Value-based Strategies for Encouraging New Development of ...

Value-basedStrategiesforEncouraging NewDevelopmentofAntimicrobialDrugs

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AbouttheDuke-MargolisCenterforHealthPolicy

TheRobertJ.Margolis,MD,CenterforHealthPolicyatDukeUniversitybringstogetherexpertisefromtheWashington,DCpolicycommunity,DukeUniversityandDukeHealthtoaddressthemostpressingissuesinhealthpolicy.

TheCenter’smissionistoimprovehealthandthevalueofhealthcarebydevelopingandimplementingevidence-basedpolicysolutionslocally,nationally,andglobally.Formoreinformation,visithealthpolicy.duke.edu.

AuthorsGregoryW.DanielDeputyDirector,Duke-RobertJ.Margolis,MD,CenterforHealthPolicyandClinicalProfessor,FuquaSchoolofBusiness,DukeUniversity

MarkB.McClellanDirector,Duke-RobertJ.Margolis,MD,CenterforHealthPolicyandRobertJ.Margolis,MDProfessorofBusiness,MedicineandHealthPolicy,DukeUniversity

MonikaSchneider

ResearchAssociate,Duke-RobertJ.Margolis,MD,CenterforHealthPolicy,DukeUniversity

JingyuanQian

SeniorResearchAssistant,Duke-RobertJ.Margolis,MD,CenterforHealthPolicy,DukeUniversity

GabrielaLavezzariSVPBusinessDevelopment,Biocerna(formerlyResearchDirector,Duke-RobertJ.Margolis,MD,CenterforHealthPolicy,DukeUniversity)

EllendeGraffenreidDirectorofCommunications,Duke-RobertJ.Margolis,MD,CenterforHealthPolicy,DukeUniversity

AdvisoryGroupHalaAudiHead,UKAntimicrobialResistanceReviewTeam

PatrickCourneyaExecutiveVicePresident,Hospitals,QualityandCareDeliveryExcellenceChiefMedicalOfficer,MedicareAdvantage,CostandPrescriptionDrugPlans,Kaiser

EdCoxDirector,OfficeofAntimicrobialProducts,CenterforDrugEvaluationandResearch,FoodandDrugAdministration(FDA)

VanceFowlerProfessorofMedicineandinMolecularGeneticsandMicrobiologyandMemberofDukeClinicalResearchInstitute,DukeUniversitySchoolofMedicine

Value-basedStrategiesforEncouragingNewDevelopmentofAntimicrobialDrugs

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RobertGuidosAssociateDirectorforLegislativeAffairs,CenterforDrugEvaluationandResearch,FoodandDrugAdministration(FDA)

StephanHarbarthHead,DRIVE-ABProject,InnovativeMedicinesInitiative

AmandaJezekVicePresident,PublicPolicyandGovernmentRelations,InfectiousDiseasesSocietyofAmerica

JoeLarsenDeputyDirector(Acting),BiomedicalAdvancedResearchDevelopmentAuthority(BARDA)

RamananLaxminarayanDirector,CenterforDiseaseDynamics,Economics&Policy

ShariLingDeputyChiefMedicalOfficer,CentersforMedicareandMedicaidServices(CMS)

LynnMarksSVP,SeniorClinicalAdvisor,InfectiousDisease,GlaxoSmithKline

CliveMeanwellCEO,TheMedicinesCompany

SteveMillerSeniorVicePresidentandChiefMedicalOfficer,ExpressScripts

SumathiNambiarDirector,DivisionofAnti-InfectiveProducts,CenterforDrugEvaluationandResearch,FoodandDrugAdministration(FDA)

KevinOuttersonProfessorofLaw,BostonUniversityExecutiveDirector,CARB-X

EdmundPezallaScholarinResidence,Duke-MargolisCenterforHealthPolicy,DukeUniversityFormerVicePresident,NationalMedicalDirectorforPharmacyPolicyandStrategy,Aetna

CharleneReedCEO,FoundationtoCombatAntimicrobialResistance

JohnRexChiefStrategyOfficer,CARB-XChiefMedicalOfficer,F2G,Ltd.(formerly)SeniorVice-PresidentandChiefStrategyOfficerforInfectiousDiseases,AstraZeneca

John-ArneRottingenAssociateFellowCentreonGlobalHealthSecurity

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ArjunSrinivasanAssociateDirector,HealthcareAssociatedInfectionPreventionPrograms,DivisionofHealthcareQualityPromotion,CentersforDiseaseControlandPrevention(CDC)

MelissaStundickHeadofStrategicAlliances,SperoTherapeutics

EugeneSunChiefExecutiveOfficer,MelintaTherapeutics

UrsulaTheuretzbacherFounder,CentreforAnti-InfectiveAgents

BrentWallaceChiefMedicalOfficer,IntermountainHealthcare

BlakeWisePresidentandChiefOperatingOfficer,Achaogen,Inc.

Acknowledgments:TheauthorswouldliketoacknowledgethefeedbackandguidancethatwereceivedfromourAntimicrobialPaymentReformAdvisoryGroup,andtothankthemforthetimeandeffortthattheycontributedtothedevelopmentofthisproposal.ThisworkwassupportedbyfundsfromtheU.S.FoodandDrugAdministrationandfromMerck&Co.


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TableofContentsExecutiveSummary..............................................................................................................................1

Overview..............................................................................................................................................3

TheProblem.........................................................................................................................................3Weakantimicrobialpipelinewithlowreturnoninvestmentrelativetopublichealthvalue...................3Reimbursementforhigh-priorityantimicrobialsdoesnotreflectpublichealthbenefit...........................4Evidenceofsuperiorityfromclinicaltrialsisnotroutinelyfeasible..........................................................4Diagnosticuncertaintylimitsappropriateuse.........................................................................................5Appropriatestewardshipmeanslowervolume........................................................................................5Fee-for-servicepaymentsfailtoencourageappropriateuse...................................................................6Consequencesofinadequatemarketreimbursementfordevelopment..................................................6

Effortstoimproveantimicrobialdevelopment.....................................................................................6Global“push”and“pull”incentives.........................................................................................................6GlobalsupportforaMarketEntryReward..............................................................................................7U.S.incentives..........................................................................................................................................8

PathforaccomplishingdelinkageintheU.S.......................................................................................10Coreprinciples........................................................................................................................................10

PriorityAntimicrobialValueandEntryAward....................................................................................12QuickAccesstoFundsthroughaMarketEntryReward.........................................................................12Transitioningtopaymentsthatsupportvalue.......................................................................................13

Implementationissues.......................................................................................................................14Determiningeligibledrugcandidates....................................................................................................14Developingevidenceforvalue-basedcontracts.....................................................................................14Financingmechanisms...........................................................................................................................15CareSettings..........................................................................................................................................16DrugsforRareInfections........................................................................................................................17TransitiontoRoutineUseofValue-BasedPaymentsforAntimicrobials................................................17

Conclusion..........................................................................................................................................17

Appendix1.U.S.NetSalesofNew-Molecule,Brand-NameAntibioticDrugsApprovedafter2000,inU.S.dollars(millions)..........................................................18

References.........................................................................................................................................19


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ExecutiveSummaryResistancetocurrentantimicrobialdrugsisagrowingsourceofmorbidity,mortality,andhealthcarecosts.Challengingmarketdynamicshaveledtoaweakpipelineofdrugcandidatestorespondtothesethreats.Combined,thesetwotrendsrepresentasignificantandgrowingthreattoUSandglobalhealthpreparedness.

Mostcompanieshaveexitedtheantimicrobialmarket,andthosethatremainareworkingonasmallnumberofdrugs.Lowreturnoninvestment(ROI)relativetobroadpublichealthbenefitsisamajorcontributortothesparsepipelineofdrugstargetingmultidrug-resistantorganismsthatposeseriouspublichealththreats.LowROIisdrivenlargelybyappropriateantimicrobialstewardshipprograms(ASPs)thatlimittheuseofinnovativetherapiestoappropriatepatients,availabilityofeffectiveandlow-costgenericsfortypicalinfectionsthatlimitnovelantimicrobialuse,andareimbursementsystemthatdoesnotreflectthetruepublichealthvalueofeffectivedrugsformultidrug-resistantorganisms.Inparticular,antimicrobialsforhigh-priority,resistantorganismshaveapublichealthvaluethatfarexceedsthefee-for-service(FFS)paymentforthepatientswhoactuallyhaveresistantinfections.Rather,theirvalueincludesbeingavailableforusewhennecessarytostemthespreadofresistantmicrobesbeforetheytakehold.Becauseofthesechallengingmarketconditions,awiderangeofglobalexperts(includingChathamHouse,theAMRReviewinLondon,andtheDRIVE-ABconsortiumintheE.U.)haverecommendedmuchstrongermarketentryor“pull”economicincentivestoencourageinvestmentstobringsuchantimicrobialstomarket.

