Over­com­ing mar­ket ob­sta­cles to new an­tibi­otics

Financial Mirror (Cyprus) - - FRONT PAGE -

From the strict per­spec­tive of some in­vestors, as­tute fi­nan­cial man­age­ment by a com­pany to bol­ster its share price is a good thing. By this nar­row logic, when it comes to the phar­ma­ceu­ti­cal in­dus­try, we should be un­con­cerned if drug firms’ share prices are boosted not by new dis­cov­er­ies, but by fi­nan­cial ma­noeu­vres, such as share buy­backs or tax in­ver­sion.

But the phar­ma­ceu­ti­cal in­dus­try is not an in­dus­try like any other. It is in­trin­si­cally bound up with the pub­lic good, hav­ing his­tor­i­cally provided the med­i­cal in­no­va­tion that is essen­tial to so­ci­ety’s abil­ity to fight dis­ease. Fur­ther­more, while pa­tients are the con­sumers, the ac­tual buy­ers are of­ten gov­ern­ments. Even in the United States, pub­lic pur­chasers ac­count for at least 40% of the pre­scrip­tion drug mar­ket.

Gov­ern­ments also bankroll much of the re­search un­der­ly­ing the in­dus­try’s prof­its. The US gov­ern­ment is the world’s largest fun­der of med­i­cal re­search and devel­op­ment; glob­ally, tax­pay­ers fi­nance a third of spend­ing on health re­search. So it should come as no sur­prise when pol­i­cy­mak­ers in­sist that the in­dus­try’s ef­forts at in­no­va­tion be chan­nelled into ar­eas that pro­vide the most ben­e­fit to tax­pay­ers and pa­tients, rather than those – like fi­nan­cial ma­noeu­vres – that might be most prof­itable for the in­dus­try in the short term.

The phar­ma­ceu­ti­cal in­dus­try is at its best when pri­vate prof­itabil­ity and so­cial good co­in­cide, as it does when use­ful new drugs at­tract large mar­ket shares. But, un­for­tu­nately, that is not al­ways the case – and the re­sults can be tragic. In the field of an­tibi­otics devel­op­ment, in par­tic­u­lar, the di­ver­gence be­tween profit-seek­ing be­hav­iour and the pub­lic good is tak­ing the world to the brink of cri­sis.

When an­tibi­otics first en­tered into com­mon use in the 1940s, pre­vi­ously dan­ger­ous con­di­tions, such as pneu­mo­nia or in­fected cuts, be­came benign con­di­tions that could be treated eas­ily. An­tibi­otics un­der­pin mod­ern medicine; with­out them, surgery or chemo­ther­apy be­come much riskier.

But an­tibi­otics lose their ef­fec­tive­ness over time. And whereas previous gen­er­a­tions of sci­en­tists quickly found new sub­sti­tutes, to­day, in many cases, doc­tors are down to their last line of de­fence. For a range of in­fec­tions – in­clud­ing strains of pneu­mo­nia, E. coli, and gon­or­rhea – there are no re­place­ments in re­serve. One would think this would cause drug com­pa­nies and their in­vestors to com­pete to de­velop new an­tibi­otics. But much of the phar­ma­ceu­ti­cal in­dus­try has aban­doned this pur­suit. De­vel­op­ing new an­tibi­otics is dif­fi­cult and ex­pen­sive – and, cru­cially, far less prof­itable than in­vest­ments in other im­por­tant fields, such as can­cer and di­a­betes.

Part of the prob­lem is these drugs’ unique im­por­tance. Com­pa­nies are not al­ways able to re­coup their in­vest­ments by set­ting a high price on patented an­tibi­otics. When a new an­tibi­otic is dis­cov­ered, pub­lic health au­thor­i­ties rightly want to keep it in re­serve, in­sist­ing that it be used only when all other op­tions have failed. As a re­sult, a new an­tibi­otic may not be­come widely used un­til af­ter its pa­tent has ex­pired and its in­ven­tors are forced to com­pete with generic man­u­fac­tur­ers.

In Jan­uary, the phar­ma­ceu­ti­cal in­dus­try took a big step to­ward solv­ing this prob­lem when more than 100 com­pa­nies and trade as­so­ci­a­tions from more than 20 coun­tries signed a dec­la­ra­tion call­ing on gov­ern­ments to adopt a new model of an­tibi­otic devel­op­ment. As part of this new model, the sig­na­to­ries com­mit­ted them­selves to pro­vide ac­cess to new drugs for all those who need them, in­crease in­vest­ment in R&D that meets global pub­lic health needs, and help slow the devel­op­ment of drug re­sis­tance in hu­mans and an­i­mals.

Gov­ern­ments should en­cour­age and en­able the in­dus­try to meet these ob­jec­tives. One way would to be to adopt a pro­posal I made last year and in­tro­duce re­wards of $1 bln or more to those who de­velop the most­needed types of an­tibi­otics. Such an ap­proach would bal­ance com­mer­cial re­turns with af­ford­abil­ity, global ac­cess, and con­ser­va­tion, while sav­ing gov­ern­ments money in the long run.

Us­ing this ap­proach to re­stock the an­tibi­otics pipe­line would cost roughly $25 bln over ten years. Shared among G-20 gov­ern­ments, this is very lit­tle money, and would be a re­mark­ably good in­vest­ment – es­pe­cially given that an­tibi­otic re­sis­tance cur­rently costs the US health­care sys­tem alone about $20 bln per year.

Gov­ern­ments could in­tro­duce in­cen­tives for an­tibi­otics R&D, paid for with their ex­ist­ing fund­ing streams or new fund­ing streams that are in­no­va­tive and self­sus­tain­ing. One op­tion would be a small ac­cess-to-mar­ket fee that could be col­lected by phar­ma­ceu­ti­cal reg­u­la­tors in large mar­kets. This sys­tem recog­nises that an­tibi­otics are a shared and ex­haustible re­source on which the vi­a­bil­ity of a range of other phar­ma­ceu­ti­cal prod­ucts and med­i­cal de­vices – from chemo­ther­apy to joint re­place­ments – de­pends. It is com­pa­ra­ble to ap­proaches in sec­tors such as en­ergy, water, or fish­eries, where reg­u­la­tory tools are used to en­sure that shared re­sources and in­fra­struc­ture are man­aged and re­plen­ished in the in­ter­ests of both con­sumers and the pro­duc­ers whose busi­nesses rely on them.

The nec­es­sary $2.5 bln per year would amount to just 0.25% of global phar­ma­ceu­ti­cal sales – hardly a strain on an in­dus­try that is, by and large, in sound fi­nan­cial health. And the scheme would be par­tic­u­larly at­trac­tive if it could be im­ple­mented on a pay-or-play ba­sis, whereby com­pa­nies could choose whether to in­vest in R&D or to con­trib­ute to a fund re­ward­ing those whose ef­forts re­sult in the de­sired drugs. It is time to turn ideas into ef­fec­tive ac­tion and solve the prob­lem of drug re­sis­tance. To do that, com­pa­nies and gov­ern­ments must recog­nise that an­tibi­otics are not a com­mod­ity like any other.

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