Business Model Options for Antibiotics: Learning from Other Industries

Chatham House, The Royal Institute of International Affairs (London) and the Big Innovation Centre (London), 2015

Boston Univ. School of Law, Public Law Research Paper No. 15-05

43 Pages Posted: 25 Feb 2015

See all articles by Ella Jaczynska

Ella Jaczynska

GlaxoSmithKline

Kevin Outterson

Boston University School of Law

Jorge Mestre-Ferrandiz

Office of Health Economics

Date Written: February 24, 2015

Abstract

As resistance to antibiotics continues to grow, there is a well-recognized misalignment between the clinical need for new antibiotics and the incentives for their development. The returns from investment in antibiotics research and development (R&D) are perceived as too small. Partly as a result, the number of large multinational companies researching antibiotics has fallen drastically in the past 20 years and few high-quality antibiotics have been developed.

In looking at the antimicrobial resistance (AMR) situation, we were aware that other industries have faced conceptually similar challenges and that they might offer helpful lessons and possible solutions that could be adapted to the problems of antimicrobial R&D. Our focus was particularly on learning about models in which the incentive for R&D is delinked from the volume of sales.

A Big Innovation Centre and Chatham House workshop brought together on 1 September 2014 six companies that are members of the Big Innovation Centre: BAE Systems (defence), Allianz (insurance), Barclays Bank (finance), EDF Energy (energy), Dun & Bradstreet (corporate information) and Knowledge Unlatched (academic publishing). These companies presented business and incentivization models they had implemented or devised that could be explored further for their applicability to antibiotics R&D. It was made clear to them that any models shared might be adapted so that they a) provide the pharmaceutical industry with an incentive to invest in antibiotics R&D, b) offer insight to health services about how to fund and to maintain the availability of appropriate antibiotics and c) ensure that both new and existing antibiotics are used appropriately and wisely.

Learning from other industries has been a very fruitful exercise. They have offered a different perspective on how to tackle the AMR issue and have provided relevant analogies to consider.

This research report offers a number of innovative models and ideas that address many of the critical questions facing policy-makers in the EU and the US as they seek solutions. It also contributes to key new initiatives globally and in Europe and the US specifically, including the World Health Organization’s Global Strategy on AMR, the Innovative Medicines Initiative DRIVE-AB project in the EU, the UK’s Review on Antimicrobial Resistance and, in the US, the President’s Advisory Council and the National Strategy for Combating Antibiotic-Resistant Bacteria.

This report highlights important lessons about how these other industries have adapted to diverse challenges in their environment. Based on this work and on our own review over the past few months, we see a clear need for a ‘bucket’ of various funding mechanisms that can exist in parallel. There should be separate funding mechanisms in place during the R&D phase of developing an antibiotic and a different mechanism to fund the maintenance, delivery and distribution of the antibiotic after regulatory approval.

The report articulates three essential messages: (1) Global collaboration is required on a scale not seen before in relation to antimicrobial resistance. Many independent initiatives are under way nationally and regionally, but they need to be brought together in a concerted worldwide effort to engage on a global scale. The report is designed to help bridge these various efforts and move towards consensus on global action. We propose four initiatives:

a. Creating a global antibiotics public-private partnership (GAPPP). A GAPPP should involve private companies, academic institutions and public bodies. It must be a sustainable, independent and self-funding operation with a focus on the research and early development of antibiotics in response to identified global public health needs.

b. Creating a global antibiotics fund (GAF), which would be set up to be an over-arching umbrella fund (potentially consolidating all the pre-existing small funds that exist globally). It could exist alongside or in collaboration with major existing funding sources, such as BARDA and IMI, that have very pre- defined targets for funding. A GAF would provide monetary support to a GAPPP in order to enable its R&D effort. A GAF would work with existing funders for better awareness of the work each is supporting and for collaboration in funding priorities, options and courses of action. Ultimately, proposals for a GAPPP and a GAF are a possible way forward to pool skills, resources and funding so as to ensure a sustainable long-term solution.

c. Exploring the Gavi (the Vaccine Alliance)-type model and determining whether or not an independent global body should serve as the global procurement and distribution entity for antibiotics.

d. Becoming better stewards of antibiotics, as they are valuable drugs. Otherwise, boosting the production of new antibiotics will be futile. Antibiotics must be used appropriately everywhere around the globe. A worldwide effort to conserve them and to ensure appropriate access and use requires international coordination and the participation of every country. Some form of an international treaty or framework agreement is called for.

(2) There is a need to explore ‘service-availability’/’option-to-use’ types of agreements/contracts between developers/manufacturers and health care systems as a means to support the ‘delinkage’ concept. As in the defence sector, products are developed but kept on the shelf, maintained and ready when needed, including all the services to deliver them effectively and efficiently. Long-term contracts with customers ensure that the services they require are available when needed. Innovators of new antibiotics should not be rewarded with the traditional ‘price x volume’ model but should focus more on delivering the product, resources and services when needed. Governments would pay an annual ‘service-availability’ fee/premium delinked from the volume of sales. Lessons from the insurance industry indicate how these annual ‘premiums’ could be calculated.

(3) There is a need to engage customers (in the broadest sense) and ensure that the right incentives, both financial and non-financial, are aligned from the bench to the bedside. We should not focus on incentives just for the pharmaceutical companies; we must include prescribers, health systems, patients and all other stakeholders.

Keywords: antibiotics, innovation, new drugs, resistance

JEL Classification: I12, I19, K32, K39

Suggested Citation

Jaczynska, Ella and Outterson, Kevin and Mestre-Ferrandiz, Jorge, Business Model Options for Antibiotics: Learning from Other Industries (February 24, 2015). Chatham House, The Royal Institute of International Affairs (London) and the Big Innovation Centre (London), 2015, Boston Univ. School of Law, Public Law Research Paper No. 15-05, Available at SSRN: https://ssrn.com/abstract=2569183

Ella Jaczynska

GlaxoSmithKline ( email )

5 Moore Drive
RTP, NC 27709
United States

Kevin Outterson (Contact Author)

Boston University School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States

Jorge Mestre-Ferrandiz

Office of Health Economics ( email )

12 Whitehall
London, SW1A 2DY
United Kingdom

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