However,theseapproacheshavenotyettakenhold.Thepublicinvestmentrequiredisdauntingatatimeofincreasingfiscalpressures.Moreover,bringingaproducttomarketdoesnotassureitscontinuingavailabilityandappropriateuse.Further,theU.S.healthcaresystemreliesonmultipleprivatepayersaswellaspublicfinancing,andapublicfundingapproachmightcrowdoutprivatespendinganddeliverysystems.

TheDuke-MargolisCenterforHealthPolicyisdevelopingU.S.policyapproachesthatcouldprovidebettereconomicincentivestoantimicrobialdevelopersthatsuccessfullybringeffectivedrugstothemarket,providingasocietalbenefitthatexceedsthecostoftheincentive.Workingwithabroad-basedadvisorygroup,Duke-Margolishasdevelopedaproposalforapublicly-leveraged,value-basedpaymentmodeltoaddressthesechallengesinaU.S.context.TheCenterbaseditsworkonseveralprinciples:bepartofacomprehensivestrategy;promoteinnovation,access,andstewardship;besustainableandpredictable,leveragepublicmoneywithprivatefunds;providerapidaccesstofundsuponmarketentry;andalignwithbroadershiftsintheU.S.healthcaresystemtovalueandquality.

OurPriorityAntimicrobialValueandEntry(PAVE)Awardproposalcombinesamarketentryrewardwithpopulation-basedpaymentsfrompublicandprivatepayersthatphaseinovertime.ThemarketentryrewardprovidesfundsoverearlyyearsofmarketingafterFDAapproval.Subsequentpaymentsrelyonthedevelopertoincreaserevenuefrompopulation-basedcontractswithpayersthatarelinkedtovaluetosocietythroughinfectionprevention,availability,supportforsustainableuse,andcontinueddatacollection.Byleveragingbothpublicandprivatesupport,thePAVEAwardprovidesdeveloperswithquickaccesstoasignificantrewarduponmarketentryaswellasstrongincentivesformanufacturerstoengagewithpayersinshiftingreimbursementfromFFStopopulation-basedcontractsthatsupporthigh-value,sustainableuse.ThePAVEAward’srisk-sharingmodeldelinksROIfromvolumeusetorewardandsupportavailabilityandappropriateuseofeffectiveantimicrobials.Thismodeladdressesthefundamentalneedforpublicinvestmentindrugsthatcombatresistantbacterialinfectionsbyresolving


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thecurrentconflictbetweenthedriversofROIandstrongstewardshipprograms,whilereinforcingthe“volumetovalue”shiftinhealthcarepayments,andleveraging,ratherthanreplacing,privatefinancing.Finally,themodelcancomplementandbuilduponapproachessupportedbyprivatefoundations,othercountries,andmultinationalorganizationstofurthergenerateglobalsupportforthedevelopmentofpriorityantimicrobials.


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OverviewIncreasingantimicrobialresistance(AMR)isaseriousandgrowingglobalpublichealththreat.IntheU.S.alone,theseinfectionsaffectmorethantwomillionpeopleannually,causeanestimated23,000deaths,andgenerateanestimatedeconomicburdenexceeding$55billion.1Ifcurrenttrendscontinue,300millionpeopleworldwideareexpectedtodieprematurelyinthenext35yearsduetoantimicrobialresistantinfections.2

InappropriateuseofexistingantimicrobialscontributestothedevelopmentofAMR.Onethirdofthe266.1millioncoursesofantibioticsdispensedtooutpatientsintheU.S.in2014wereeitherunnecessaryorinappropriate,atadirectcostofover$1billionperyear.3–5Further,theIMSInstituteforHealthcareInformaticsestimatesthatantibioticmisuseleadstomorethan$35billioninavoidablecosts.Highprescriptionratesforbroad-spectrumdrugsfurthercontributetoAMRbyincreasingtheselectivepressureonallbacteriatodevelopbroaderresistance.Unfortunately,limiteddevelopmentandadoptionofeffectiveandrapiddiagnostictoolsinclinicalpracticehinderstheuseofnarrow-spectrumantibiotics,whichtargetgroupsofbacteriamoreselectively.

In2013,theCentersforDiseaseControlandPrevention(CDC)releasedareportdetailingthemosturgentresistantbacterialthreatstopublichealth.6Additionaltypesofinfectionsarefacingadwindlingnumberoftreatmentoptions,andtheWorldHealthOrganization(WHO)independentlyidentifiedtwelveprioritybacterialpathogensthatshouldbecometheprimaryfocusofresearchanddevelopment(R&D)efforts.7AlthoughthepublichealththreatsandR&Dprioritieshavebeenidentified,thepipelineofpotentialtreatmentsislimited,highlightingtheneedforpoliciesthatprovidefinancialincentivestosupportdevelopmentandavailability.

Thispaperdescribeshowtostimulateinvestmentindevelopmentandappropriateuseofhighpriorityantimicrobialdrugs,includinganewproposalthatreflectsU.S.andglobaltrendstowardvalue-based,notvolume-basedpaymentsystems.Ourrecommendationsreflectworkguidedbyamulti-stakeholderAdvisoryGroupthatincludesrepresentativesfromprivateandpublicpayers,pharmaceuticalcompaniesofallsizes,professionalsocieties,academicresearchers,thinktanks,governmentagencies*andpatientadvocacyorganizations,aswellasthroughinteractionswithstakeholdersduringanexpertworkshopandpublicmeeting.

TheProblemWEAKANTIMICROBIALPIPELINEWITHLOWRETURNONINVESTMENTRELATIVETOPUBLICHEALTHVALUE

Avibrantandinnovativeantimicrobialdrugpipelineisneededtoaddressthegrowingpublichealththreatofresistantorganisms,yetasmallnumberofcandidatesareindevelopment.Oftheapproximately40potentialdrugsinclinicaldevelopment,onlysixteenaretargetedtoward“urgent”pathogensand,basedontypicalattritionratesacrossdrugdevelopment,onlysixofthesesixteenareexpectedtobeapprovedbetween2017and2024.8,9Incomparison,morethan170drugsfordiabetesandmorethan700forcancerareinvariousstagesofclinicaldevelopment.10,11

*e.g.,theBiomedicalAdvancedResearchandDevelopmentAuthority(BARDA),theCentersforDiseaseControlandPrevention(CDC),theNationalInstitutesofHealth(NIH),andtheU.S.FoodandDrugAdministration(FDA)


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Onereasonforthelimitedpipelineistherelativelyhighcostanddifficultyofdevelopingantimicrobialsanddemonstratingtheireffectiveness.Drugdevelopmentinmanyclinicalareasisexpensiveandrisky;estimatedcostsacrossallareasrangeupto$1.2-$2.6billionfornoveldrugs,andittakesroughly8yearsformarketapprovalfrominitialINDfiling,withanoverallsuccessrateof10percent.9,12,13Butthereareotherparticularmarket-relatedchallengesthatleadtoinadequateinvestmentinantimicrobialresearchanddevelopment.

