy decisions, you have to know the truth...what's driving the costs. there is no reason all thee issues can't be pushed back in an audit and reveal the truth. Changing the practices can only come after the causes are revealed.
I bet many would be surprised at the answers.
When Fascism comes to America, it will call itself Anti-Fascism, and tell you to give up your guns.
The FDA is part of the problem. They make obtaining FDA drug approval very expensive. If the FDA wants to improve the situation they just need to look at themselves.
Otherwise I foresee a case where they take the $2 billion profit, then go ahead and charge $10,000 a pill, just like cancer drugs.
excitingthingstodo.blogspot.com
In fact the free market is most probably the culprit with overusage of antibiotic for cattle and chicken rising. In this case though, public research should be here the solution. Yes sometimes the free market is not the solution, but rather public pooled resource, call it socialist or whatnot. Just like you would not want to have fire service be private, sometimes some research area need to be public too.
C. Sagan : A demon haunted world:
http://www.amazon.com/gp/product/0345409469/
visit randi.org
If the US wants pharma to develop new classes of antibiotics then the simplest method is to extend the patent from 20 to 30 years **providing that the drug qualifies as an antibiotic**.
This has the effect of a) incentivising pharma to spend on research in these classes of drugs and b) discouraging widespread abuse by disallowing generic implementations for at least a generation.
Job done! Next?
Tubby or not tubby. Fat is the question
The whole concept of Intellectual Property is created by the government, and you need government to enforce it. When regular real estate is subject to eminent domain, why patents, copyrights etc should be above it? If some drug company develops a drug that can cure Hep-C and is profitable enough to sell it in third world countries for 20$ a dose, but insists on charging 160,000$ per dose for USA, I think the government should just step in, take over the patent based on eminent domain, pay the company something along the lines of what is suggested in the summary. Take a billion or two, and the entire cost of development, testing and regulatory approval too. But we can't let the drug companies game our government and treat us like a milch cow.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
WHY are antibiotics so unprofitable?
Me thinks the issue is because there are cheaper alternatives to any new and improved antibiotic that are considered 'good enough'.
Let's say big pharma developed a new wonder antibiotic, and it cost 5x what generic antibiotics currently cost - who would pay 5x the price of generic alternatives? Would your insurance company? Would you pay it out of pocket? Most people defer their medicine choices to their insurance company because of cost, rarely do patients opt to pay for denied prescriptions out of their own pockets, they'll simply accept whatever alternative their insurance plan covers.
Ken
in addition, proposing a 2 billion prize to a private enterprise which will *skim* a part for its own shareholder/CEO make no sense, just give directly the money to public research...
C. Sagan : A demon haunted world:
http://www.amazon.com/gp/product/0345409469/
visit randi.org
"The Peculiar Economics of Developing New Antibiotics"
If by "peculiar" you mean "completely expected".
No, many of them are exactly the same, including tetracycline, ampicillin, and amoxicillin.
These drug companies are already raking in $XX billions on other drugs, and the cost to develop a new antibiotic could be less than some of their advertising budgets. The $2 billion might not even be enough incentive.
How about a rule like for every non-antibiotic drug that is approved by the FDA, they also need to submit one antibiotic drug for approval? That would get their attention.
I like the idea of a bio Xprize, but what if we could go one further? We have to drastically reduce the cost of bringing new medicines to market, without compromising the scientific method. What if drug researches could submit candidate drugs, for a much smaller price, to universities and governments labs for testing, would be paid a bounty, but in return the drug would be licensed for manufacture by all. I assert that the current "winner take all" approach to medical patents is much less efficient than open collaborative systems, really it survives because at the end of the day we are all willing to pump huge amounts of money into it, one way or another. What is nice about an open source system is that there is little incentive for anyone to falsify or hide results, and redundant testing by other labs, along with doctor hands experience, will quickly identify bad actors.
Competitions like that can help. However, funding of basic research that can then lead to big breakthroughs later is also a good idea.
Here's a proposal: stop granting hugely profitable exclusive patents on university research funded by the federal government. Give the government a right to license broadly patents it helped fund and share the proceeds with the discovering professors and students. That way the cost to the pharma companies would be smaller.
