Analytical Framework for Examining the Value of Antibacterial Products. 2 Incentives for Developing Antibacterial Drugs, Vaccines for Bacterial Diseases, and Rapid Diagnostics

04/15/2014

The literature is replete with possible incentives to stimulate new antibacterial product development.  Additionally, the recently enacted Title VIII (Generating Antibiotic Incentives Now) of the Food and Drug Administration Safety and Innovation Act (Public Law 112-144)(GAIN), creates incentives to encourage the development of antibacterial or antifungal drugs for the treatment of serious or life-threatening infections, including drugs to treat antibacterial drug-resistant infections.  GAIN extends the period of exclusivity for certain qualifying products by adding 5-years of additional exclusivity.  In this study, we took a comprehensive approach to examining incentives, not just those that are included in GAIN.

For organization purposes, we adopted the incentive categories proposed by Kesselheim and Outterson (2010) as our starting point as presented in Table 1 below.  The columns in the table depict the goal of the incentive under consideration, i.e., conservation or production.  Conservation efforts aim to limit the development of drug resistance in drugs currently on the market while production incentives aim to stimulate development of new drug compounds.  The rows correspond to the four primary legal tools that can be used to achieve conservation or production goals, i.e., property, regulation, contract or tort. 

Optimal antibacterial drug incentive strategies would combine elements from both columns, incentivizing both conservation as well as new production.  To the extent that the same impacts can be attained through different legal mechanisms (i.e., property, regulation, contract, or tort), we view the choice of specific mechanism used as a practical decision outside the scope of this study.


Table 1: Types of Incentives for Antibacterial Drug, Vaccine, and Diagnostic Product Development

Type Conservation Production
Property Intellectual property (IP) used as conservation tools to privately constrain demand (1) Intellectual property (IP) used as incentives to bring new antibacterial drugs to market (2)
Regulation Public health infection control and antibacterial drug stewardship programs regulate demand for antibacterial drugs (3) FDA regulations relaxed to speed approval of new antibacterial drugs. Tax subsidies support R&D (4)
Contract Prizes, grants, and value-based reimbursement support antibacterial drug conservation. (5) Prizes, grants, and value-based reimbursement support new antibacterial drug production. (6)
Tort Patients sue for hospital-associated infections, increasing institutional incentives to promote safety through antibacterial drug conservation (7) Federal law designed to preempt state tort law, waiving drug company tort liability for antibacterial drugs (8)

Source: Kesselheim & Outterson, 2010


Next, we undertook a comprehensive review of the policy literature on antibacterial drug incentives that have been proposed over the past decade to start with an organized list.  This literature review resulted in the identification of over 50 incentives that fell into one of the 8 categories shown in Table 1.  For example, the conservation-regulation category included 18 different incentives from the policy literature ranging from education campaigns to encourage appropriate use to expanding the promotion of vaccination to providing transparency on institutional infection rates.

We then performed an initial qualitative iterative evaluation that involved assessing each of the 50+ incentives against multiple criteria depicted in Table 2.  We combined incentives that were considered similar.  For example, “incentive designed to encourage antibacterial drug substitutes, such as free or heavily discounted “cold kits” to physicians” and “education campaigns to encourage appropriate use of antibacterial drugs” were combined into one incentive category titled “education campaigns.”

Table 2: Antibacterial Incentive Evaluation Criteria

Evaluation Question Yes No Comment

Is the incentive practical to implement?

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Is implementation time for the incentive reasonable?

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Is the incentive politically feasible?

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Is there a good match between the incentive and type of developer?

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Does the incentive avoid creating market distortions?

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Does the incentive impede access and affordability?

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Does the incentive avoid creating other perverse incentives or outcomes?

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Are the transaction costs imposed by the incentive acceptable?

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Is the level of risk associated with the incentive acceptable?

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Does the incentive stimulate valuable innovation?

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Does the incentive stimulate competition?

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Is the incentive cost-effective compared to next best alternative?

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Does the incentive promote development of antibacterial drugs?

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Does the incentive promote conservation and/or appropriate use?

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Is the incentive within possible FDA/DHHS purview?

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Can the incentive be analyzed within EPV model framework?

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This initial evaluation process resulted in reducing the 50+ incentives to the 10 as depicted in Table 3 below that ultimately correspond to the 5 categories shown in the “Private NPV Model Category” column.  The table shows each incentive’s expected impact on parameters in the private and social NPV models (explained below), as well as the intention of the incentive (i.e., to promote development of antibacterial drugs, vaccines, and/or rapid diagnostic tools, or to promote antibacterial drug conservation).  The table also depicts the parameters that each of the 10 incentive categories would impact within the private EPV model framework developed for the study (see Sections 3.1 and 3.5 for discussions of the private and social frameworks, respectively).  Further examination of this list of 10 from a modeling perspective resulted in combining those categories of incentives that impact the same model parameters resulting in a total of 5 incentive categories noted in the “Private NPV Model Category” column of Table 3.  For example, the incentives “education campaigns” through “performance- and value-based reimbursement schemes” affect the same model parameter, “unit sales”, in the same direction.  Thus, we cannot really distinguish between education campaigns and vaccine promotion in the context of our model and hence need to combine these into one category for analysis purposes.


