Incentivising innovation
in antibiotics

Humanity is fast approaching a post-antibiotic era where mortality rates soar due to untreatable microbial infections. In 2012, the then director-general of the World Health Organization (WHO), Margaret Chen, warned that “a post-antibiotic era means, in effect, an end to modern medicine as we know it”. Even today, over 1.2 million deaths are thought to be the direct result of infection with antibiotic-resistant bacteria. If action is not taken, this number has been projected to increase to ten million by 2050.

Antibiotic resistance arises from random genetic mutations and is propagated through natural selection. Such mutations are particularly worrisome when they occur in genetic elements that can be transferred between individual bacteria and even across different microbial species to spread resistance widely. This problem was recognised soon after antibiotics were first discovered. Indeed, Alexander Fleming warned of the dangers in his 1945 Nobel lecture: “It is not difficult to make microbes resistant to penicillin in the laboratory by exposing them to concentrations not sufficient to kill them.”

Resistance has been stimulated by the careless use of antibiotics, particularly in healthcare and agriculture. The problem of resistance cannot be ignored by individual countries, as resistant strains easily cross borders in today’s interconnected world. Exemplifying this is the bacterium responsible for causing gonorrhoea, Neisseria gonorrhoeae. Since effective treatment became available in the 1930s, N. gonorrhoeae strains resistant to five entire classes of antimicrobials and antibiotics (sulphonamides, penicillins, aminoglycosides, macrolides and fluoroquinolones) have spread throughout the world. Society is now down to its last line of treatment, cephalosporins. However, cephalosporin-resistant strains were first identified in Japan in 2011 and are now observed in additional Southeast Asian countries and in Europe. If no new treatments are found, gonorrhoea will, again, become an untreatable disease.

Overcoming antibiotic resistance will require multiple approaches. That said, the core of any future strategy will include the development of novel antibiotics alongside a new model termed ‘antibiotic stewardship’.

‘Over 1.2 million deaths are thought to be the direct result of infection with antibioticresistant bacteria’

This concept is where antibiotics are used sparingly to discourage resistance while we retain a bank of ‘last-resort’ antibiotics, administered only when all others have failed. Unfortunately, these two solutions can be at odds with the current business model of the pharmaceutical industry. As of November 2023, no new classes of antibiotics have been brought to market since the 1980s, so
ideas for incentivising innovation in this field merit serious consideration.

Bringing a new drug to market is expensive, with an average cost of around $1bn to the innovators. To encourage such research and investment, current systems usually reward pharmaceutical companies with patents and/or regulatory data exclusivity for eligible drugs.

A patent provides rights to exclude others from commercially benefiting from such patented drugs for an initial 20 years, allowing the company time to recoup its investment and then generate a profit. Data exclusivity provides protection for the preclinical tests and clinical trials submitted by an innovator to regulatory agencies for obtaining marketing authorisation for a medicinal product. Once these periods of exclusivity end, other companies can produce ‘generic’ or ‘biosimilar’ versions of the drug to sell at a fraction of the original price.

Overall, this system encourages a pharmaceutical company to sell as much as possible of its drug while under exclusivity protection before its market price falls upon the entry of generics. However, this approach conflicts with antibiotic stewardship. If a novel antibiotic is to be used only sparingly, then it will be impossible for the pharmaceutical company to recoup its investment through sales volume. Merely raising the price is too simplistic. Firstly, high-income countries, which do not typically suffer from extensive antibiotic resistance, may not prescribe a novel antibiotic at all in the upcoming years and instead reserve it as a last resort. Lower-income countries, the most in need, would be unable to afford it. As such, how can intellectual property laws be modified to uncouple drug profitability from sales volume and reward innovation over utilisation?

One idea that has gained traction is ‘transferable patent exclusivity vouchers’ (TPEVs). These vouchers would be awarded to a company that develops a novel antibiotic and would be used to extend the patent term of any medicine currently under patent protection. Importantly, it would be possible for TPEVs to be sold between companies.

Thus, a pharmaceutical company could obtain a voucher by innovating a novel antibiotic and then use this to longer protect its most profitable drug, eg an anti-cancer drug, to generate income. Alternatively, smaller companies with less valuable patent portfolios could obtain vouchers and then sell these to others that hold such ‘blockbuster’ drugs.

To illustrate why such a model is attractive to the pharmaceutical industry, take the anti-cancer drug Keytruda, produced by Merck & Co. In 2022, Merck reported a global revenue of $20.9bn for this drug and this is expected to increase further over time. However, Keytruda’s original product patent protection appears set to expire in 2028. The ability to extend this monopoly for a year in a major jurisdiction would, to say the least, be of interest to Merck. The hypothetical bargain would therefore be that society gains a new antibiotic in return for Merck retaining longer protection for Keytruda.

Discussions concerning TPEVs have begun at the level of government. In the UK, the TPEV model was noted in a 2018 report by the House of Commons’ Health and Social Care Committee. That year also saw the REVAMP Act introduced to the US House of Representatives, proposing TPEVs in return for the development of ‘priority antimicrobials’, although it did not advance to a full vote.

