7

Accelerating Research and Development of Antimicrobial Medical Products

Session II, part B, of the workshop presented commercial perspectives on the opportunities and barriers to accelerating discovery and development of medical products to counter microbial threats, with a focus on antimicrobial resistance (AMR). Panelists examined the role of private-sector incentives and public–private partnerships to address the unique challenges of accelerating pharmaceutical research and development (R&D) for antimicrobials. The session was moderated by Jami Taylor, board advisor at Stanton Park Advisors and included brief remarks from four panelists: Paul Schaper, executive director of global public policy at Merck & Co., Inc.; Joanna Wolkowski, vice president of portfolio and decision analysis at Pfizer Inc.; Thomas Cueni, director general of the International Federation of Pharmaceutical Manufacturers & Associations (IFPMA); and Jonathan Kfoury, managing director of L.E.K. Consulting. A discussion with workshop participants followed.

COMMERCIAL PERSPECTIVES ON OPPORTUNITIES AND BARRIERS TO DISCOVERY AND DEVELOPMENT OF ANTIMICROBIALS

Panelists shared their experiences within the biopharmaceutical industry and discussed key issues pertaining to antimicrobial product discovery and delivery to the market, including incentives, challenges, and strategies. They reflected on the scientific, regulatory, and economic challenges with R&D that are more acute for antimicrobial products and focused on the issue of return on investment for companies engaged in this arena.

The panel members covered a range of existing push and pull incentives designed to address return on investment, and they provided their perspectives on creating a suite of incentives with the potential to stimulate R&D.

Advancing a Suite of Incentives to Support the Research and Development Life Cycle

Paul Schaper, executive director of global public policy at Merck & Co., Inc., noted that Merck has been involved in the antimicrobial arena for more than 80 years. As a result, the company has witnessed many of the challenges that occur prior to the successful launch of new antimicrobials, such as Merck’s novel antitoxin targeting Clostridium difficile and two antibiotics targeting gram-negative bacteria. Schaper argued that the R&D environment continues to be fragile in light of the scientific, regulatory, and economic challenges that hinder sustained investment in antimicrobials, vaccines, and alternative technologies. He highlighted the need to advance a suite of incentives that balances push and pull incentives, and address reimbursement reform in order to support products through their 10- to 15-year development life cycle.

There has been global high-level political recognition on the importance of new incentives for medical products to combat AMR, but actions thus far have focused on push incentives, which lower the cost of entry toward R&D of a desired product, including grant funding, tax credits, and public–private partnerships (G7 Leaders, 2015; UN, 2016; G20 Leaders, 2017).¹ Push incentives can help during the clinical development stage, but later stages of the product life cycle require pull incentives, Schaper said. Pull incentives are provided during the approval process and after successful drug entry into the market. They supplement income in future sales or guarantee revenues for a product that is delinked from sales volume to encourage sustainable, appropriate use. Schaper called for a broader suite of incentives, from early in the R&D life cycle through bringing a product to market, keeping it there, and making it accessible. Because of the lack of pull incentives, fewer drugs are coming to market, he noted, and several companies have left the antimicrobial development arena despite receiving push incentives such as grants from BARDA.

In addition to misaligned incentives, Schaper highlighted regulatory challenges related to product reimbursement that discourage manufactur-

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¹ Several governments and global initiatives have offered push incentives, such as the Biomedical Advanced Research and Development Authority (BARDA) of the U.S. Department of Health and Human Services, the Global Health Innovative Technology Fund headquartered in Japan, and the Innovative Medicines Initiative (IMI) of the European Union.

ers. Most antimicrobials enter the market with noninferiority trials,² which compare them to therapies already available on the market. He noted that in Europe, if a product is deemed noninferior, it can only charge the price of the comparable generic medication. Schaper also raised the issue of hospital reimbursement by diagnosis related groups (DRGs), which are fixed compensation rates depending on a patient’s diagnosis. This approach encourages facilities to use the least expensive products available even when more expensive, newer products would be more appropriate, he said.

