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

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.

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?			______________________
Is implementation time for the incentive reasonable?			______________________
Is the incentive politically feasible?			______________________
Is there a good match between the incentive and type of developer?			______________________
Does the incentive avoid creating market distortions?			______________________
Does the incentive impede access and affordability?			______________________
Does the incentive avoid creating other perverse incentives or outcomes?			______________________
Are the transaction costs imposed by the incentive acceptable?			______________________
Is the level of risk associated with the incentive acceptable?			______________________
Does the incentive stimulate valuable innovation?			______________________
Does the incentive stimulate competition?			______________________
Is the incentive cost-effective compared to next best alternative?			______________________
Does the incentive promote development of antibacterial drugs?			______________________
Does the incentive promote conservation and/or appropriate use?			______________________
Is the incentive within possible FDA/DHHS purview?			______________________
Can the incentive be analyzed within EPV model framework?			______________________

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

[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.

• 2.1 Production Incentives

• 2.2 Conservation Incentives

  • As depicted in Table 3, there are a number of approaches that might prolong the useful lives of antibacterial drugs through stewardship, appropriate use, and conservation.  All of these goals are important for public health.  However, from the perspective of the antibacterial drug developer, all of these programs reduce demand for their products and therefore reduce incentives to create new drugs.  Some of these incentives include the following:

    • Education campaigns – Many patients continue to believe that antibacterial drugs are effective against common non-bacterial conditions (such as colds and influenza) and therefore seek antibacterial drug prescriptions from their doctors to treat these viral infections.  Correcting these widespread false beliefs through better public education could help to decrease the demand for antibacterial drugs and slow the development of resistance.
    • Improvements in hospital infection control – Reducing healthcare-associated infections can decrease both antibacterial demand and the incidence of antibacterial drug resistance.
    • Vaccination promotion – Vaccines for both bacterial and viral diseases, such as the pneumococcal conjugate vaccine and the influenza vaccine, can reduce disease incidence, bacterial coinfections, antibacterial drug demand, and antibacterial drug resistance, while also providing spillover benefits to non-vaccinated individuals, whose risk of infection decreases as more of the population are vaccinated.  Direct subsidies for research into new antibacterial vaccines would also reduce the demand for antibacterials drugs, delaying resistance.
    • Better monitoring and reporting of infection rates and antibacterial drug resistance (AR) – Surveillance of antibacterial drug resistance (AR) will improve understanding of the impacts of changes in antibacterial drug prescribing patterns, help identify new resistance mechanisms and outbreaks of resistant pathogens, assist in development of public health guidelines for infection control, and allow better education of health care providers and patients regarding AR (Laxminarayan & Malani, 2007; Mossialos, et al., 2010; Ming, Chen, Miller, Sexton, & Anderson, 2012).
    • Performance- and value-based reimbursement schemes – Under a performance-based scheme, hospital reimbursement would be tied to levels of infection and drug resistance.  Alternatively, in a value-based reimbursement approach, existing insurance plans would implement a system that provides reimbursement for antibacterial drugs according to their health impact, encouraging manufacturers to set their price based on the calculated impact, with more effective drugs being priced higher.

    As noted earlier, the conservation incentives have the effect of reducing antibacterial drug developer revenues and thus can be examined using the analytical framework developed by simply applying a percentage reduction to the total developer revenue scheme or varying percentage reductions to annual developer revenues.  We did not, however, analyze conservation incentives in this study.

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