The European Union (EU) has also applied this concept to the sphere of regulatory data protection. The EC has officially proposed introducing ‘transferable data exclusivity vouchers’ (TDEVs) in its 2023 draft ‘Regulation on the reform of the EU pharmaceutical legislation’. These vouchers are functionally equivalent to TPEVs; they delay the entry of generic or biosimilar medicines by one year and are sellable, transferrable assets.

‘How can intellectual property laws be modified to uncouple drug profitability from sales volume and reward innovation over utilisation?’

These vouchers would be issued at the discretion of the EC in exchange for the development of novel antibiotics. A drug would be assessed by the European Medicines Agency (EMA) and awarded the voucher if it represents an entirely new class of antimicrobials, has a unique mechanism of action or could address a multidrug-resistant infection. A maximum of ten vouchers would be given out over a 15-year period and the recipient would be obliged to ensure supply of the antimicrobial to the EU. In an effort to ensure market predictability, these vouchers would be usable for a drug only within
its first four years of regulatory data protection and only a once per drug.

However, there has been significant resistance against the Commission’s proposal for TDEVs. The Permanent Representation of the Netherlands to the EU published a non-paper supported by 13 other EU member states, collectively voicing their opposition to TDEVs. The European Consumer Organisation also voiced concerns and ReAct, an independent network funded by the Swedish Government, published its criticism in the worldrenowned academic journal, The Lancet.

A major criticism is that TDEVs would ultimately be paid for by each EU member state’s healthcare systems, as these would be forced to purchase brand-named drugs at higher prices for one year longer. The average cost of this has been the subject of argument. The European Federation of Pharmaceutical Industries and Associations, a pharmaceutical lobbying organisation, estimates that each voucher would be worth €350-840m, but ReAct argues that costs of up to €5bn would be possible for the most profitable drugs. It is argued that such costs are unjustifiably high and would impose too large a burden on healthcare systems. Such increased costs may also delay the availability of particular treatments in less wealthy European countries.

It was also argued that TDEVs do nothing to discourage a company pushing to sell as much of its novel antibiotic as possible, and that this would still occur in countries with limited regulation on antibiotics.

Thus, novel antibiotics may not be shielded from resistance. Additionally, TDEVs may introduce market ambiguity and could undermine legal certainty as companies producing biosimilars or generic drugs will be unable to accurately predict when the market exclusivity of a drug will end.

Finally, it has been argued that although TDEVs may encourage innovation in antibiotic research, they may stifle progress in other research fields as companies simply extend blockbuster drugs to generate profit as opposed to investing in research and development (R&D).

Other strategies have been proposed. With regards to IP, one alternative is to grant longer market exclusivity to only the novel antibiotic itself. Thus, a company could be reimbursed for its R&D costs over a longer period. This approach has already been enacted in the US with the Generating Antibiotic Incentives Now (GAIN) Act in 2012, which offers a five-year extension to market exclusivity for new antimicrobials.

However, the GAIN Act has arguably failed to adequately promote the production of truly novel drugs. This Act was considered too broad in scope, leading to an increased focus on simply modifying existing drugs instead of truly innovating new approaches. This is problematic, as drugs that operate through the same chemical mechanisms are both sensitive to the same mode of resistance. Thus, the diversity of society’s antibiotic portfolio did not increase.

Proposals to improve such extended protection for antibiotics have been made. These proposals include rewarding only those drugs that address truly unmet needs, expanding programmes into vaccination research and combining extended exclusivity with increased drug prices.

IP-based approaches are not the only means of encouraging innovation. Significant public funding is beginning to be offered to small- and mediumsized enterprises to reduce the barrier to market entry. For example, the Antimicrobial Action Fund, supported by organisations such as the WHO, European Investment Bank and Wellcome Trust, expects to raise $1bn to invest in small biotechnology companies.

‘The core of any future strategy will include the development of novel antibiotics alongside a new model termed ‘antibiotic stewardship'

The EU also funds the New Drugs 4 Bad Bugs initiative, which has a budget of €650m to invest in antibiotic development. Overall, such funds aim to stimulate the initial stages of drug R&D.

Market entry rewards could be offered to companies that develop novel antibiotics to reward end-stage success. Upon approval, such companies would receive financial rewards, with conditions set to ensure antibiotic stewardship and equitable access. Thus, generating profit would become easier as these financial rewards would offset development costs.

Finally, medical agencies could purchase antibiotics on a ‘subscription’ basis. This approach was started by NHS England in 2019 when it launched a pilot programme paying a fixed annual fee for antimicrobials based on an assessed value to the NHS, as opposed to the volumes used. A similar model has also started in Sweden, although this programme still allows companies to engage in volume-based sales while being guaranteed minimum income for qualifying antibiotics. Overall, these models guarantee pharmaceutical companies a yearly income for supplying an antibiotic, as opposed to income being based solely on usage.

Governments and international organisations are increasingly recognising the need to encourage the development of novel antibiotics. Enhanced funding for drug development is likely to drive more players to the market, but alternative models of reward will be required to ensure responsible use of any successful products.

IP is already playing a role in the development of these alternative models. The EC’s proposal to introduce TDEVs is a significant milestone and would be a radical approach. However, its acceptance into practice is uncertain. Regardless of the outcome, the issue of antibiotic resistance is a global problem and cooperation across borders will be required to ensure equitable access to any future innovations.

References are available on request.