REIMBURSEMENTFORHIGH-PRIORITYANTIMICROBIALSDOESNOTREFLECTPUBLICHEALTHBENEFIT

Alongsidesubstantialdevelopmentcostsanduncertainty,thefinancialrewardsforbringingpriorityantimicrobialstomarketarelow.ProductdevelopersevaluatemarketopportunitiesbasedonNetPresentValue(NPV)analysis,whichcomparestheinvestmenttogetadrugtomarketwiththeprojectedfuturereturnsintoday’sdollars.A2014studyfromtheEasternResearchGroupcalculatedaNPVforantimicrobialdrugsintherangeof-$4.5millionto$37.4million,mainlyduetolimitedmarketrevenues.14,15Between2011and2015,themedianyearlysalesofbrand-nameantibioticswithunexpiredpatentsrangedfrom$24millionto$75million(Appendix1)*,comparedtomorethan$500millionformostbrand-nameoncologydrugsapprovedduringthesameperiod.16Amongthesixteennew,brand-nameantimicrobialsapprovedsince2000,onlyfivehavegeneratedannualsalesofmorethan$100million*.Blockbusterdrugstatusrequiresannualsalesover$1billion;antibioticsstruggletoreach10percentofthatgoal.ANPVof$200milliongenerallyhasbeenviewedasabenchmarkabovewhichcompaniesmightdeeminvestmentworthwhile,althoughthisbenchmarkmayvarybysizeandtypeofcompany.17

Incontrasttoreturnsforinnovativetherapiesfornon-communicablediseases,themarketreturnstoantimicrobialdevelopersarelowrelativetothepotentialbenefitstosocietybecausethosewhousethedrugarenottheonlybeneficiariesoftreatment.Rather,benefitsofthesedrugsaccruetothosewhoneverneedtreatment,becausetheavailabilityoftheantimicrobialpreventsthespreadoftheresistantorganism.Thepeoplewhobenefitfromavoidinginfectionsthroughavailabilityandappropriateuseofaneffectivedrugprovidenorevenueforantibioticmanufacturers.Accompaniedbystrongattentiontolimitantimicrobialusetoappropriatecases—sinceusedrivesresistance,overusedrivesresistancemorerapidly—fewindividualswilleverdevelopaseriousresistantinfection.Ideally,theavailabilityofthesehigh-prioritytreatmentswouldbeaccompaniedbystronginfectioncontrolandstewardshipprograms,tominimizetheneedfortheiruse.Fornon-communicablediseaseslikecancer,themainvalueoftreatmentislimitedtotheactualindividualswhoareatriskfororwhodevelopthedisease.

Healthcarepaymentsfocusontheindividualswhoreceivetreatment.Payersandpatientsconsiderthevalueoftreatmenttotheirindividualcases,notthebroaderbenefitsandcostsavingstotheinfectionsthatareprevented.Asaresult,especiallywhenusedappropriately,antimicrobialsforhigh-priorityinfectionsaregenerallylow-revenueproducts.

EVIDENCEOFSUPERIORITYFROMCLINICALTRIALSISNOTROUTINELYFEASIBLE

Newantimicrobialsusuallywillnotcomewithevidencedemonstratingsuperioroutcomescomparedtostandardofcare.18Althoughnewantimicrobialswillhavepreclinicalinvitroandinvivodatashowingtheiractivityagainstbacteriathatareresistanttootherdrugs,demonstratingthismicrobiological

*Derivedfrompubliclyavailablesalesdata2010-2015


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superiorityinstudiesofhumansisnotpossibleroutinely.Thelackofclinicalsuperiorityevidenceisduetobothpracticalconstraintsinantimicrobialclinicaltrialsandthedesirabilityofminimizingtherateofinfectionduetohighlyresistantbacterialstrains.Instead,mostantimicrobialshavebeen,andwillcontinuetobe,studiedusingnon-inferioritytrialdesignsinwhichthenewagentiscomparedtoanotherdrugexpectedtoalsobeactive.Ethically,thecomparisonarminatrialmustbearegimenthatrepresentswhatthetreatingphysicianthinksisthebestcourseoftreatmenttocuretheinfection.Assumingthereisaneffectiveantimicrobialdrugorregimeneffectiveagainstthebacteriaunderstudyandbecausetheoutcomeofinterestisbinary(curevsnocure),theexpectedtreatmenteffectformostnovelantimicrobialsis,atbest,acureratethatisnoworsethanusualcare.

Further,ifalargeclinicaltrialcouldbedesignedtofocusonaspecificbacteriumforwhichtherearenoeffectivetherapies,thenthatwouldindicateafailureofpoliciestopreventtheemergenceofawidespreadresistantmicrobe.Ifaccrualofsubstantialnumbersofpatientsintosuchatrialwerepossible,itwouldimplyasituationwithgrimpublichealthimplications.

Fromtheperspectiveofpayersfocusedonvalueforanindividualpatient,adesirefordemonstrationofsuperiorityisunderstandabletojustifycoverageandreimbursementofnewantimicrobialsathigherprices.Butthisperspectivedoesnotaccountforthepublichealthgoalofprovidingrobustavailabilityofantimicrobialswhentheroutinelyviablepathforregulatoryapprovalcannotbeexpectedtoproducesuchevidence.

DIAGNOSTICUNCERTAINTYLIMITSAPPROPRIATEUSE

Alackofsensitive,specific,andrapiddiagnosticsleadstochallengesbothinclinicaluseandinantibioticdevelopment.Inday-to-daypractice,acuteinfectionsrequireimmediatetreatment,butdeterminationofthespecificcauseoftheinfectionissurprisinglydifficult.Thisparadoxicalproblemarisesbecausetheorganismswhicharecommonlypartofthehealthyhumanmicrobiomeareveryoftenthesameorganismswhichcancauseinfectionandmeredetectionofapotentialpathogendoesnotmeanthatitiscausative.Asaresult,physiciansoftenoptforrelativelybroadempiricaltherapyratherthannarrow(er)therapy,andmostoftennewerandnoveltherapies,basedondiagnosticstests.Negativeresults(lackofdetectionofapathogenorlackofdetectionofresistance)areresultsthatareparticularlylikelytobeignoredifthepatienthassignificantriskfactorsforsuchinfections.

Lackofavailablerapiddiagnosticscanalsoposeachallengeinantimicrobialclinicaltrials,particularlywhenatrialseekstostudyinfectionsduetoaspecificbacterium.Ifapatientispotentiallysuitableforsuchaclinicaltrialbutthephysicianisunabletoconfirmthispromptlywithatest,thepatientmaybetreatedwithoneormoreantibioticspriortoenrollment,whichconfoundsexaminationofthetreatmenteffectsofthenewdrugunderstudy.Further,ifapatientisultimatelyfoundtonothavebeeninfectedwiththetargetorganism(withoutarapiddiagnosticthiswouldbeunknownatenrollment),butisenrolledinthetrialbecauseempiricevidencesuggeststhathemaybe,thesponsorwillhavespentadditionaltimeandmoneyfordatathatwillultimatelynotcontributetodrugapproval.Bothscenariossignificantlyincreaseinefficiency.

APPROPRIATESTEWARDSHIPMEANSLOWERVOLUME

Novelantimicrobialdrugsmustbeusedappropriatelytoslowthedevelopmentofresistance.Inhealthcaresettings,thisgoalisaccomplishedthroughASPswiththecoreelements(definedbytheCDC)ofleadershipcommitment,accountability,drugexpertise,action,tracking,reporting,andeducation.19


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Stewardshipplaysacriticalpublichealthrolebyconservingnewdrugsforresistantinfections;however,thispracticealsolimitssalesvolumeandROIfornewantibiotics.Appropriatestewardshipalsomeansthatmostnovelantimicrobialshaveanarrowsetofpatientsforwhomtheymaybeclinicallyappropriate,limitinguse.IntheU.S.,theCentersforMedicareandMedicaidServices(CMS)hasmandatedstewardshipprogramsasaconditionofparticipationinMedicarefornursinghomes,andissuedaproposedruletorequirethesameconditionswithinhospitals.TheCDChassettargetstoreduceinappropriateantibioticuseintheoutpatientsettingby50percentandwithinhospitalsby20percent.Bothactionsareexcellentpublichealthmeasures,butbothaccentuatethedifficultiesofavolume-basedsalesmodelforantibiotics.Thesemeasurescanbereinforcedbyfinancialincentives:reasonablyeffectivegenericdrugsareavailableformostinfections,sothatpayersandpatientsshouldpreferthesealternativestohigh-pricednewantimicrobials.

FEE-FOR-SERVICEPAYMENTSFAILTOENCOURAGEAPPROPRIATEUSE

TheU.S.healthcaresystemreliesonFFSpayments.Thispaymentsystemisapoorfitforantimicrobialsbecausevolume-basedpaymentsarefundamentallyinconflictwithstewardshiptoavoidtheuseofvaluableantimicrobialswhennotneededtodetertheemergenceofresistance.Asanalternativetopressuresfrommanufacturers(andpotentiallypatients)toincreaseutilization,apaymentapproachthatdelinksrevenuefromvolumeofsalescouldprovidebetterincentivesforappropriateuse.InmanyareasofU.S.healthcare,theshiftfromvolume-tovalue-basedreimbursementisencouragingmoreappropriatetreatment.Butsuchpaymentmechanismshavegenerallynotbeenusedforantimicrobials.

