Modern medicine relies on effective antibacterial drugs, vaccines, and rapid diagnostic tools, collectively referred to as “antibacterial products” hereinafter, for the prevention, detection, and treatment of bacterial infections. Since antibacterial drugs first came into use in the 1940s, they have transformed mankind’s ability to combat deadly microorganisms and saved innumerable lives. However, use of these drugs is not without consequences. The mutations and natural selection processes that occur when an antibacterial drug is utilized can lead to the selection of strains of bacteria that are resistant to antibacterial drug or drugs. Many such strains (e.g., methicillin-resistant Staphylococcus aureus) are now quite common throughout the U.S. and the world. Today, the rapid rate of increase in antibacterial drug resistant bacteria combined with a weak pipeline for new antibacterial drugs threatens to create a public health crisis in which we are no longer able to effectively treat common infections (Kesselheim & Outterson, 2010; Laxminarayan & Malani, 2007; Infectious Diseases Society of America , 2004; Smith & Coast, 2013).
Drug resistance problems are compounded by the misuse of existing antibacterial drugs. Antibacterial drugs are commonly overused by physicians and patients; for example, they may be prescribed to treat conditions caused by viral pathogens, which will not respond to antibacterial treatment, or for infections that will resolve quickly on their own. Additionally, under-treatment through inadequate dosage or inappropriate treatment duration can also give rise to resistant bacterial strains (Laxminarayan & Malani, 2007; Kesselheim & Outterson, 2010; Levy, 1992).
Appropriate use of existing diagnostic tests and/or the development of new tests could help relieve selective pressure resulting from unnecessary or inappropriate antibacterial use. By identifying the etiologic causes of infections, diagnostic tools can help physicians determine an appropriate course of treatment for their patients. Unfortunately, many existing tests are too slow to provide results, too invasive or uncomfortable for patients, or too expensive to be practical (Laxminarayan & Malani, 2007).
An alternative mechanism for reducing antibacterial drug demand is infection prevention, which might be achieved in part through more widespread vaccination, the development of additional vaccines, and more effective infection control, especially in health care facilities. Plus, there are likely to be spillover benefits from vaccination of part of the population to unvaccinated individuals. Nevertheless, the cost and voluntary nature of vaccinations hinder their uptake, and vaccines for some common infections, such as a vaccine to prevent infections caused by Staphylococcus aureus, are not yet available (Laxminarayan & Malani, 2007).
Despite the potential of new antibacterial products to reduce the social burden associated with resistant infections, some of the large companies have been exiting the markets for antibacterial drugs and vaccines in recent years and have also not responded to the possible social value of opportunities in production of rapid diagnostic products. These market exits have been driven by the most basic of reasons: insufficient return to capital invested in development of these products. Commentators have identified a number of factors limiting markets for some new antibacterial products, including short treatment durations, an absence of market mechanisms to capture social benefits, challenges of conducting clinical trials, use of single-purchaser government power to limit payments for final products, and the availability of cheap generic drugs to treat most infections. However, empirical evidence is lacking to evaluate the relative impact of these factors (Kesselheim & Outterson, 2010; Mossialos, et al., 2010). Furthermore, there remain a number of participants in, as well as, new entrants to these markets and there are opportunities for novel products despite the exits of many large companies (Usdin, 2012). Current antibacterial product development efforts are directed primarily towards addressing the treatment of acute bacterial skin and skin structure infections including infections caused by methicillin-resistant Staphylococcus aureus (MRSA), Clostridium difficile associated diarrhea, and some infections caused by drug-resistant gram-negative pathogens.
Given the potentially sizable social benefits of new antibacterial products, governments have been considering a number of alternative policies to foster development. While many approaches have been proposed, the path for policymakers to succeed in accelerating antibacterial product development is not well established. Further, a rigorous transparent analytical framework that can be used to systematically examine the effects of different policy alternatives is currently lacking. This study is therefore intended to fill that void by developing an analytical framework to evaluate the economics (private and social value) of development of antibacterial products that can aid in considering potential strategies designed to incentivize these antibacterial products.