Use the government's proceeds from licensing said patent to fund the FDA's evaluation of any drugs based on the research. This further cuts down on the costs to the drug company.
Make it a term in the research's patents that final drug patents based on it must be similarly licensed. Use those proceeds to subsidize Medicare and Medicaid.
Then, the drug research is more widely spread, the benefits and risks of the research are more widely spread, the risks are lower per company, the costs of the drugs are lower to bring to market. The market prices may even follow suit.
Then, tie the research funding to a certain amount of the funds across the country being used for classes of drugs the public really needs but are being underrepresented, like antibiotics.
If it costs $1B to get a drug through the FDA approval process, and your prize is $2B, you will only play the game if you think you'll get your first or possibly second try through the approval process. If you have to start half a dozen and have them fail at various points through the approval process, you've already spent the potential prize money without winning it.
We might need to look at how safe drugs have to be before they can be FDA-certified. I've harped on this before but I know people who thought Vioxx was a lifesaver in treating their arthritis, and experienced a very significant change in health and happiness when it was taken off the market because of the harm it did to other people. If we insist on drugs that have statistically significant positive effects, with infinitesimal negative effects, we may run out of options and end up dying the way people did in the middle ages, while the drugs we need sit on a shelf somewhere, waiting for a different regulatory environment.
Nostalgia's not what it used to be.
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.
So, um, quick question: Why are all of those other developed nations with single-payer not "getting someplace" on this? I mean, surely they're not (again) waiting for the US to do it, right?
Right?
Do you have ESP?
Setting aside socialism, if the system was working anything approaching optimum for the current configuration of third party payers and patent holders and everything else, insurance companies would already be inventing (and/or buying inventors of) drugs and practically giving them away to their members (or cross-licensing them with other insurers cheap to get their members the best drugs available in multiple categories). As a side effect, insurance companies would inherently aim to reduce side effects (guess who pays when you have a heart attack because of taking some drug) rather than cover side effects up (see: VIOXX). It would also eliminate the (real or imagined) conflict of interest between finding cures and finding treatments.
If I have been able to see further than others, it is because I bought a pair of binoculars.
Actually, they do use the same drugs on animals as they do in humans.
More and more humans are now resorting to buying fish drugs from the pet store to treat their conditions.
We fund the NIH to the tune of aprox. $100/head for every man, woman, and child in this country - $30 Billion in funding divided by a population of 300 Million...
That's a pretty hefty investment IMHO... How much per capita do other countries governments invest in medical health research?
Ken
http://www.pbs.org/wgbh/pages/frontline/hunting-the-nightmare-bacteria/
My father was one of the first to use the then new 'sulfa' drugs, it saved his life. This was when they were brand new and no studies had been done. I would venture to say in the 1930s when this happened profit was low on the totem pole of motivators to find drugs that save lives.
Today the decision to find new science will be based predominately on profit not necessarily to benefit humanity.
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
No, profit for insurance companies is what they take in from premiums minus what they pay out in claims. If claims rise they take a hit in the short term but raise rates to compensate and the absolute profit they makes grows if they maintain the same profit margin. Rates going up is now pretty predictable so they don't even take the hit in the short term. They raise them expecting claims to increase then make minor adjustments in how much they raise them the next time. It is in the insurance companies' best interest to make health care as expensive as possible so that they can charge higher premiums. It is easy to do by simply making the paperwork required to file a claim labor intensive and being slow about paying. Insurance companies can place that burden on the health care providers who pass it on the to patient as a hidden cost. The insurance company is borrowing money interest free from the health care provider by being slow in paying while forcing them to jump through hoops with paper work that wastes office staff labor.
Bacteriophages are being used to cure such infections in one of polish hospitals. For example MRSA is being cured in 80% of cases.
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Why you are not going to see such treatments in USA?? Phages are not patentable, so no way to earn hard cash here.
I wonder how many $billions it cost to develop Penicillin. Half a dozen researchers for a couple of years. Maybe 0.001 billion.
There is something wrong with modern society.
We could also apply penalties to drug companies that fail to market effective, new drugs. For example confiscation of profits could be a penalty for drug companies that do not do work on less profitable drug development. So reward the ones that do as well as punish those that do not. Exceptions could be made for tiny companies that only sell one or two items to the public.
drug testing in China seems to have hit some hiccups though. Too many fraudulent trials.