Table 3: List of Incentives for Antibacterial Drugs, Vaccines, and Rapid Point-of-Care (POC) Diagnostics

Incentive Type Incentive Detail Potential Impact(s) on Private NPV? Potential Impact(s) on Social NPV? Promotes Development of Antibacterial Promotes Conservation, Appropriate Use, and/or Stewardship? Private NPV Model Category Impact on Private ENPV
Drugs? Rapid Point-of-Care Diagnostics? Vaccines?
Production Intellectual Property (IP) extensions [a] Increase in sponsor revenue stream due to delayed generic entry • Reductions in number, duration, severity of infections due to new antibacterial product
• Reduced market competition
Yes No [j] Yes Possible [i] Intellectual Property (IP) extensions [a] Delays generic entry
Tax incentives Decrease in cost of capital • Reductions in number, duration, severity of infections due to new antibacterial product
• Reduced tax revenue for the government
Yes Yes Yes Possible [i] Tax incentives Decreases cost of capital
Modifications to the clinical trial process & approval standards (including LPAD) • Decrease in time to market
• Decrease in clinical trial costs
Reductions in number, duration, severity of infections due to new antibacterial product Increase in probability of adverse events due to fewer safety data Yes [f] Yes [f] Yes [f] Possible [g] Modifications to the clinical trial process & approval standards [c] Reduces time to market [c]
Grants for antibacterial products research and development Decrease in R&D costs • Reductions in number, duration, severity of infections due to new antibacterial product
• Added societal cost equivalent to the prize amount (or NPV of prize)
Yes Yes Yes Possible [i] Grants/Awards/Prizes for antibacterial product research and development [d]
• Pre-clinical
• Phase 1
• Phase 2
• Phase 3
• NDA/BLA Approval
Decreases R&D costs
Prizes and product development partnerships (PDPs) Increase in antibacterial sponsor revenues due to lump-sum prize payment • Reductions in number, duration, severity of infections due to antibacterial production
• Added societal cost equivalent to the prize amount (or NPV of prize)
Yes Yes Yes Possible [i]
Conservation

Education campaigns

Decrease in revenues for antibacterial drug sponsor Reductions in number, duration, severity of infections No Yes Yes Yes Conservation for Drugs but Promotion for Vaccines and Rapid POC Diagnostics [e] Reduces unit sales
Improvements in hospital infection control Decrease in revenues for antibacterial drug sponsor • Reductions in number, duration, severity of infections
• Increase in useful life of antibacterial (due to deferred antimicrobial resistance)
No Yes Yes Yes
Vaccination promotion Decrease in revenues for antibacterial drug sponsor Reductions in number, duration, severity of infections No No Yes Yes
Better monitoring & reporting of infection rates & antibacterial drug resistance Decrease in revenues for antibacterial drug sponsor (2nd order) • Reductions in number, duration, severity of infections
• Increase in useful life of antibacterial (due to deferred antimicrobial resistance) - 2nd order
No Yes Yes Yes
Performance- and value-based reimbursement schemes [b] Decrease in revenues for antibacterial drug sponsor (2nd order) Increase in useful life of antibacterial (due to deferred antimicrobial resistance) - 2nd order Yes [h] Yes Yes Yes
Revocation of marketing authorization for antibacterial drugs that pollute Decrease in revenues for antibacterial drug sponsor • Reductions in number, duration, severity of infections
• Increase in useful life of antibacterial (due to deferred antimicrobial resistance) - 2nd order
No Yes Yes Yes Conservation for Drugs but Promotion for Vaccines and Rapid POC Diagnostics [e] Truncates revenue time horizon

[a] IP collectively refers to patents/Data Exclusivity/Marketing Exclusivity/Patent Term Adjustments/Patent Term Extensions/Supplementary Protection Certificates (see Section 2.1.1 for further detail).

[b] Can be designed to maintain/increase total reimbursement to sponsor through price adjustments

[c] These could also simultaneously impact clinical trial costs. However, allowing both parameters to vary in the private ENPV model would lead to non-unique solutions for the incentive level. Thus, we limited the effect of each incentive to a single model parameter to avoid solver problems.

[d] While these can be structured in multiple different ways, in this study, they are envisioned to be paid out sequentially upon successful completion of a phase. It should be noted that for rapid point of care diagnostics, there would only be three award/grant/prize stages, one for a pilot clinical study, another for a full-scale clinical trial, and a final one for 510(k) submission to FDA.

[e] All of the conservation incentives reduce private ENPV and hence are not examined in the model.

[f] It might undermine value of programs to apply to all.

[g] Vaccines and diagnostics would promote conservation, but speeding more antibacterial drugs to market might harm conservation through market dynamics.

[h] An effective P4P system must greatly increase reimbursement across the entire antibacterial drugs class.

[i] If paired with conservation targets.

[j] Currently, there are no market or data exclusivity protections for rapid point-of-care diagnostics.

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