CONSEQUENCESOFINADEQUATEMARKETREIMBURSEMENTFORDEVELOPMENT

Failureofcurrentpaymentsystemstorecognizepublichealthbenefits,pressuresforappropriatestewardship,andtheinsufficientimplementationofnewdiagnosticstoaididentificationoftherightdrugfortherightpatientattherighttimeallresultinlowrevenuesforantimicrobialdevelopers,resultinginmanycompaniesleavingtheantimicrobialspace.Remainingsmallandmediumcompaniesstrugglewithsecuringfundsfrominvestors,andlargemanufacturerswithadiversifiedpipelinestruggletojustifyinvestingR&Ddollarsinanareawithanunpredictableandlowreturncomparedtootheropportunities.Theselowrevenueshaveledmanylargerdrugdeveloperstoshifttheirdiscoveryanddevelopmenteffortstomorelucrativeareas.Forexample,AstraZenecarecentlysolditslate-stageantimicrobialportfoliotoPfizerandspunoffitsearlystageworktofocusondevelopingmedicinesinthreefocusedareas,includingoncology.20In2014,oneoftheworld’slargestprivateantibioticR&DeffortswasatCubistPharmaceuticals.AfterbeingacquiredbyMerck,thevastmajorityoftheCubistR&Deffortwasshutdown.21Ofthetop50pharmaceuticalcompanies(rankedbyglobalsales),onlyfivehaveantibioticsinclinicaldevelopment.8

EffortstoimproveantimicrobialdevelopmentGLOBAL“PUSH”AND“PULL”INCENTIVES

Toaddresstheseissues,manyglobaleffortshaveproposedeconomicincentivestostimulateandrewardinnovation,whichinclude“push”and“pull”incentives.“Push”incentivesfocusonreducingtheR&Dcostsfornewantimicrobialsbyprovidingfinancialandinfrastructuresupport.“Pull”incentivesrewardmanufacturersafteranantimicrobialentersthemarket,increasingpotentialrevenue.


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ChathamHouse,aLondon-basedpublicpolicyinstitute,publishedareportin2015proposingantibioticincentivesspanningtheentiredevelopmentpipeline.22Recommendedpre-clinicalandclinicaltrialpushincentivesincludepublicfundingtosupportinitialdiscoveryresearch,andtaxcredits,cashrewards,andpublic-privatepartnershipstoreduceclinicaltrialsanddevelopmentcosts,aswellasamarketentryreward(MER)thatwouldreducethemanufacturers'dependenceonsalesvolumeforROI(alsoknownas“delinkage”).

InMay2016,theReviewonAntimicrobialResistance(AMRReview),commissionedbytheU.K.PrimeMinisterandsupportedbytheWellcomeTrust,publishedadetailedproposaltocombatantimicrobialresistanceincludinganInnovationFundtosupportforearly-stagedevelopmentofantimicrobialsandalump-sumpaymentMERtodevelopersofantimicrobialsmeetingadefinedclinicalneed.23

InJune2016,DRIVE-AB,anEUinitiativecomprisedof23publicandprivatepartners,releasedapreliminaryreportdetailingfivepromisingincentivesforantimicrobialinnovation:1)grantsforearlystageresearch;2)establishinganon-profitdeveloperwhowouldmanageandfinancediscoverythroughcommercialization;3)aMERtodevelopersfollowingapprovalofanantimicrobialthatmeetscertaincriteria;4)an“annuallicensefee”todrugdevelopersforaccesstoaspecifiedvolumeofantimicrobialsaddressingunmetmedicalneeds;5)adual-pricingmodelthatchargesahigherpriceforinappropriateuse.24FinalrecommendationsfromDRIVE-ABwillbereleasedlaterintheyear.

InSeptember2016,stakeholdersfromthepharmaceuticalindustryputtogetheraRoadmapforProgressonCombattingAntimicrobialResistance,whichfolloweduponthepreviousDavosDeclarationthatwassignedbyover100companiesandassociations.25Recommendationsincludedreducingtheenvironmentalimpactofantibioticproduction,encouragingappropriateuseofantibiotics,improvingaccesstoantimicrobialproducts,andgeneratingnewopportunitiesforcollaborationacrossindustryandpublicsectors,whichincludessupportforlumpsumpaymentsuponmarketentry.

TheBostonConsultingGroup(BCG)completedastudyfortheGermanGlobalUnionforAntibioticsResearchandDevelopment(GUARD)InitiativeinFebruary2017.26TworecommendationstargetedresearchanddevelopmentthroughthegenerationofTargetProductProfilestoguidedecisionsforpreclinicalresearch,andaGlobalResearchFundtobeusedtofundprojects,increasethecommunityofantibioticresearchers,andsupportinfrastructure.TwoadditionalrecommendationsincludedaGlobalDevelopmentFundtosupportclinicalresearch,andaGlobalLaunchReward,aMER,withbuiltinsustainabilitymechanismsforthecompanytopaybacktherewardovertimeandundercertainconditions.

GLOBALSUPPORTFORAMARKETENTRYREWARD

AlloftheseglobaleffortsrecommendedsomeformofaMER,whichisdesignedtopayforvitalantimicrobialdrugswithpublicfunds.TheMERprovidessubstantialadditionalrevenuestoreflectpublichealthvaluequicklyafterapproval,andremovestheneedforvolumesales,whichhelpsthedeveloperrecoupinvestments.Aformof‘delinkage’,whichremovesthe‘link’betweendevelopmentcostsandrevenues,theMERenablesuncouplingoftheROIfromthevolumeofdrugsales.DelinkagecouldbenefittheantimicrobialmarketbyremovingdependenceonsalestodriveROI,providingreimbursementandrevenueindependentofsalesvolume,removingtheneedtosethighprices,andprovidingsupportforappropriateuse.


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Asgenerallydescribedabove,implementationoftheMERwouldrequiretheformationofanewentitysuchasatrusttooverseetherewardandthemanagementoftheantimicrobial.Therewardwouldreplaceexistingpaymentsforantimicrobials,befundedbypublicsources,andbemanagedthroughnationalorinternationalcontractsthatwouldpreventmarketing,promotesustainableuse,andensureaccessinlow-resourcecountries.Whilefundsmaybedistributedinalumpsumoryearlypayments,currentproposalsenvisionpaymentsoverfiveyearsformeetingcertainbenchmarks.TheantimicrobialMERwouldneedtobelargeenoughforthedevelopertorecoupR&Dinvestmentsandprovideenoughrevenuetojustifyamoresubstantialcommitmenttothistherapeuticarea.Giventhesignificantpublichealthbenefitsfromthedevelopmentofpriorityantimicrobials,therecommendationshaveestimatedtheeffectivelevelofpublicpaymenttobebetween$500millionto$4billiontoachieveanNPVof$200millionforR&Dinvestmentinapriorityantimicrobial.14,23,27,28

WhiletheMERwouldprovideaclearrewardfordevelopers,thereareseveralchallengeswiththismodel.First,publicfundsaredifficulttoobtainandpotentiallysubjecttoongoingbudgetaryapproval;themoresuchfundscanleverage,notreplace,existingpaymentsources,themorelikelyaneffectiveMERcanbeimplementedandsustained.Second,manufacturershavelittletonoincentivetoremainengagedintheproductlifecycleafterreceivingtherewardunlesssomesalesvolumeincentiveremains.Finally,ifthepaymentforthisdrugwasfullydelinkedfromsalesvolume,thenproviderscouldpotentiallyaccessthedrugforfree,adisincentivetostewardship.Proposalstoaddresstheseissuesincludesettingstrictguidelinesforrewardeligibilityanddevelopingaproviderpricingsystemtoencouragestewardship.However,suchoversightwouldaddfurtheradministrativecosts,andmaynotbeeffective.

U.S.INCENTIVES

TheU.S.hasbeenleveragingpushandpullincentivestopromoteantimicrobialdevelopment.Table1summarizesthepushincentivesthathavebeenproposedorimplementedinrecentyears.TheLimitedPopulationAntibacterialDrug(LPAD)pathway,whichwasincludedinthe21stCenturyCuresAct(2016),providestheopportunityformorestreamlinedclinicaltrialsandanexpeditedapprovalprocessforantibioticsthataddressunmetmedicalneedsforlimitedpatientpopulations,butdoesnotaddresstheproblemoflimitedsalesvolumesleadingtolowexpectedROI.29


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Table1.U.S.PushIncentivesforAntimicrobials

Initiative Sponsororganization Description

Grantfunding NationalInstitutesofHealth(NIH)

Fundsawardedforbasicresearchonbacteriaandantimicrobials.InFY2015,Congressappropriated$100milliontoNIHspecificallyforAMRresearch.