Drug companies pretty much expect to get sued by the likes of the law offices of James Suck-a-glove and lose every penny they made thanks to a jury in east Texas. And it doesn't matter that the side effect warnings are well disclosed. Take a look at pretty much every drug ad on TV. They basically say, "If you have such-and-such condition, ask your doctor about Fartseeguh. Meanwhile, here's a 45-second long list of things that might happen to you even if you didn't take this drug because we're expecting to get sued even if you don't take this drug." At a certain point, the drug company is looking a the upfront costs as well as the potential legal costs and deciding that there is too much risk. The FDA is no help because they insist on all this testing beforehand and when the lawsuits come they are notably untouchable. Aren't they supposed to protect the public from dangerous drugs? If they approved it, shouldn't they be held liable too?
The success rate for drug development is about 10-15%.
Now, you're probably spending $1B cumulative on all the failed drugs to get one hit. They key here is that you're not actually guaranteed to get a drug that works. You could easily spend more than $2B on a program like this, with a little bad luck.
Let's look at this differently. About 250 million antibiotics prescriptions are given out in the US every year. Let's have every one of those pay $10 over cost of manufacture and marketing (for example) to the drug companies who have developed new antibiotics in the prior 10 years (that collective effort helps all the antibiotics companies). Now you're spreading around an "extra" $2.5 billion every year, not just once. That's going to compensate for higher risk approaches more quickly and contribute to a longer term solution for this.
Drug approval requires so much heavy lifting in the US that costs to develop new drugs skyrocket, and the only drugs that get developed are those that are taken routinely for high profit. Boner pills flourish, antibiotics stagnate. The solution here isn't to jack the price of antibiotics to an astronomical level that a very small percent of the population could possibly afford - drugs and surgeries in the US are already way overpriced with major corporations snorting all of that profit up - the solution is to reduce the cost of R&D and approvals.
My last chest x-ray in China took about 25 minutes -- walk in, no appointment, cost $12 USD, includes assessment (albeit I don't know how great the assessment is), and it's not kept in some locked away book.. I take that xray home with me.
a) antibiotics are usually expensive. A packet with 7 pills for 7 days easy costs $100, so there is plenty of money to make considering production costs of such chemicals is lower than the cost of the paper and plastic box they are sold in. /. articles recent years about that) ... the multiple resistance is man made, too. To much antibiotics in lifestock breeding, to much non superviced usage in humans, who either don't take the prescribed dose, or when the child suddenly is ill as well, give the rest of the package to the child or when they find a two years old rest in their 'drug depot' they throw it into the toilet or into the ordinary waste bin. On top of that there was a time where doctors prescribed antibiotics for everything, often two simultaniously.
b) antibiotics are not 'developed' like software or engineered like a house or an engine. You basically only find them by trial and error, either by trying new substances or by modifying existing ones. Yes, there ar more modern approaches as we know more about cell biology, where scientiests try to predict which 'chemical' might have the desired effect, that narrows down the field of trial and error and perhaps can be called 'developing'
c) actually all pharma concerns are working on new antibiotics, they might be greedy but they are not idiots (there have been some
d) the problem is man made, can't be so hard to 'clean up' hospitals properly to kill MRBs
Bacteria get resistant because they survived one onslaugtbon them with antibiotibs. Can't be so hard to grasp that, kill them all, take the whole package, no survivours, simlle! (Yes, I simplified)
e) extremely mediocre standards of water cleaness, especially in the US. Clinton made a bill about improving the water infrastructure so that you safely can drink water from the tab, without fear to poison your children with lead or arsenic or having rests of oestrogene or medicals in the water. The next president canceled the bill (no jdea if his family owned water 'production' plants). I doubt there are many places in the US where tab water would pass as drinkable under European legislations. Btw: water is as close as in 'free' in europe as you can get. My waterbill per YEAR is $300 (for two persons, would not wonder if it is even lower as it is combined with the waste, taxes and some other minour stuff). And it does not contain even the slightest trace amount of an antibiotic or oestrogen!
Cost free eBook I read (by iBook/Kobo/Amazon/ObookO/Gutenberg etc.): "The Green Odyssey" by Philip Jose Farmer.
