A Critical Assessment of Incentive Strategies for Development of Novel Antibiotics

31 October 2014

LSE Health, London School of Economics and Political Science

Matthew Renwick, David Brogan, & Elias Mossialos1

In recent years, a concern has emerged in the public health arena regarding the deadly combination of increasing antimicrobial resistance and stunted antibiotic development. Antimicrobial resistance is an evolutionary adaptation that will not cease, but can be mitigated with careful stewardship of existing antibiotics. The decline in investment in antibiotic development is a complex, multifactorial market failure arising from the nature of antibiotic prescribing, current pricing, existing patent structures, and societal expectations.

While combating antimicrobial resistance is the realm of scientists, addressing public health crises due to market failures is the realm of policy makers. This report seeks to provide a basic armamentarium from which to begin that discussion. This project undertook a rapid review of the antibiotic incentive literature using guidelines from the Centre for Reviews and Dissemination. A total of forty-four antibiotic incentive strategies were identified and classified in traditional categories of push, pull, and hybrid mechanisms.

Push methods reduce the cost of researching and developing new drugs. Push incentives are useful because they lower the barriers to entry that preclude small and medium sized pharmaceutical enterprises. In addition, research and development incentives delivered upfront are dramatically more valuable than similar sized future payments, which must be discounted to present value. However, push strategies are troublesome because they can result in conflicting priorities of development trajectory and they expose a funder to the financial risk of project failure.

In contrast, pull mechanisms, which can be categorized as either outcome-based or lego-regulatory, reward successful development of a drug by increasing or ensuring future revenue. These pull methods are beneficial because they only reward successful research, encourage efficient and rapid development, and align the priorities of the developer with those of the funder or regulator. These strategies tend to be problematic because they rely on the payer remaining dedicated to their future payment commitment despite potential changes in funding priorities. It is also a challenge to define the optimal set of drug characteristics linked to the reward so that they are not perversely specific nor too loose resulting in a mismatching of goals.

Finally, a combination of complimentary push and pull strategies can be formulated into a hybrid approach that balances the merits and drawbacks of the individual incentives. A detailed review of the individual advantages and disadvantages of each incentive is provided.

Given the large number of incentives, a framework was developed to assist with the selection of incentives to address two major concerns – market failures and public health goals. Specific objectives within these areas have been identified as:

Objectives to address market failures:
1. Improve the overall net present value for new antibiotic projects
2. Enable greater participation of small and medium sized enterprises
3. Encourage participation by large pharmaceutical companies
4. Facilitate cooperation and synergy across the antibiotic market

Objectives to address public health priorities:
1. Promoting antibiotic stewardship
2. Improving patient access to new antibiotics

To make the selection process manageable, we suggest first selecting a set of incentives that address all four market objectives with the goal of creating an attractive and supportive market for investment in antibiotic research and development. To aid in this task, the incentives are classified into six different types based on their ability to meet these objectives. These incentive types include: broad-spectrum incentives, participation-focused incentives, cooperation and synergy-focused incentives, SME-focused incentives, Big Pharma-focused incentives, and weak market incentives. The broad-spectrum incentives are able to satisfy all market criteria while in other cases a 4 combination of multiple incentives from different categories could be used. Once this market-centric package has been created, it can be supplemented and reformed to additionally tackle the two major public health objectives: stewardship and access.

There are a number of crucial implementation issues that must be considered prior to finalizing an incentive package. These issues will reflect political priorities, operational realities, and industry demands concerning:
1. The size of the incentives
2. The timing of incentive delivery
3. Governance of the incentive package
4. International coordination
5. Intellectual property laws

The ultimate array of possible incentives to use will be constrained by the outcome of this feasibility analysis. Thus, an effective incentive package will be one that repairs the market failures that have resulted in a dry development pipeline, facilitates public health priorities that reflect the growing need for a sustainable solution to antimicrobial resistance, and function within implementation constraints. Much can be done, but a significant effort will be required to address the impending crisis.

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