Schaper went on to reflect on another aspect of note with antimicrobial development: the fact that new drugs are usually not used early in their life cycle. When antimicrobials are first available on the market, it may not be clear how to use them. He noted that at this stage, little is known about the resistance profile of circulating pathogens to the new medication. As these data are obtained over time, novel antimicrobials can be used to treat patients in cases where they will be efficacious. Related to this challenge, he said that new payment system models and innovative incentives are needed to ensure that antimicrobial manufacturers are compensated for their investments regardless of actual use.

Ensuring Commercial Viability of Antimicrobial Research and Development

Joanna Wolkowski, vice president of portfolio and decision analysis at Pfizer Inc., provided an overview of Pfizer’s programs addressing multiple aspects of AMR, including antimicrobial stewardship, resistance surveillance, regulation, and manufacturing of products to treat and prevent bacterial infections. She reiterated the enormity of the AMR issue—high associated economic costs and millions of affected lives—as well as the obstacles in the R&D process. As it takes 10 to 15 years of investment to bring one drug to market and about 50 compounds involved in the discovery pipeline before reaching one potentially viable product, Wolkowski argued that companies should be adequately rewarded for their investments and risks in finding R&D opportunities within the current marketplace. As a result, Pfizer takes into account the incentives in place and uses financial modeling to identify where and how they can best allocate their investments in AMR for greatest return on investment and impact on patient lives.

Wolkowski also mentioned that return on investment in R&D of medical products is key to maximize the effect on AMR while being fiscally responsible. Yet, for antimicrobials, the financial effect of a drug being

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² Noninferiority trials compare new products with a control therapy already being used. If a product is successful in a noninferiority trial, it can only be said to be equivalent to the standard of the control. These trials cannot demonstrate therapeutic superiority.

successfully delivered to market can be more uncertain than for other products, she said. For example, standby antimicrobials are expressly developed to be new powerful drugs kept in reserve until a critical need, but Wolkowski noted that companies would be unable to command a commercial value equivalent to its generated societal value. These factors, as well as antimicrobial stewardship initiatives, can discourage investments in new antimicrobials. Wolkowski approached the challenge of ensuring return on investment on antimicrobials by focusing on the reliable returns through the end of a 15-year R&D process and delinking revenues from antimicrobial use.

In the meantime, companies like Pfizer can continue working to counter AMR by improving stewardship as a strategy to preserve the effect of current antimicrobials before new drugs can be brought to the market. In addition, surveillance to track resistance patterns in the environment can help companies identify key antimicrobial targets with potential for new drug development. Wolkowski also suggested exerting influence at key points in the existing regulatory framework that may affect how drugs reach the market, improving the understanding of manufacturing mechanisms, and identifying new ways to combat bacterial infections like the use of vaccines to prevent infections in the first place. She concluded by stating the opportunities in the marketplace need to be examined to help patients in a way that catalyzes and rewards the investments and efforts in R&D. If these strategic trade-offs and implications considering the budget and time constraints are assessed, she said, the R&D model for antimicrobials can be shifted to make it sustainable.

Building Global Allies for Industry-Wide Innovation

Thomas Cueni, director general of IFPMA, shared insights from his experience in the pharmaceutical industry on the particular challenges of AMR, highlighting political impediments to action despite industry engagement with the issue. According to Cueni, “The problem with AMR is that it doesn’t have a face.” To illustrate, he compared progress made in the area of antimicrobials versus pandemic influenza preparedness from the time they were both identified as top areas for research by the World Health Organization’s (WHO’s) Priority Medicines for Europe and the World report to now.³ Cueni argued that society has seen galvanization since the 2009 H1N1 pandemic, including the formation of the Pandemic Influenza Preparedness Framework, but he said there has been no equivalent for AMR, seen as a “silent potential killer.” Along with other speakers in the workshop, Cueni remarked on the conundrum of investing in standby med-

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³ WHO’s Priority Medicines for Europe and the World was commissioned in 2004 and updated in 2013 (WHO, 2013).

icines that will not generate enough revenues to incentivize development. He noted that until the costs and effects of AMR are felt by individuals and policy makers, it will continue to be difficult to raise the necessary resources to meaningfully address the problem.