Actually, they do use the same drugs on animals as they do in humans.
Actually, thry don't. No idea about the USA, but in most western countries classes of antibiotics exist that are strictly for animal treatment alone. And animals are forbidden to be treated with medicals that are strictly reserved for humans, so that humans still can be treated if bacteria are resistant to some of the stuff reserved for animals only. This praxis is done since the 1970s.
On top of that antibiotics treatments for lifestock is strongly restricted. Meat that contains trace amounts of antibiotics or hormones can not be sold (hence the every few years new bowling 'trade war'/'tariff threats' of the USA against europe, trying to force us to allow import of sub standard meat)
Cost free eBook I read (by iBook/Kobo/Amazon/ObookO/Gutenberg etc.): "The Green Odyssey" by Philip Jose Farmer.
Well, the money end of drug development (Pharma) went through massive layoffs and shrinkage during Bush II the Lesser's reign. I think more people were laid off than actually employed in Pharma at any one time (and no, quite a lot of them did not find further research jobs).
No idea about the USA
Indeed. There are some drugs that are humans only, but that's because they're too damned expensive to administer to animals.
I work for a company that makes Orphan drugs. Yes, they're ridiculously expensive. The reason is that the number of patients for our drugs number in the couple of thousands globally. Our workforce to run the entire plant, do QA, maintenance, regulatory administration and production processes etc numbers in the several hundreds. Those people need to be paid every month by what a couple thousand people pay for their meds every month.
And that is without taking into account that this entire plant was built for making this drug, which was an investment of hundreds of millions of dollars, with several millions annually for upkeep and maintenance.
I agree that we probably make a decent profit or we wouldn't be doing it.
However, if subsidizing we to stop, we'd just stop making it because with the numbers I mentioned above, it is impossible to make our drugs in a manner that would be affordable without it. And that would mean those people would simply die.
Are you being facetious?
The USA government bans importation or re-importation of prescription drugs. After all the R&D and regulatory stuff, the marginal cost of producing one extra pill is almost negligible. Therefore, a place like Canada can impose price controls without a US-based drug company refusing to sell them the product. At the margin, it's all profit, so they don't care. However, those drugs can't come back into the US, so prices remain artificially inflated in the US market.
Why should any country with socialized medicine develop drugs when the USA federal government is willing to force its citizens to subsidize the drug development for the rest of the world?
I have chronic tooth abscesses. My dentist always proscribes Amoxicillin 500MG. Fish mox forte from Cal Vet supply is identical. At my last dentist visit he told me I had an anaerobic bacteria infection and proscribed something different. A few months later more tooth pain. A quick search for anaerobic antibiotics gives me Metronidazole for the treatment of anaerobic abscesses. $60 for 60 from the vet supply. I would pay less at a pharmacy but my insurance doesn't cover dental visits.
If you're at the stage where you have a life-threatening multi-drug resistant infection, you're probably in a hospital gurney and that miracle antibiotic will be delivered by IV in a tightly controlled dosing regimen.
the overhead cost for pharmaceutical development is sky-high. These regs are not only from the FDA, but general business regs like SarbOx as well.
This is a classic case of liberal statist thinking that business has an unlimited ability to absorb costs..
To say there is no market for antibiotics because they are used for only a short time is only part of the problem. It wouldn't matter if a lot of people were continually getting infected.
Sulfa and penicillin went into mass production because of WWII. The huge number of battlefield wounds and the resulting infections created a large demand and there was a crash program to manufacture these antibiotics.
After the war, mass production continued and in many countries antibiotics could be purchased over the counter. While this eventually contributed to bacterial resistance, there's no doubt there was a huge market for antibiotics and it prompted the development of many different antibiotic families.
So the question must be asked why aren't the same economic factors still causing the development of new antibiotics? While it costs more to develop a new antibiotic today, there's a lot more people in the world to justify it. The answer is that while certain diseases have become resistant, for the most part the old antibiotics still work and there just isn't enough people needing new antibiotics to justify the development expenses.
If the use of all antibiotics were subject to rules from under the same roof (FDA), I seriously doubt we'd have such outrageous misuse of them on livestock. Get control out of the hands of the Ag Dept. Developing new antibiotics is a must, but the rate at which they become ineffective has got to be slowed.