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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.
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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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.
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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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?
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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.
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
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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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.