Furthermore, Cueni asserted that the global call to action for AMR has not been matched by sufficient investments from governments.⁴ The private sector invested four times as much as all government budgets combined in AMR-related research. The estimates show that the private sector has spent more than $2 billion over the past decade on AMR-related research, compared with government initiatives amounting to $500 million over the same period (AMR Industry Alliance, 2018). Cueni was emphatic that this level of government spending would not be enough to generate one new antimicrobial. While public–private partnerships like BARDA, IMI, and the Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator (CARB-X) have helped push private-sector investment in this field to current levels, he deemed even $2 billion as insufficient to develop the necessary antibiotics. Cueni reiterated the urgency of combating AMR and the inadequate progress made to date if ultimately nothing has changed since 2004.

Cueni concurred with the need for both push and pull incentives and added that he believed there was no one-size-fits-all optimal package of incentives. He said that sustaining research is high risk, and push incentives are not enough to overcome the regulatory and scientific challenges to antimicrobial development. Cueni saw potential in a number of pull incentives while being cognizant of their individual drawbacks. Market entry rewards would guarantee income for pharmaceutical companies for bringing products onto the market as standby drugs designed for low volume of use; however, Cueni has yet to see any entity provide adequate funding in market entry reward initiatives.

Transferable market exclusivity (TME) is another pull incentive for consideration, though Cueni said it was more politically challenging, since it would provide pharmaceutical companies with patent extensions in wealthy countries on their existing legacy products in exchange for the successful release of a new antimicrobial product (Kesselheim, 2010). Companies can then use the additional revenues associated with the patent extension to offset the costs associated with the new product’s development. He also highlighted drug reimbursement reform as a promising strategy to spark new antimicrobial development, though again he cautioned against pursuing any single strategy. To illustrate this, he said the price of new cancer

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⁴ Cueni referenced the fact that AMR was on the agendas for the Global Call to Action on Antimicrobial Resistance, organized by the Wellcome Trust, the United Nations Foundation, and the governments of Ghana, Thailand, and the United Kingdom, and the Berlin Declaration of the Group of Twenty Health Ministers, both in 2017.

immunotherapy can cost up to $475,000 per treatment, which would not be possible for antimicrobials (Dolgin, 2018). Cueni emphasized that it is important to move from talk to action in addressing AMR, and noted that even when the pharmaceutical industry is aware of the low profitability in producing new antimicrobials, they are open to being allies in public health and offering support to meet the needs of society.

Leveraging Existing Models and Pursuing Diagnostics

Jonathan Kfoury, managing director of L.E.K. Consulting, shared his observations from prior experience in clinical development of antimicrobials at Cubist and his work with other small biopharmaceutical companies. He noted that both large and small pharmaceutical companies are lowering their investments in antimicrobial research, despite the growing global need for new products. He agreed with Wolkowski that the major challenge impeding antimicrobial product development relates to negative forecasted returns on investment. Large companies in particular have to decide whether to invest in antimicrobials that address resistant infections, when faced with opportunities to invest in a range of other, potentially more profitable products. Kfoury also agreed with the other panelists that current incentives are not enough to pursue antimicrobials to the extent necessary in the next few decades.

While existing push incentives have been valuable to stimulating early-stage R&D efforts, more pull incentives are needed to specifically draw in midsize and large companies facing a range of investment decisions, he said. Kfoury emphasized the need for developing a suite of incentives versus a single pathway solution. This would help companies plan through their product development process and identify the best incentive to tap into at different stages. He also noted that different companies may need assistance at various stages of product development as the economics and operations behind the incentives for early-stage R&D are different from preclinical stage; phase 1, 2, and 3 trials; registration; and commercialization. Kfoury proposed incorporating strategies that leverage existing models, such as reimbursement “carve-outs” from DRG payments to ensure revenue streams from new antimicrobials. Under this strategy, all of the patient’s treatment services for a resistant bacterial infection would be covered by the DRG payment, except the new antimicrobial (Kfoury, 2014). Hospitals that appropriately apply the new antibiotics to treat the infections would be fully reimbursed for the cost of the drug. In other words, a carve-out would avoid penalizing hospitals if they used a new drug that is more expensive than alternatives to treat a certain condition if the scenario met appropriate guidelines, he said.

