Studies in Industrial Organization: Global Price Fixing (2nd Edition)
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And that will involve hard choices with big dollar signs attached. Successful drug development relies on an extremely simple assumption. Unlike cancer drugs, most antibiotics are inexpensive; the few with high price tags are reserved for rare hospital use. And unlike drugs to treat chronic diseases, people take antibiotics for only short periods of time.
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A daily dose of Lipitor causes the world no harm—but every dose of antibiotics poses a risk of encouraging bacteria to adapt and develop resistance. So these new medications are caught in a conundrum: Their fiscal promise and their social value are at odds. More than half are pre-revenue, still working on their first product. Because this situation is common, the policy conversation around getting new antibiotics has focused on offering support to small companies.
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Short version: They gift pharma companies huge wads of cash. Last year, a European coalition known as DriveAB that has been examining antibiotic production and distribution drew up a menu of possible pull incentives and evaluated how powerful each might be. They too concluded that market entry rewards hold the most promise, though they recommended spacing payments out over the life of the drug, to ensure that companies keep manufacturing them.
A raft of studies written over the past few years have recommended other possibilities, such as transferrable exclusivity vouchers, essentially allowing companies that develop a successful antibiotic to keep another drug under patent for extra years, or purchase commitments between governments and companies in which a certain amount of drugs is bought and shelved until needed. Some thinkers have recommended changes in reimbursement, in which Medicare would pay more for an antibiotic deployed after a diagnostic test has been performed—a maneuver that makes the drug intrinsically more valuable, slowing its use and keeping resistance at bay.
Some of these proposals are moving from policy into reality. The United Kingdom just announced a plan to pay for antibiotics based on their value to medicine, rather than the number of doses; and in February the Pew Trusts and a list of companies and associations sent a letter to US senators urging consideration of a package of incentives. The design of the clinical trials used to evaluate powerful new antibiotics—always against existing drugs, not against nothing—is out of step with how resistant infections occur. Patients with virulent, multidrug resistant infections need to be treated immediately; any delays can risk their lives.
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This is one of the issues Achaogen foundered on. Plazomicin was a promising treatment for the most serious superbugs, the highly resistant, gut-dwelling ones known as CREs. But the company could not get enough patients into a trial for that indication, and the FDA approved the drug only for treating resistant urinary tract infections—an important problem, but not as critical as the CREs. Once it was on the market, doctors could have used it against CREs off-label, if they chose.
But with Achaogen headed to Chapter 11 and up for sale, plazomicin might become not available at all. A transferrable patent voucher will cost individual patients whose drug might otherwise have gone generic and become cheaper. A bulk purchase would eat up the budget of a healthcare organization or agency. Market entry rewards are so large they would need to be appropriated within the annual budget of the FDA.
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China is the second-largest economy in the world, and is the top destination for many international firms looking to grow. China is also home to many of the world's up-and-coming businesses, which are increasingly looking to expand in other emerging markets and also in western Europe and the US.
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