BroadSpectrumAntimicrobialsProgram

U.S.BiomedicalAdvancedResearchandDevelopmentAuthority(BARDA)

BARDAinvestsnon-dilutivefundinginacompany’santibioticportfoliotohelpcompaniesthroughclinicaltesting.

CARB-X BARDA,NIH&WellcomeTrust

Public-privatepartnership,whichincludeslifescienceacceleratorsandresearchuniversities.FocusingonpreclinicalR&D,aimstobroadlycultivatepromisingnovelantimicrobialproductsthatcanbemovedintoclinicalpipeline.$450millionincommittedfunding2016-2021,witheveryfederaldollarleveragedbyanequalamountinprivatefunds.TheinitialgroupoffundedcompanieswereannouncedinMarch2017.

Taxcreditsforresearchanddevelopment

PendingHousebill,“ReinvigoratingAntibioticandDiagnosticInnovationAct”

Wouldallowcompaniestoreceivetaxcreditsequaling50percentofclinicaltestingexpensesforaqualifyinginfectiousdiseasetherapeuticordiagnostic.

Limitedpopulationantibacterialdrug(LPAD)pathway

Section3042in“21stCenturyCuresAct”

Allowsantimicrobialdrugstobestudiedinsmaller,lessexpensiveclinicaltrials,whichwouldexpeditetheapprovalofthedrug,butwouldlimittheeligiblepatientpopulation.

Inaddition,theU.S.hasimplementedseveralpullincentivestoprovidearewardaftertheproducthasenteredthemarket.TheGeneratingAntibioticIncentivesNow(GAIN)Act(2012)extendstheexclusivityperiodofcertainantimicrobialsbyfiveyears.In2000,CMSlaunchedtheNewTechnologyAdd-OnPayment(NTAP)program,whichprovideshigherMedicarepaymentsfornewmedicalproductsthataredeemedbyCMS,throughanapplicationprocess,toleadtosubstantialclinicalimprovement.NTAPpaymentswerenotdesignedspecificallyforantimicrobials,andonlyoneantimicrobialdrughasbeenapprovedforthisprogramduetoafocusonnon-inferiorityclinicaltrials.

InMarch2017the“ImprovingAccesstoAffordablePrescriptionDrugsAct”wasintroducedintheHouseandtheSenate,andasectionofthisbilldescribesamonetaryprizethatwouldbeprovidedtoantimicrobialdeveloperswhobringtomarketaqualifiedhighprioritydruginexchangeforforfeitureofmarketexclusivityandreasonablepricing.30,31Theseprizeswouldbepaidoutofatwobilliondollar“AntibioticsPrizeFund”.ThisproposalissimilartothosethathavebeenputforwardforaMER,butitisunlikelytomoveforwardduetothebillincludingadditionalrecommendationswithwiderangingimplicationsacrosstheentirehealthcaresector.

Twofurtherpullincentiveproposalshaveattractedconsiderableattention.ThefirstistheDevelopinganInnovativeStrategyforAntimicrobialResistantMicroorganisms(DISARM)Act,whichwasfirst

TheDISARMActandTransferableExclusivityVouchers:Animmediateimpact

Newlegislativeeffortsfocusonprovidinghigherandmorepredictablereimbursementtonewantimicrobialproducts,providingsignificantincentivesforantimicrobialdevelopment.BoththeTEVandtheDISARMActcouldbeintegratedwiththePriorityAntimicrobialValueandEntryAwardproposaltoleveragehealthplanpaymentsandpaymentreformtopromoteavailabilityandappropriateuseofantimicrobials.Eligibilityrequirementswithintheselegislativeproposalswouldcreatecriteriaforeligibilityandmeasuresofappropriateuse,aswellasencouragesurveillancereporting—importantfoundationsforamoresustainablesystemforfinancingandusinghigh-priorityantimicrobialsintheUnitedStates.


10

introducedintheHousein2015andisintendedtoallowbroaderadd-onMedicarepaymentsforinnovativeantimicrobialdrugs.WhiledrugsneedtoreceivespecificapprovalfromCMSunderNTAP,DISARMdrugsautomaticallyqualifyforadditionalpaymentsiftheytreatinfectionscausedbyqualifyingpathogens.TheseadditionalpaymentswouldeliminatethedisincentiveforhospitalstousehighpricedantimicrobialsbyoffsettingthecostoftheantimicrobialtotheMS-DRG,andthepaymentscouldpotentiallysupportbettertrackingofantimicrobialresistanceanduseofpriorityantimicrobialdrugs.However,thisincentivestilllinksrevenuetosalesvolume,potentiallycreatingincentivesforoveruse,anddoesnotrewardthepublichealthvaluefortheantimicrobialbeyondthepatientstreated.

AnotherproposedincentivethatwouldaddressthelinkageofsalesvolumeandROIisthetransferableexclusivityvoucher(TEV).32ThereareseveraladvantagestotheTEV,includingthetangiblereturntothemanufacturerandeaseofimplementation.Further,theTEVdoesnotrequiredirectgovernmentappropriations.However,theTEVischallengedbythefactthatnewrevenuescomefromraisingdrugspendinginothertherapeuticareasbydelayinggenericentry.Further,theTEVitselfdoesnotprovideanyincentiveforappropriatestewardshiporcontinuedavailabilityofthedrugoveritslifecycle.Itwouldrequirestrongadministrativeguardrailstoaddresstheseconcerns.

PathforaccomplishingdelinkageintheU.S.COREPRINCIPLES

Theglobalproposalsoutlinedabove(ChathamHouse,AMRReview,etc.)representimportantstepstopromotedevelopmentofnewantimicrobialdrugs.However,theymaybeinfeasibleforimplementationintheU.S.duetomultiplefactors,includingthelackofasinglepayersystem,limitedpublicfunds,andactivemovementfromvolumetomorepopulation-basedfinancingapproachesacrosstheU.S.healthcaresystem.Inordertoaccommodatetheseuniquefactorswhilestillaligningwithglobaleffortstocombatantimicrobialresistance,wehaveidentifiedeightcoreprinciplestoserveasafoundationforourproposal.Theseprinciples,whiledescribedinpreviousproposals,haveadditionalcomponentstoreflectuniquefactorsthataffecttheU.S.(sidebar).

Asdescribedabove,severalglobalorganizationshaveproposedtheuseofpublicfundstospurinnovation,butsoleuseofpublicfundsisnotapreferredoptionintheU.S.Instead,weproposeapartialpubliccontribution(reflectingpublicgood,populationhealthneeds,andappropriateuse)buildingoncontinuedpaymentsfrommultiplepublicandprivatepayers.Whilethesepayersserve

Coreprinciplesforantimicrobialeconomicincentives

1. Beapartofacomprehensivestrategy,whichpromotesdevelopmentacrossthelifecycleofadrug,andenablesthesuccessofbothsmallandlargedevelopers

2. Promoteandrewardinnovation3. Promoteaccess

4. Promotestewardshipsothatantibioticsaresustainableovergenerations

5. Besustainableanddependableoverthelongdrugdevelopmentcycle(atleastadecade)

6. Leveragepublicfundswithprivatepayments

7. Providedeveloperswithrapidaccesstofundsuponmarketentry

8. Supportandalignwithbroadershiftsinpaymentmodelstovalueandqualityandawayfromvolumeandintensity


11

distinctpopulationswithdifferentbenefitdesignsandotherfeatures,theyaregenerallymovingfromvolumetovalue-basedpaymentmodels,whichourproposalreinforcesforantimicrobials.

Theshiftfromvolume-tovalue-basedpaymentwithintheU.S.issupportedbyavarietyofmechanisms,includingAlternativePaymentModels(APMs),whichareaimedatreducingunnecessaryhealthcostswhilesustainingorimprovingthequalityofcare.Thisshiftisoftenimplementedthroughpartialorfullepisode-basedbundledpayments(e.g.,onepaymenttoallproviderstreatinganepisodeofcare),orper-patientpayments(e.g.,per-memberper-monthpaymenttoapatient’sprimaryproviders).TheAlternativePaymentModelFrameworkfromtheHealthCarePaymentLearning&ActionNetwork(HCPLAN)outlinesapathtomovefromFFStopopulation-basedpayments.33Withinthisframework,thegoalistoachievepaymentsthatarepartiallyorfullyattheepisode-orperson-levelforapopulationofpatients.