Kfoury concluded by highlighting the lack of rapid diagnostics for resis-

tant infections and the challenge for physicians to decide on appropriate therapies at a given point in time, which further limits the use of targeted drugs. With current practices relying on clinical judgment and blood cultures, resistant infections may take several days to diagnose after the initial clinical presentation. To address this overall crisis within public health but also within industry, Kfoury called for greater collaboration on diagnostic innovation among pharmaceutical companies, diagnostic companies, governments, and nongovernmental partners to bring about novel products capable of addressing specific resistant pathogens.

DISCUSSION

The discussion began with Anas El Turabi, Frank Knox fellow in health policy at Harvard University, who asked the panelists if they have seen any evidence of more drug effectiveness and shorter hospital stays in cases where institutions have shifted to a value-based purchasing paradigm and incentivized the use of more appropriate, albeit expensive, medications. Schaper responded that the evidence needed to establish these reimbursement incentives does not exist yet, because clinical trials are designed to evaluate a new product’s noninferiority compared with generic alternatives. As he referenced in his presentation, Schaper said another challenge is DRG payments for hospitals, when they favor the use of cheaper, broad-spectrum generic antimicrobials and create impediments for physicians to prescribe a more expensive and targeted drug. He also highlighted a gap in diagnostics and the potential effect of including new drugs in automated antimicrobial susceptibility testing. Schaper asserted that to promote antimicrobial development, hospital systems and payers must not let cost be the predominant driver for drug choices; they must be willing to pay more for a novel drug over cheaper alternatives.

The discussion turned to specifics on the use of pull incentives. Jay Siegel, former head of scientific strategy and policy for Johnson & Johnson, asked about the feasibility of designing sufficient TMEs and other intellectual property-based incentives that could overcome political and public perception barriers in order to promote standby drug development. Siegel underscored his point by sharing his experience at Johnson & Johnson, where he said the U.S. Food and Drug Administration’s (FDA’s) priority review voucher program for neglected tropical diseases was a factor for investing in programs for bedaquiline, a new drug to treat drug-resistant tuberculosis (TB); he further argued that altruism was another main driver for their investments especially at the preclinical stage. Cueni believed that different political systems will need to experiment with different strategies for incentives. Based on his experience in Europe, for example, he was skeptical of reimbursement reform alone being the solution because of the

noninferiority challenge. Cueni acknowledged the potential of TMEs and other intellectual property-based innovations to spur new drug development and the benefit to investors of not disbursing funds up front.

Elaborating on the issue of public perceptions, Cueni noted that he had observed from industry discussions that companies were aware of the public perception that companies would benefit from a “free ride,” notwithstanding that they would still bear a significant risk themselves. He reported that companies have been open-minded and willing to combine different strategies and take on guardrails such as antimicrobial stewardship provisions. Future initiatives could be based on a combination of market-based incentives, in particular pull incentives, he said, to stimulate R&D investment with provisions on antimicrobial stewardship and access to medicines to ensure the delivery of new drugs to developing countries. Wolkowski reiterated Cueni’s approach to employing a combination of strategies and stated that these types of incentives can benefit both large and small companies alike. With TMEs, for example, small companies that invest in necessary antimicrobials can potentially sell that exclusivity to larger partners that have more suitable products for patents.

