Economics to boost antibiotics development

Economics to boost antibiotics development

Considering the importance of antibiotics for our healthcare, the issue of a dwindling development pipeline must be addressed. This article outlines various economic suggestions.

Mankind owes a lot to anti-infective drugs. They have been crucial in extending our lifespan and quality of life. Alarmingly, microbial resistance to known antibiotics has risen and release of new antibiotics has dropped to such a worrying degree that one may speak of a crisis.

The crisis has already arrived. We are in an era now when doctors like me have no effective antibiotics for some of their patients. […] [It]’s going to be a 10- to 15-year process to reinvigorate the pipeline. Where we are right now is scary.

Helen Boucher, quote from Freedman (2019)

If this problem is not solved, the current ~700,000 worldwide deaths per year caused by resistance to anti-infectives could rise to 10 million per year by 2050. These numbers might even be underestimations, as penalties for hospital-acquired infections in some jurisdictions may cause underreporting.

Not only would the avoidable deterioration and loss of human lives be tragic, there would also be serious economic consequences due to the resulting workforce reduction and increased healthcare costs. Hence, novel economic approaches are required in this industry sector.

Why is there antibiotic resistance?

Even though antibiotic treatment eliminates countless bacteria, eventually some cells will have a peculiarity that renders the drug ineffective. This can be the result of a naturally occurring genetic mutation. These survivor cells are the origins of antibiotic-resistant strains. The speed at which this evolution happens can be influenced by us to some degree. Critical causes for accelerated development of resistant strains are:

  • Prescription of wrong or unnecessary antibiotics. This may be due to lack of information, e.g. in case of an unclear diagnosis or poor professional knowledge, the doctor goes with their best bet such as broad-spectrum antibiotics. There may also be non-therapeutic incentives to prescribe certain drugs.
  • Routine antibiotic use in healthy livestock contributes to the generation of resistant strains that are passed on to humans.
  • Lack of compliance by patients. Patients who stop their treatment course prematurely or self-medicate with left-over antibiotics do not necessarily eradicate their infection (even if they feel better). The surviving bacteria are the ones likely to have resistant traits. The patients are essentially conditioning their bacterial strains to tolerate the drug.
  • Co-resistance. If antibiotics have a similar structure or mechanism of action, microbes that are resistant to one drug become automatically resistant to the other one(s).

Three key elements for improvement

To solve the antibiotics crisis three principal actions have been suggested.

  1. Better stewardship of existing antibiotics. The focus of healthcare providers should be on preventing over-use instead of mere cost control to achieve optimal patient outcomes.
  2. Maximising the impact of existing drugs particularly by improving rapid tests for specific targets and narrow-spectrum antibiotics. This would reduce the use of broad-spectrum antibiotics.
  3. Increasing the development of new antibiotics mainly through better financial incentives or new economic models.

All three are discussed in the context of potential economic solutions below.

Push incentives

A huge problem is the lack of a reliable antibiotics pipeline due to poor financial incentives to advance candidate compounds into clinical trials. Between the 1980s and early 2000s, antibiotics FDA approvals fell by 90%. Without government support, antibiotics development is hardly profitable using traditional pharmaceutical business models.

Research grants, government contracts, public-private partnerships and tax credits promise to reduce R&D costs. The fundraising success by Scottish MGB Biopharma in August 2019 gives hope and also seems to prove the point. Even though private investors were in the mix, a substantial amount originated from public sources through Innovate UK and the Scottish Investment Bank. In general, push incentives have indeed increased antibiotic development and the number of FDA approvals in the 2010s. However, most of these new drugs do not target extremely resistant strains and some overlap in their targets, which means they compete for market share.

Other push incentives require antimicrobials against serious or life-threatening infections to be treated like orphan drugs. Such measures allow for a faster approval process to shorten the time to market. This could involve streamlined conditions for clinical trials to lower expenses and shorten their duration, putting more emphasis on non-human results, fast track and priority reviews as well as market exclusivity in addition to regular patent protection to fend off generics. Last autumn, an anti-fungal formulation was granted orphan status by the FDA, and an antibiotic for the treatment of complicated urinary tract infections was FDA-approved after having received Qualified Infectious Disease Product (QIDP) designation, including Priority Review.

Pull incentives

High prices would make the antibiotics market attractive for developers. However, these may not necessarily prevent over-usage and would disadvantage low-income areas. Also, whenever hospital spending is constrained, price is the main determinant for antibiotics procurement. Financial incentives, like reimbursement allowances for selected antibiotics, could influence such decision-making in favour of optimal patient outcome. This goal is part of the UK’s Quality Premium scheme and was the aim of the 2014 US ‘Developing an Innovative Strategy for Antimicrobial Resistant Microorganisms’ (DISARM) Act, which was not enacted.

De-linking sales and profit

The ‘blockbuster’ drug model, i.e. high sales volumes to rake in high revenues, is inappropriate for antibiotics because it goes against the stewardship principle that aims to slow down resistance development. At their foundation new models must disconnect profits from sales volume and price.


Hospitals could purchase permits for a fixed fee to cover a set amount of antibiotics of last resort. The allowable amount could, for example, be determined by the number of beds. This model would create predictable revenue streams for manufacturers because permit sales can be estimated in advance and are independent of actual usage. This might incentivise the development of important niche antimicrobials with small market size. A related idea is to pay developers a sort of insurance premium for access to antibiotics.

Global coordinator

A global actor could buy out an entire successful product or reimburse development costs. In the case of a buy-out an international body acquires global sales rights from the manufacturer to manage large-scale supply and stewardship. The reimbursement model incentivises development of more useful drugs because the overall return to the manufacturer is dependent on the drug’s market performance.

Non-profit model

The essential argument for non-profits is that they are not harassed by shareholders to provide continuously increasing value or high investor returns. They can afford to prioritise patient needs. Thus, they can target small markets, tolerate lower sales prices and usage controls. Non-profits could either market drugs themselves, licence or sell early-stage compounds to for-profit companies. The reduced failure risk for the acquirer would cut follow-on R&D costs and theoretically limit the sales price. Such non-profits would ideally exist within a larger coordinated framework to optimise R&D efforts of all participants. It might be more efficient to invest once in the creation of several non-profits to kick-start their sustainable drug development than to keep creating pull incentives for individual novel antibiotics.

Rapid diagnostics

Improving diagnostics can reduce the use of ineffective broad-spectrum antibiotics and increase the market for narrow-spectrum drugs which may otherwise not be used, for example, due to their harsher side effects. If doctors had rapid point-of-care diagnostics available that identify the antibiotic sensitivity in an infected patient, they could quickly choose the most suitable drug. This would also encourage companies to review existing drug libraries and reassess treatments that were thought to have too small a market in the past. Herein also lies an incentive to develop better diagnostics.

Mis-use deterrents

Taxes & fees

Fees and taxes could be introduced to discourage unnecessary prescriptions or use in healthy farm animals. Taxes could be applied at individual or aggregated level, e.g. GP. User fees for use in livestock could be levied at the manufacturing or importing stage.


Quotas could be established by issuing permits to prescribers. Market forces could then be left to determine the price.

Note that generally the focus of the crisis discussion (and this article) is on antibiotics, i.e. compounds to prevent or treat bacterial infections. Wider terms cover anti-microbial drugs to include further microorganisms such as fungi and anti-infectives to include viruses. Oftentimes these terms are used somewhat interchangeably.

Main references

1 thought on “Economics to boost antibiotics development

Comments are closed.