APMsareexpandingintheU.S.,andpreviousexperimentshaveprovidedevidenceofreductioninhealthcosts,especiallyincontrollingexcessspendingoninpatientcare,reducingtheaverageMedicarepaymentperepisodebytwotosixpercenteachyear.34TheMedicareAccessandCHIPReauthorizationAct(MACRA)of2015enablesphysiciansandprovidersworkingwiththemtotransitiontopaymentsbasedonqualityratherthanvolumeofcare.

Sofar,therehavebeenlimitedexamplesoftheuseofvalue-ratherthanvolume-basedpaymentsfordrugs,butsomecompanieshaveenteredintorisk-sharingagreementsbasedontheperformanceofthedrug;forexample,AmgenhasnegotiateddealswithseveralpayersfortheirPCSK9inhibitorwherepayersarereimbursedaportionofthedrugcostifagreed-uponperformancemetricsarenotmet.Therearearangeofoperationalandregulatorychallengestotheimplementationofsuchmodelsthatcomplicatetheirroutineuse,particularlyinareaslikeantimicrobialsthatcurrentlyrepresentonlyasmallpartofhealthcarepayments.Butantimicrobialsmayhavethegreatestbenefitfromashiftawayfromvolume-basedpaymentbecauseofstewardshipconcerns.Ashiftfromvolume-basedtowardper-personpaymentsforacoveredpopulation,aswellaspaymentsthatarelinkedtomeasuresofappropriateuseandcontinuedvalue,couldprovidemuchstrongerincentivesforappropriateuse—andcouldbeimplementedinamannerthatdoesnotincreaseoutlaysforpayers.Additionalpublicmarketentryrewardpayments—toreflectthepublichealthvalueoftheantimicrobial—couldreinforcethisvalue-basedpaymentstructure.Aswedescribebelow,publicsupportformarketentrylinkedtothisshiftinpaymentcouldprovideincentivesformanufacturerstoworkwithotherstakeholderstohelpovercomethebarrierstovalue-basedpaymentsforantimicrobials.


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PriorityAntimicrobialValueandEntryAwardToaddressthefundamentalpublichealthneedforadditionalfinancialsupportforthedevelopment,availability,andappropriateuseofhigh-priorityantimicrobialdrugswithintheU.S.healthcaresystem,weproposeapublicly-leveraged,value-basedpaymentmodel.Thismodel,calledthePriorityAntimicrobialValueandEntry(PAVE)Award,supportsandrewardsaccesstoandsustainableuseofinnovativeantimicrobialdrugs,whileprotectingthepublic’shealthfromresistantinfections.ThePAVEAwardprovidesdevelopersquickaccesstoasignificantrewarduponmarketentryofaneffectiveantimicrobial,andprovidesstrongincentivestoshiftreimbursementfrominsuranceplanstopopulation-andvalue-basedcontracts,notpaymentsbasedonvolumeofsales(Figure1).Thefollowingsectionsdescribethedetailsofthemodel,whichcombinesaversionoftheMERuponmarketentrywithsubsequentpaymentscontingentupondemonstratingincreasingrevenuefromvalue-basedcontractswithpayerslinkedtoavailability,sustainableuse,andcontinueddatacollection.

QUICKACCESSTOFUNDSTHROUGHAMARKETENTRYREWARD

ThefirstcomponentofthePAVEAward,whichisbuiltupontheexistingMERmodel,includesapubliclyfinancedpullincentive,ashasbeenrecommendedbymultiplegroups.Thispublicfundingwouldreflectasocietalcontributiontoaglobalthreat.InthePAVEAward,theMERcomponentwouldbeavailableoverthefirstfewyearsuponmarketentryforaverylimitedsetofhighpriorityantimicrobialswithspecificeligibilitycriteriatogivemanufacturerscleardevelopmentgoals,andthemagnitudeoftheMERcouldincreaseifthedrugmeetsadditional,desiredcharacteristicsthatarebeneficialtolargerpublichealthneeds,suchasanovelmechanismofaction,oralavailability,ornewclassofdrug.35ThisphaseofthePAVEAwardwouldprovidedeveloperspredictablerevenue,contingentonthedrug’smarketavailability,lackofprolongedshortages,orfailuretomeettheconditionsforsupportingashifttosustainablepaymentdescribedbelow.

Figure1.OutlineofPAVEaward


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TheMERwouldneedtobelargeenoughtojustifyacommitmenttoantimicrobialdevelopment,butmustalsobesustainable.WhiletheCentersupportstheconceptofasubstantialentryrewardforaproductthatmeetstheeligibilitycriteria,wefavoranapproachthatdoesn’tcompletelyrelyonthereward,toensurethatthemajorityoftherevenuefrompayersshiftstoalternativepaymentmodelsthatpromoteappropriatestewardship.FFSpaymentsforthesehigh-priorityantimicrobialsareonlyadequateifthereisahighprevalenceofhighlyresistantinfections,whichwouldbedevastatingfromthepublichealthperspective.

TRANSITIONINGTOPAYMENTSTHATSUPPORTVALUE

ThefirstcomponentofthePAVEAwarddiffersfromthetraditionalMERbyprovidingannualpayments,withthelargestportionpaidinyearone,andwithsignificantbutdecliningpaymentsthroughyearsfiveorsixasdirectpaymentsfordrugavailabilityanduserampup.Themagnitudeofthesepaymentswillvarydependingonthedrug,withthosedrugsthatrepresentahighersocietalvaluereceivinglargerpayments.

ThesecondcomponentofthePAVEAwarddirectlyincentivizesthecompanytoweanofftheMERthroughdecliningpaymentsthroughyearsfiveorsix,witheachyear’spaymentcontingentupondevelopersdemonstratinganincreasingshareoftheirrevenuefrompopulation-basedAPMslinkedtovaluetosocietythroughavailability,supportforsustainableuse,andcontinueddatacollection.ThistransitionwouldensurethatdrugsalesshifttoAPMsdelinkedfromvolume.ThespecificAPMpaymenttermsandoverallpaymentswillcontinuetobedeterminedthroughcontractnegotiationsbetweenthemanufacturerandpayers,supportedbymeasuresthatreflectvalueandstewardshipinthecoveredpopulations(Figure1).

Whilethesecontractswouldprovideapredictableandsustainablesourceofrevenueforantimicrobialdevelopers,itisimportanttoemphasizethatitwillnotresultinhigherdrugcoststopayers;rather,itcreatesincentivesandopportunitiesforthemtopaydifferently.ThesenewcontractswouldnotrequirepayerstopaymorethaninFFSmodels,butwouldstructurepaymentswithagreateremphasisonpublichealthinreturnforaccesstothedrug.Astheinfrastructureforvaluemeasurementgrows,developingthesecontractswillbeeasierandgainmorewidespreadacceptance.

Suchvalue-basedarrangementsmightinvolveapaymenttothemanufacturerforaccesstothedrugregardlessofthenumberofunitsutilized;paymentswouldbetiedtovaluetothecoveredpopulationratherthanvolumeofsales.Ifstewardshipprotocolsareinplaceandtransmissionofresistanceiscontained,lowdrugutilizationwouldbeexpected,buthavingadrugforalowprevalenceinfectionwouldbehighlyvaluable.Forexample,amanufacturermightcontractwithahealthplanona“permemberpermonth”(PMPM)basisforprovidingthedrugwhenneeded.Amanufacturermightalsoenterintoepisode-basedpaymentcontractstoprovidethedrugasneededforallhospitalizedpatientsincertainDRGs.Inbothcases,thecontractedpaymentwouldnotdependonthevolumeofthedrugactuallyused.Rather,theper-memberorper-episodepaymentwouldvarybasedonmeasuresof,forexample,appropriateuseorcontinuedeffectivenessoftheantimicrobial.Paymentsmightalsobetiedtothedevelopmentofbetterdataandevidenceonthebenefitsandrisksofthedrug,whichcouldsupportbetterpaymentcontractsinthefuture.Inthecaseofinpatientdrugsorphysician-administereddrugsforMedicarebeneficiaries,thisreformcouldbesupportedbythedevelopmentandadoptionofMedicareAPMpilotsbytheCenterforMedicareandMedicaidServicesthatcouldalignwiththeprivateAPMcontracts.