Mark Pearson, deputy director for employment, labor, and social affairs at the Organisation for Economic Co-operation and Development, asked the panelists if there is a clear consensus from industry on their desired pull incentives. He cited several potential areas of focus that may confuse investors, such as whether investments should be in broad- or narrow-spectrum drugs or first-in-class versus non-first-in-class drugs. He also raised the concern that market entry rewards and TMEs could lead to double payment for new drugs, a payment for the award or extended patent in addition to a high price for the new product itself. Kfoury responded that Pearson’s question depends on the type of model being engineered and for what purpose. If the funding structure is based on the most pressing needs in terms of pathogens and is designed from a scientific and a stewardship perspective, he said, then that will drive a different set of numbers and solutions. He argued that there is intrinsic value for a portfolio approach that considers the pathogen perspective and addresses questions that consider the most pressing needs from a global perspective.

Cueni reiterated that there can be multiple regional approaches to pull incentive strategies and magnitudes. He argued that the key challenge is that there is no market for new antimicrobial products, citing clear opportunities for profit from new products for diseases like Alzheimer’s; this means that industry is likely to lower their future investments in antimicrobials in the coming years. To clarify, Wolkowski laid out a pharmaceutical company’s portfolio perspective in making investment decisions, which can come down to investing in a novel antimicrobial to combat AMR versus pursuing an oncology indication versus a rare disease for which there are

no existing treatments. While the need for novel antimicrobials is clear from the perspective of patients and rising rates of AMR, the uncertainty related to the return on investment of antimicrobials and the current commercial landscape discourages investing in them, she said. In fact, Wolkowski said that investments in antimicrobials have demonstrated a negative return of one-eighth of the weighted average cost of capital. She agreed that there is a need to not only implement a mechanism to keep the economics neutral but also establish up front that pull incentives will be available several years into the product life cycle.

Kfoury highlighted that in hopes to address some of these issues, FDA set out a few initiatives with the potential to improve net present values of antimicrobial products, including a licensing structure and the Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD). The LPAD program allows for expedited approval of antimicrobials that are designed to treat life-threatening infections in limited populations with unmet needs.⁵ Though specific details are forthcoming, Kfoury argued that a combination of these and other ideas put forth by FDA can be valuable to shaping different types of models that can apply to different companies as they evaluate their portfolio investments at various stages of antimicrobial R&D.

Kimberly Thompson, president of Kid Risk, Inc., asked panelists to comment on the idea of limited trust and understanding among industry and health systems on the value of medical products, and specifically what happens when the market appears uninterested in paying for the full value of the product. She cited MenAfriVac as a successful public–private partnership that was able to make an investment case for manufacturers by anticipating demand for the group A meningococcal conjugate vaccine and bringing a new product to market.⁶ She noted that the anticipated demand may not be there for antimicrobials, yet the challenge is to overcome the “valley of death” in getting stakeholders to understand the full value of developing antimicrobials. Thompson wondered whether this involved brainstorming new incentives that best accommodate multiple stakeholders or rather, aligning the right incentives with the right stakeholders. She also noted that different country markets have different attitudes toward

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⁵ At the time of the workshop on June 12, 2018, a statement from FDA Commissioner Scott Gottlieb was released on FDA’s efforts to foster discovery and development of new tools to fight antimicrobial-resistant infections. For more information on the LPAD program and other efforts, see www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm610503.htm (accessed August 20, 2018).

⁶ MenAfriVac was the initiative funded by the Bill & Melinda Gates Foundation that developed a group A meningococcal conjugate vaccine for use in “meningitis belt” countries in sub-Saharan Africa; this product was the first internationally qualified vaccine developed outside of the mainstream pharmaceutical industry.

paying for innovations and asked panelists if this factors into development of products that are seen to be more globally oriented. For example, the United States is typically seen as a favorable market for innovations, so the United States may potentially be less interested in investing in products to address the needs of developing countries; in light of that, she wondered if other countries are inclined to step up in lieu of U.S. investments.

