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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.
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?
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.
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
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.
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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?
You are wrong.
Research averages 2.7 billion dollars a year of the $25 - $30 billion yearly total funding for AIDS in the USA.
Over the last five years? R&D = $13.5 billion; total spending over $130 billion.
Here's the actual numbers:
http://kff.org/global-health-p...
Or are you comparing the sports funding at your University to the HIV research funding at your University?
That would be a pointless comparison. We already know that University of Phoenix doesn't have much of a research program in anything.
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.
That cuts both ways. HIV/AIDS research gets far more funding than things like heart diesease, diabetes, mental health despite the later affecting a far larger portion of the population. Why? Because HIV/AIDS has a huge political movement attached to it.
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
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
You mean that Canadians have a nasty spending cap and get turned down for treatments that Americans take for granted? That kind of cheap?
Don't swim in the kool-aid.
A Pirate and a Puritan look the same on a balance sheet.
No, many of them are exactly the same, including tetracycline, ampicillin, and amoxicillin.
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.
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.
You should check what you're swimming in first. You'd be surprised how many expensive treatments you can get in America that are denied in Canada because they've been shown to make things worse or to have no effect at all.
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
Not only are there orphan drugs, there are orphan diseases, one of which is MS. One of the major drugs used to control this is Avonex. Check out the cost of a monthly supply, and note that a monthly supply consists of exactly four doses. About the only way anybody but the 1% can afford it is the fact that if you're using it you're automatically eligible for Medicare, SSI and whatever assistance your state offers. And, I suspect that if that weren't the case, the price would drop dramatically because without the subsidies there wouldn't be any market for it.
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they also need to put in a requirement that if you accept the prize money, then you give up the patent, allowing generic drugs.
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.
In that situation where they cannot actually manufacture the drug in commercially viable situation, mostly likely they will never commercially manufacture the drug and there will only be generics. This will severely complicate the regulatory process as generics are generally licensed relative to their non-generic counterparts. Since there won't be any non-generics, there will little to benchmark the purity and efficacy of the generic drugs against. For some things this may not be a problem, but it seems that in general it will lead to only sub-optimal drugs being available.
I think what most people forget is that the delivery system is often as important as the active chemical in many drug treatments. Sure there are many common delivery mechanisms like pills that dissolve in the stomach and deliver the drug at certain pre-determined rate (commonly known as time-release), but many generic manufacturers attempt to move up the generic food chain by offering customized delivery systems that aren't part of the original study (e.g., time release instead of 2 doses a day, or multi-valent) or are incapable of producing the original tested delivery system (e.g., transdermal, to avoid stomach acid and intestinal absorption issues, etc) and simply produce chemically equivalent pill formulations that have off-the-shelf inactive compounding ingredients that involve little testing under the assumption of bio-equivalence or bio-availablity. Conversely, they might not be chemically equivalent (e.g., have more or less active ingredients), but in conjunction with the delivery system have similar bio-availablity (on average, but not necessarily for different individuals) or be "juiced" to counter chemical shelf life degradation (to improve profit margin on the generics).
Most likely simple broad-spectrum antibiotic drugs in generic pill form probably won't suffer many of these issues, but the issue of generics isn't as simple as most people make it out to be...
I think it's easy to argue that things should be available to the masses as soon as possible, but the initial availability is also an important part of the drug release process. Having this as standard as possible helps to make sure that the drug can be fine-tuned before it gets to the generic stage. You might also argue of the length of the initial availability period, but it's arguable that if a patent is 20 years, and it takes 10 years for approval, that 5-10 years of widespread availability in a standard form for a drug with potential short and long term side effects might not be totally unreasonable. But I guess that all depends on risk tolerance (f thousands of people are dying of a resistant bacterial infection, the relative risk of less testing might be lower)...
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).
BTW those same $10,000 IV antibiotics are a lot cheaper in Europe, because the national health systems negotiate with the drug companies.
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?