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ImplementationissuesDETERMININGELIGIBLEDRUGCANDIDATES

ThePAVEAwardmodelisintendedtopromotedevelopmentandsustainableuseofhigh-prioritydrugsthatcontributetothereductionofdrugresistantbacteria,andtheincentivecriteriashouldbetailoredspecificallytomeettheseneeds.TargetproductprofilescouldsetclearexpectationsofthedesireddrugcharacteristicsthatarerequiredtoqualifyforthePAVEAward,layingoutexpectedantimicrobialactivityandotherperformancestandardsforthedrug.Sucheligibilitycriteriawouldbenefitfromfurtherdevelopment,bothintheU.S.andinternationally.Near-termversionsofPAVEpaymentscouldbeawardedtodrugsthatmeetexistingcriteriarelatedtothepublichealthbenefit,suchasoralformsthatcouldbeusedmoreeasilytocontrolanoutbreakearlyoranovelmechanismofactionthatcouldplausiblysupportnewtypesofantibioticsforwhichresistancehasnotdeveloped.35TheWHOandCDClistsofferagoodstartingpointforprioritizingpathogensthatthedrugsshouldtarget.CARB-X,theleadingpublic-privatepartnershipsupportingpre-clinicalantibioticR&D,usestheseliststoprioritizeinvestments.However,asnewresistantbacteriaemerge,theeligibilitylistwillneedtoadapttothesechanges,sothecriteriawillneedtohavebuilt-inflexibilityandwillneedtobeupdatedonaperiodicbasis.

DEVELOPINGEVIDENCEFORVALUE-BASEDCONTRACTS

SuccessfulimplementationofthePAVEAwardwillrequirecooperationbetweendevelopers,payers,andproviders.Thecontractsshouldencourageshort-andlong-termsavingsfromreducedinappropriateuse,aswellasreducedinfection-relatedcosts,suchasextendedhospitalstays,treatmentcomplications,andadditionalinfections.

Asdescribedabove,demonstrationofsuperiorityduringclinicaldevelopmentcomparedtootherproductsisnearlyimpossibleandundesirableforpublichealthbecauseincreasingthenumberofpeopleforwhomthesedrugsareappropriatewouldmeanthatresistanceand/ortransmissionareincreasing.Continueddevelopmentofeffectivenessevidenceinthepost-marketsettingsisequallychallenging(thedrugwillbeusedsparinglylimitingsamplesize,highriskinfectionswithcomplicatingcomorbiditiescanleadtodeathevenwiththeuseofeffectiveantibiotics).However,continuedcollectionofdata

Public-privatepartnershipsprovideaccountabilitywhilesupportinginnovation

Public-PrivatePartnershipscandeliverresultsthataresuperiortoeithergovernmentorprivateactorsalone.CARB-Xisanewpublic-privatepartnershipprovidingpushincentivesforpre-clinicalR&Dtoaddressthethreatsofantimicrobialresistance.LaunchedonAugust1,2016,CARB-Xhasnowraised$455.5millioninfundingfromBARDA,NIAIDandtheWellcomeTrust.Thefirst11awardswereannouncedinMarch2017(http://www.carb-x.org/portfolio),andthreeoftheseinitialprojectsrepresentnewantibioticdrugclassesagainstGram-negatives,sevenhavenewmoleculartargets,fourarenon-traditionalapproaches,andalltargetCDCandWHOprioritypathogens.Theseprojectswereawardedalmost$24Minitiallyanduptoanother$24Mifmilestonesarehit.Allawardedfundsarematchedwithprivatemoney,with30-50%cost-sharing.

CARB-XwillonlyfundprojectsthroughphaseIclinicaltesting,leavingsignificantscientificandfinancialhurdlestoclearpriortoapproval.Manyofthesecompanieswillrelyonfundingfrominvestors,whichwillonlybeavailableifthereisaclearandpredictablepathtoROI.ImplementationofthePAVEAwardwouldprovideapredictablereturn,makingtheinvestmentinantimicrobialsmoreattractive.LikeCARB-X,thePAVEAwardwillsupplementpublicfundswithprivatepayers,leveragingbothtosupportinnovation.


15

ontheuseofnovelantibiotics,outcomes(includingsafetyoutcomes),canbenefitthehealthcarecommunityinbetterunderstandingtheuseinclinicalsettingsandsupportsustainableuse.Thus,idealperformancemeasuresinthesecontractswouldbebasedonevidenceofadrug’savailability,supportforsustainableuse,andcontinueddatacollection.

TheCenterrecommendsthat,asinotherareasofhealthcareperformancemeasurement,measuresrelatedtothevalueinpracticeofapriorityantimicrobialdrugshouldbuildonmeasuresavailabletoday.Therearesomeavailablemeasuresthatcouldbeusedasastartingpoint,includingmeasuresthatwouldpertaintoongoingavailabilityandutilityaccessmeasuresandusedata,allofwhichcanhelptotrackappropriatestewardship.TheCDC’sAntimicrobialUseOptionoftheNationalHealthcareSafetyNetworkisalreadyavailabletohospitalstoreportantibioticusedataandcouldbeusedtotrackusenationally.PairingtheAntimicrobialUseoptionwithitscompanionAntimicrobialResistanceOptioncouldprovidethetypeofdatathatwouldassistinmonitoringnewantibiotics.36Asecondsetofmeasurescouldberelatedtodatacollectionandevidencedevelopment,andcouldincludeexecutionofstudiesthatbetterdefinesafetyandutilizationpatternsofanantimicrobialdrug.Specifically,thesemeasurescouldincludetheperformanceofpatientpopulationandsusceptibilitystudiesandcost-effectivenessstudiesthatestimatecoststothepayerifthedrugwerenotavailable.Finally,contractswilltakeintoconsiderationthesupplychainandavailability.

Effectivestewardshipmeasuresarecriticalforthesuccessofdevelopersunderthesecontracts.ProviderswillneedtocollaboratewithmanufacturerstodemonstrateadequateperformanceonstewardshipmeasureswithinproviderAPMs.APMcontractscanbedesignedtobalanceover-andunder-useincentives,forexample,throughacombinationofper-memberper-monthpaymentsandpaymentsforactualuse.SolongasthepaymentswereasignificantshiftawayfromFFSpayments,manufacturersandpayerscouldnegotiatemixedmodels,wheremanufacturersandpayersbothfacefinancialrisk(e.g.,apartialcapitationpayment,withsomeadjustmentsbasedonvolumeandperformance).Indeed,afurtheradvantageofthePAVEAwardmodelisthatthesamekindsofappropriateusemeasurescanbeusedbypayerstosupportaligned,value-basedpaymentsforbothmanufacturersandproviders.Thispaymentalignmentcansupportdevelopersinworkingcollaborativelywithprovidersandpatientstopromoteandensureappropriateuse,whichiscriticalforthelong-termsustainabilityoftheantimicrobialsupplyandpublichealth.

FINANCINGMECHANISMS

BoththeAMRReviewandDRIVE-ABhavesuggestedtheuseofpublicfundstofinanceMERs.Suchfundscouldcomefromgeneralgovernmentrevenues,butdedicatedfundingsourceshavealsobeenproposedtobestreflectthepublicgoodofthesedrugs.TheAMRReviewsuggesteda“payorplay”model,inwhichmanufacturersthatarenotinvestedinantimicrobialdevelopmentwouldbechargedafee.Manytherapeuticareas(includingchemotherapyandsurgery)aredependentoneffectiveantimicrobials;consequently,drugmanufacturersshouldcontributetoantimicrobialdevelopmentthroughinvestmentintheirownantimicrobialR&Dorbypayingafee.Anotherproposedfundingmechanismisataxonallantibioticuse,effectivelya“userfee”foraccesstoantibiotics.37,38Thepurposeofthistaxwouldbetonotonlygeneratefundstorewardantimicrobialdevelopment,butalsotodiscourageinappropriateuseofcurrentantimicrobialsbyincreasingthecostofuse.Theentryrewardcouldalsobefundedthroughayearlypermemberfeeforallhealthcareplans,whichwouldservetodistributethecostofdevelopmentacrosssociety.


