Antimicrobial Drugs – A Broken Market

Five years ago, the World Health Organisation published a Global Action Plan to attempt to mitigate the growing health crisis caused by antimicrobial resistance. Antimicrobials (including antibiotics, antivirals, antifungals and antiparasitics) are medicines used to prevent and treat infections in humans. Over time antimicrobial resistance arises when bacteria, viruses, fungi and parasites change and no longer respond to medicines, making infections harder to treat. This year 700,000 people will die as a result of antimicrobial resistance around the world, compared to the 2.19 million people who have died globally due to COVID-19. However, the responses to the two crises by the healthcare industry could not have been more different. The threats posed by COVID-19 have seen pharmaceutical companies work at unprecedented speed and with seemingly unlimited government resources (the UK alone has spent GBP12 billion on vaccine development) to develop a safe and effective vaccine. This stands in stark contrast to the efforts injected into the fight against antimicrobial resistance. Governments and charities have scrambled to stimulate activity in the research and development sector by investing money, giving grants to drug start-ups for antibiotic resistance and taking equity stakes in them even as larger drug companies have exited this sector. The non-profit organisation CARB-X (Combating Antibiotic-Resistant Bacteria Biopharmaceutical Accelerator) based at Boston University, dedicated to accelerating research towards fighting the threat of drug resistant bacteria, has gathered USD500 m. Since CARB-X was founded, in July 2016, it has given 67 companies around 250 USD million to support promising preclinical and phase I research. Considering only about 14% of antibiotics and biologicals in phase I trials are likely to win approval and the cost of getting a drug FDA approval in the US is estimated at USD1.4 billion it is evident that a more far-reaching solution is required to address the growing antibacterial resistance crisis.


To understand how the market needs to be changed one first needs to understand the issues associated with developing new antimicrobial drugs. The problems of their development for the pharmaceutical industry are threefold. Firstly, prices of antimicrobials are kept low in many countries, as their profit-making life span is limited and, due to their universal use, increasing prices would create an uproar, creating little incentive for drug companies to develop new ones. As a result, investors avoid new antimicrobial firms as they are fearful the companies will run out of cash. Secondly, antimicrobials are being overused, especially in the developing world, fuelling resistance and reducing the amount of time each antimicrobial drug is effective for. Finally, relatively few patients have resistant infections that need treatment with new antibiotics, whereas most other drug categories can be used to treat most people. The US Centre for Disease Control and Prevention estimates that there are 2.8 million resistant infections annually in the US. For comparison, 7.4 million people in the US take insulin for diabetes on a daily basis, a much more lucrative market. As a result, it takes a long time for an antimicrobial drug to become profitable (see figure 1) and it is clear that new economic models need to be developed to incentivise antimicrobial discovery and development while reconciling these incentives with responsible antimicrobial use.


Figure 1. Graph showing the path to profitability for a newly developed antibiotic.


One of the best solutions is creating market entry rewards for firms that successfully bring new antimicrobials to market. The UK Antimicrobial Resistance Review group, in their 2016 report, proposed that this reward should be as high as 1.6 billion USD. This would act as an incentive to firms and supplement income in a low margin low volume sector. However, this is only part of the solution. A complete fix would help counter the incentive of pharmaceutical companies to prioritise sales over the long-term efficacy of the product and, as such, would directly align public health and commercial goals. To do this an Antimicrobial Susceptibility Bonus (an incentive for companies to reduce inappropriate sales of antimicrobials) could be introduced. It would function as the performance component of the market entry reward scheme and the future payout for firms would be contingent on pathogen susceptibility to the product (the product’s ability to stave off resistance) at, for example, 5, 10, 15 and 20 year intervals. This would then create a holistic solution as it would give the patentee financial motivation to consider stewardship of its product and reserve treatment for serious infection.


This solution is not without its problems. The conditionality of the Antimicrobial Susceptibility Bonus on the payout from the market entry reward may reduce the incentive to invest in antimicrobial research, since firms would know there is a risk that the product might not reach the performance standards required to receive the Antimicrobial Susceptibility Bonus. Moreover, as a result of the tiered payments, firms may experience cash flow issues that would have to be resolved through the development of auxiliary markets. For example, selling a fraction of its right to the Antimicrobial Susceptibility Bonus to a royalty trust. COVID-19 has highlighted the devastating impact of a health crisis on the global economy, but it has also highlighted the power of the pharmaceutical industry. Fixing the market for antimicrobial drugs will require the same level of international and industrial co-operation. At least now there is precedent for combined action.


By Alexander Czernin

Sector Head: Hermione Scott