As is his wont, Dr. Ezekiel Emanuel stirred thing up with his New York Times op-ed, “How to Develop New Antibiotics”. Acknowledging the critical need for drugs to treat bacteria resistant to existing antibiotics, Emanuel suggested that “prize money” be awarded for entities that successfully discover, develop, and commercialize new antibiotics that are effective against resistant bacteria.
“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? As the XPrize – a foundation that runs competitions to spur innovations for difficult problems that aren’t being addressed – and others have demonstrated, prizes for lofty goals can catalyze the creation of unexpected research teams with novel approaches to old challenges. The prestige, bragging rights and renewed sense of mission created by such a prize would alone make an investment in research worthwhile.”
Dr. Emanuel’s proposal is certainly provocative. His op-ed is providing a much needed discussion about a medical problem in severe need of solving. As he stated, 23,000 will die of such infections this year at a direct health care cost of $20 billion. If his Xprize idea were to take hold, the cumulative $10 billion payout would be a great investment. It must be noted, however, that drug R&D is a highly dependent endeavor and a successful drug program rarely can be credited to just one institution. A $2 billion prize would certainly generate many claimants. Nevertheless, this area of medicine is in need of fresh ideas and the Emanuel proposal will, hopefully, stimulate them.
Actually, Dr. Emanuel hits on the biggest deterrent to investments in antibiotics research – the unfavorable economic climate for such drugs.
“Even though antibiotics are lifesaving, they do not command a premium price in the marketplace. 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?”
Indeed, that is the key question and it isn’t hypothetical. When CURES for Hepatitis C reached the market over the last year, payers were outraged at their cost of $84,000/treatment. Despite this high price, Sovaldi (Gilead) and Viekira Pak (AbbVie) not only save lives but also save the healthcare system money by preventing the downstream consequences of Hepatitis C such as liver failure and liver transplantations. Yet, the headlines around these drugs were not on the “medical miracle” but rather “Why does this pill cost $1,000?”
Novel antibiotics that emerge from the $2 billion Emanuel XPrize might be attacked even more virulently. Many would fight premium pricing for these drugs because the perception would be that the rewards for such medical breakthroughs would have been already granted. However, as Dr. Emanuel points out, it would probably cost a company $1 billion to bring a new antibiotic from initial discovery through regulatory approval. Yes, that does leave $1 billion in “profit”. Assuming that the average patent life for this new antibiotic is 13 years, this would amount to $75 million/year of patent life. This would be on top of the profits that the company would get in the sales of the drugs over this period.
That might sound pretty good. However, any new antibiotic effective against a resistant infection would be used as a last resort, only after other older drugs have failed. Thus, the patient population would be narrow. Furthermore, there would be intense pressure on companies in setting the price for this medical breakthrough as governments and payers would claim that these companies have already been “rewarded” with $1 billion. Thus, the new antibiotic would be relegated to “niche product” status that would be priced very low with respect to the value it would bring. I find it hard to believe that, under such a scenario, that a company like Pfizer, cited by Dr. Emanuel as “long the leader in developing antibiotics”, would be enticed to reinstitute R&D in this area.
It is ironic that “we are willing to pay tens of thousands of dollars for knee surgery” but would balk at paying one-tenth of that amount for a pill that’s a lifesaving antibiotic. But 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.