16

AnalternateapproachintheU.S.torelyingsolelyontaxesandfeeswouldbetorelyonthesaleoftransferableexclusivityvouchers(TEVs),eitheraloneorincombinationwithasmallertax,asdescribedabove.Insteadofbeingawardedtomanufacturerswhobringpriorityantimicrobialstothemarket,TEVscouldbeanexpedientmethodforprovidingpublicfundingforantimicrobialdevelopment.Asdescribedabove,therearesomeundueconsequencesthatcouldarisefromsuchincentives,whichcouldpotentiallybeaddressedbyestablishingguardrailstopromoteefficiency.Appropriatelimitsonthetimeand/orrevenuegeneratedbytheTEV,alongwithsufficientsupportforpatientassistanceprograms,wouldeasesomeofthenegativeimpactsofshiftingthefinancialburdenfromantimicrobialdrugstootherdiseaseareas(Table2).Additionally,thevoucherrecipientshouldbeobligatedtoprovidenoticeofwhichdrugwillbereceivingtheextensionfouryearspriortoexpirationofthatdrug’sexclusivity,whichshouldbesufficientnoticetoalleviatetheimpactongenericmanufacturers.32

Table2.Proposed“guardrails”foranantimicrobialtransferableexclusivityvoucherprogram32

Challenges Potentialsolutions

Increasescostinotherareasofhealthcare Capvoucher(invalueorduration)

Cannegativelyaffectthegenericmarket • Voucherwillonlybeawardedtonewdrugs(notapplicableforpreviouslyapproveddrugs)

• Companythatwillbeusingthevouchermustdeclarewhichdrugthevoucherwillbeusedonatleast4yearspriortoexclusivityexpiration

Doesnotencouragestewardship Linkqualityreportingrequirements(e.g.,efficacy,lengthofhospitalstay)toreceiptofvoucher

Couldbepoorlytargetedtoneededantibiotics Limiteligibilitytodrugsthatmeetcriteriasetbypublic/privatepartnershipgroup,whichwillidentifyunmetneedbasedonperiodicreviewsofinfectionrate,resistance,andthedrugpipeline

Tenyearsafterimplementationofvoucherprogram,theGAOcouldconductastudytodeterminetheeffectivenessofthevouchersandwhetherthevoucherprogramshouldcontinue

Whateverfinancingmechanismisused,publicinvestmentisneededtosupportthepublichealthbenefitsofantimicrobialdrugdevelopmentandavailabilitythatarenotcapturedwellinpaymentsforactualuseofthedrug.Whilethispublicinvestmentwouldsupportabenefittoallofsociety,givenincreasingfiscalpressures,itiscriticaltoleverageanypublicfundingtominimizethecostsoftheseeffortstothepublic.Themarketentryrewardproposedherebuildsonratherthanreplacesexistingfundingstreamsforantimicrobials,limitingtheneedforpublicfunds.

CARESETTINGS

Marketchallengesforantimicrobialdevelopmentspantheinpatientandoutpatientsettings,butmostnovelantimicrobialsunderdevelopmentandespeciallythoseintendedtotreatthemosturgentinfectionsthatwouldqualifyforthePAVEAwardwouldbeusedintheinpatientsetting.However,thePAVEAwardcouldpotentiallybeappliedovertime,ifneededtodrugsintheoutpatientsetting.Productdevelopers,payers,andprovidersareenteringintomorerisk-sharing,outcomes-basedmodelstohelpaddressproductperformanceuncertaintyandtohelpensurebettervaluefordollarsspent.FuturepaymentapproachesforantimicrobialsinthissettingcouldleverageCDCtrackingsystemsaswellasappropriateuseguidelinesthathavebeenissuedbyCDCandothergroupstoensureappropriateprescribingandstewardship.Theguidelinesandoutcomesgoverningthevalue-basedpaymentmodel


17

forhigh-priorityinpatientantimicrobialsmayneedadjustmentstobeapplicableintheoutpatientsetting.Butweexpectthatthesameprinciplesandapproachcanbeapplied.

DRUGSFORRAREINFECTIONS

Someantimicrobial-resistantinfectionsareextremelyrare.Newantimicrobialsthattreattheseinfectionsareunlikelytogeneratesignificantcostsforpayers—andpayersmaynotseethevalueinhavingcontractsinplacefortheiruse.Creatingvalue-basedpaymentcontracts—oranypayercontracts—maynotbeworthwhile.Inthesecaseswherenoconsequentialprivatemarketexists,aswithdrugsneededascountermeasures,aMERmightbelinkedtoappropriateaccessandcontinuedevidencedevelopment.Ofcourse,itwillgenerallybeinthemanufacturer’sinteresttoworkoutvalue-basedcontractsforpriorityantimicrobialswheneverfeasible,toprovideadditionalrevenuestreams.

TRANSITIONTOROUTINEUSEOFVALUE-BASEDPAYMENTSFORANTIMICROBIALS

Thepresentationofourmodelfocusesonthecurrentstatusoffee-for-servicepaymentsforantimicrobials,recognizingthatitmaytakeseveralyearstophaseintheuseofAPMsbasedonvaluenotvolumeofsales.Withtheincentivesandmomentumcreatedbyourproposedapproach,theaimistomakevalue-basedpaymentthenormforantimicrobialrevenues.Asthesemechanismsbecomemoreroutine,alargershareofrevenuesfromvalue-basedpaymentsshouldbeexpectedearlierafterlaunchofanewpriorityantimicrobialthatqualifiesforthemarketentrypayment.Legislationsupportingthisapproachmightevenspecifyatransitionpathtothepredominantorfulluseofvalue-basedpaymentsforantimicrobials,suchthatantimicrobialslaunchedin,forexample,2027,wouldbeexpectedtohaveahighshareofvalue-basedpaymentcontractsinplacefromlaunchonwards.

ConclusionRecognizingtheimportanceofarobustpipelineofantimicrobialdrugcandidatestomaintainingpublichealth,theproposaldescribedhereisdesignedtoprovideastrong,leveragedfinancialincentiveforpriorityantimicrobialdevelopmentwithintheU.S.ThePAVEAwardandsubsequentvalue-basedcontractswouldbuilduponpaymentstructuresthatarecurrentlyinplacetoshiftthefocusfromsalesvolumetooutcomesandappropriateuse.Thisproposalwillrequirecollaborationacrossarangeofstakeholders,allofwhomwillstandtobenefitfromtheavailabilityofeffective,high-priorityantimicrobials.Whileitmaytakeseveralyearstofullyimplementthisproposal,thePAVEAwardcouldbeginmakingamajorcontributionnowtotheglobalefforttocreateandsustainarobustpipelineofantimicrobialstoaddressurgentandgrowingpublichealthneeds.Inparticular,PAVEcouldbeintegratedwithcurrentlegislativeproposalsforTEVandDISARM,usingtheTEVasthefundingmechanismforthePAVEAwardandimplementingDISARMinawaythatsupportsthetransitiontobetterpaymentmodelsforavailabilityanduseofpriorityantimicrobialsinhospitalizedpatients.Withthegrowingthreatofantimicrobialresistance,andtheurgentneedtodevelopamoresustainablewayofassuringtheavailabilityandappropriateuseofpriorityantimicrobialsintheUnitedStates,thetimeforimplementationisnow.


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Appendix1.U.S.NetSalesofNew-Molecule,Brand-NameAntibioticDrugsApprovedafter2000,inU.S.dollars(millions)

BrandName MoleculeName Owner ApprovalYear

SALES

2011 2012 2013 2014 2015

Avycaz ceftazidime/avibactam Allergen 2015 Productnotyetlaunched 35.8

Sivextro tedizolidphosphate Merck 2014 Productnotyetlaunched 2.4 37

Dalvance dalbavancin Allergen 2014 Productnotyetlaunched 14.6 20.3

Orbactiv oritavancin MedicinesCo. 2014 Productnotyetlaunched 0.8 9.1

Dificid fidaxomicin Merck 2011 24.4 74.4 51.6 47.7 39.8

Teflaro Ceftarolinefosamil Allergen 2010 2.7 22.4 44 70.3 118.5

Vibativ Telavancin Theravance 2009 10.0 0.0 0.0 4.4 9.4

Doribax Doripenem J&J(divested) 2007 Marketinganddevelopmenthaltedin2010

Tygacil Tigecycline Pfizer 2005 148 152 150 112 110

Ketek Telithromycin Sanofi(divested) 2004 Offthemarket

Cubicin Daptomycin Merck 2003 698.8 809.2 908 977 1127

Factive Gemifloxacin Vansen(Divested) 2003 6.3 0.36 -0.12 Divestedthedrugin2012.

Spectracef Cefditorenpivoxil Vansen(Divested) 2001 8.1 0.33 -0.72 Divestedthe

drugin2012.

Invanz Ertapenem Merck 2001 406 445 488 529 569

Zyvox Linezolid Pfizer 2000 640 665 688 680 457.8


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