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The Economics of Antibiotic Resistance

The business model for developing new antibiotics is broken, researchers say. The question is, can we make a new one that works?

By Nathan Collins


(Photo: scelera/Flickr)

Drug discovery is big business with oftentimes questionable ethics. Nowhere is that more true than in the world of antibiotics. Older drugs are fast losing their ability to fight disease, and we’re in dire need of new antibiotic treatments—but a strange brew of evolutionary and economic forces makes it unlikely that companies will pursue new drugs to fight back.

The solution, according to an essay published this week in PLoS Medicine, is to decouple antibiotic sales from research and development—basically, to find a new way to fund drug research while, at least to some extent, discouraging sales. But sorting out the details is going to take some hard work, even if drug companies get on board with the basic idea.

“The current business model for antibiotics is plagued by market failures and perverse incentives that both work against [efforts to maintain drugs’ effectiveness] and provide insufficient rewards to drive the development of much-needed new treatments for resistant infection,” writes a team led by Boston University law professor Kevin Outterson, who specializes in health law and intellectual property.

The government needs to pay drug developers based not on sales, but on development costs and the potential benefits to public health.

Fundamentally, the public-health problem is that we overuse antibiotics, which—in a perverse evolutionary twist—fosters the creation of drug-resistant bacteria. The economics are odd too: Understandably, drug companies want to profit from the drugs they develop, which means selling more of them. This, in turn, compounds the resistance problem. But in discouraging overprescribing (and overusing), public-health officials indirectly discourage the development of new antibiotics.

Unless, of course, someone comes up with a new business model. The most promising alternative, Outterson and his colleagues write, is to pay for R&D in a different way—to “delink” drug development from sales. But who should pay for the R&D?

Early on in the R&D process, the answer is the government, the researchers argue, in the form of publicly funded university research. Tax credits, prizes, grants, and extra support through the clinical trial process could help through the next phase of development.

Most crucial—and tricky—is what happens once a new antibiotic gets approved. At that stage, Outterson and his colleagues argue, the government needs to pay drug developers based not on sales, but on development costs and the potential benefits to public health. Doing so, the team writes, more directly rewards innovation itself, rather than whomever sells the most pills. Even then, there will be issues to deal with, such as intellectual property rights and their effects on the global distribution of a new antibiotic drug.

“[W]e see the need for a global conversation that applies delinkage principles to address access, conservation, and innovation of antibiotics in concert and not in isolation,” the authors write. “Global political commitment is needed now to transform antibiotic delinkage from a promising idea into reality.”