Cueni voiced his support for public–private partnerships and added that the rollout of bedaquiline was possible through such a partnership. Cueni cautioned about the difference between developing a vaccine against a single disease and tackling the larger issue of AMR, which requires a continuous supply of many antimicrobials and vaccines to tackle future resistance patterns. Developing these products will require trust, he said. He shared examples of willing collaborators in public–private partnerships, including the Global Antibiotic Research and Development Partnership, a joint initiative of WHO and the Drugs for Neglected Diseases Initiative, and other initiatives borne out of Wellcome Trust, as well as the German R&D Hub and the United Kingdom. According to Cueni, these stakeholders recognize that these partnerships are not sufficient to develop the number of products needed for the future, and thus new pull incentives are necessary in light of this shortfall.

Also responding to the question about trust among stakeholders, Schaper stated that solutions and incentives need to consider a balance of risks across both the public and private sectors. He reminded that a suite of incentives would help achieve this goal through the stages of product development. Schaper envisioned a level of trust where governments can establish a mechanism that would assure companies of incentives for successfully bringing a product to market that targets an established resistant pathogen.

Anna Vassall, professor of health economics at the London School of Hygiene & Tropical Medicine, asked about experiences with push and pull mechanisms in BRICS countries,⁷ specifically related to new drugs targeting drug-resistant TB. She was concerned about countries that would be falling out of reliable donor funding eligibility for TB drugs, yet did not have adequate health systems and funds to invest in the drugs themselves (e.g., bedaquiline in South Africa). In response, Schaper referred to a distinction between TB and AMR—the effect of push incentives is limited for TB because the disease is not prevalent in developed countries, while antimicrobials are needed by developed and developing countries alike. However, he saw the potential for BRICS countries to combine their purchasing power to develop mechanisms that would stimulate R&D targeted at developing countries. He agreed that most BRICS countries face a particular challenge

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⁷ BRICS refers to the countries of Brazil, Russia, India, China, and South Africa.

for falling out of funding eligibility because the Global Fund and other development partners are focused on the highest disease burden and lowest country financing capability.

The discussion wrapped up with Ramanan Laxminarayan, senior fellow and director of the Center for Disease Dynamics, Economics & Policy, offering his perspective on several fundamental challenges he saw fueling the difficulty among industry to generate return on investments in antimicrobials. First, he noted that AMR is perceived as a continuous, longstanding problem, so there is no urgency to actively innovate or make any decisions that have not already been made. In addition, Laxminarayan believed that there is insufficient price signaling from industry of the future high costs of new antimicrobials to users. Thus, users or prescribers of antimicrobials such as physicians are not taking the appropriate steps to conserve existing cheaper products, which parallels the negative effect of cheap gasoline prices on fuel conservation, he said. Finally, Laxminarayan emphasized the challenge of feasibly delivering a new antimicrobial, even once it has been developed, to determine which of the billions of people who contract a bacterial infection every year will die from a resistant strain. He concluded that new antimicrobials alone are not sufficient to address AMR and that industry could provide more guidance and leadership to “owning the problem.”

Cueni agreed that other interventions are needed to complement antimicrobial development, and mentioned the AMR Industry Alliance is an example of cross-sector collaboration between private companies from the pharmaceutical, diagnostics, and biotechnology industries. He further commented on Laxminarayan’s observations by illustrating the situation of bedaquiline. Cueni argued against recent proposals to license bedaquiline for TB treatment, stating such licensing would lead to inappropriate use of the drug. He added that TB’s current stewardship mechanism of providing access to bedaquiline only from Global Drug Facility certified hospitals would not be applicable to other antimicrobials. However, Cueni highlighted efforts from GlaxoSmithKline, Novartis, and Pfizer to experiment with remuneration systems for sales representatives that reward for educating appropriate use rather than maximum sales. Cueni concluded with the need for industry to expand the discussion beyond human use of antimicrobials to include livestock and other industries. He mentioned that the AMR Industry Alliance had begun addressing the issue of environmental discharge related to antimicrobial production, particularly in China and India, and stated that industry response will require a One Health approach. He also highlighted the importance of transparency, not only among industry, but also for consumers who have to make decisions about buying food that has been exposed to antimicrobials.

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