The economics of our drug industry can't give us drugs we need, and soon will REALLY need. Is there a workaround?

“Antibiotic resistance really has the potential to make everything about the way we live different.”

-- Kevin Outterson, a founding member of the CDC’s working group
on antimicrobial resistance, to The New Yorker's James Surowiecki

by Ken

I think most of us are aware, in a general way, that there is a mismatch in the world of drug development between actual health needs and profitability. As, again, we're probably all aware, drug development is expensive, especially when you factor in the huge budgets required for regulatory hurdles and for marketing. Why, the subject even turned up as a plot point in last night's Royal Pains episode, with its attention to "orphan" diseases, the ones that fall beyond the economic interest of the pharmaceutical companies.

The New Yorker's James Surowiecki explains in his current (August 25) "Financial Page" piece, "Ebolanomics" (which, remember, you can actually read for yourself for free during the magazine's summer of "free"), that we shouldn't be surprised, during the current frenzy over ebola, that "there are no real tools to stop it." It suffers from a drug-fighting double whammy: Its victims are both predominantly poor and few in number, in the grand scale of things.

When pharmaceutical companies are deciding where to direct their R. & D. money, they naturally assess the potential market for a drug candidate. That means that they have an incentive to target diseases that affect wealthier people (above all, people in the developed world), who can afford to pay a lot. They have an incentive to make drugs that many people will take. And they have an incentive to make drugs that people will take regularly for a long time—drugs like statins.

This system does a reasonable job of getting Westerners the drugs they want (albeit often at high prices). But it also leads to enormous underinvestment in certain kinds of diseases and certain categories of drugs. Diseases that mostly affect poor people in poor countries aren’t a research priority, because it’s unlikely that those markets will ever provide a decent return. So diseases like malaria and tuberculosis, which together kill two million people a year, have received less attention from pharmaceutical companies than high cholesterol. Then, there’s what the World Health Organization calls “neglected tropical diseases,” such as Chagas disease and dengue; they affect more than a billion people and kill as many as half a million a year. One study found that of the more than fifteen hundred drugs that came to market between 1975 and 2004 just ten were targeted at these maladies. And when a disease’s victims are both poor and not very numerous that’s a double whammy. On both scores, a drug for Ebola looks like a bad investment: so far, the disease has appeared only in poor countries and has affected a relatively small number of people.

THE PROBLEM GOES BEYOND "ORPHAN DISEASES"

Surowiecki goes on to point out that this economic disincentive isn't limited to drugs for the poor and/or few. It poses a huge obstacle to the development of drugs that are likely to be needed desperately by the entire population.

This is, again, something I think we're all aware of in a general way: the growing problem of drug-resistant forms of diseases against which we will increasingly have no line of antibiotic defense. The economics of the pharmaceutical industry are again all wrong for this sort of thing. How can we expect drug makers to invest the necessary zillions to develoop drugs that they can't even market? The whole point of such drugs, after all, is to be ready when the existing drugs are no longer effective, and it doesn't take much thought to realize that, beyond the usual testing for efficacy and safety, these drugs mustn't be used till then. Overuse of the previous generations of antibiotics has played a large role in creating this looming crisis, after all.

In recent years, the rise of drug-resistant microbes has made the antibiotics we use less effective and has increased the risk that an infectious disease could get out of control. What people in the West need, health officials agree, is new drugs that we can keep in reserve against an outbreak that regular antibiotics can’t contain. Yet, over the past thirty years, the supply of new antibiotics has slowed to a trickle. “Antibiotic resistance really has the potential to make everything about the way we live different,” Kevin Outterson, a co-director of the Health Law program at Boston University and a founding member of the C.D.C.’s working group on antimicrobial resistance, told me. “So we need to stoke the pipeline.”

The trouble, again, is the business model. If a drug company did invent a powerful new antibiotic, we wouldn’t want it to be widely prescribed, because the goal would be to delay resistance. “Public-health officials would appropriately try to limit sales of the drug as much as possible,” Outterson says: a good public-health policy; a bad investment prospect.

Again, I think we're all vaguely aware of this looming crisis. But I think we mostly avoid thinking about it, since nobody seems to have any answer beyond crossing our fingers and hoping "that day" is as far in the future as possible. Never mind that for some diseases "that day" may already be here. This is stuff that I, for one, find too scary to think about, given that there doesn't seem to be anything we can do about it.


OUR MAN SUGGESTS A POSSIBLE WAY

"How," Surowiecki asks, "can we get the drugs we need without magically transforming the industry that develops them?" And he suggests an answer, which would be "to reward companies for creating substantial public-health benefits."

[T]he simplest way to do this would be to offer prizes for new drugs. Outterson describes one scenario: “The government would make a payment or a stream of payments to the company, and in exchange the company would give up the right to sell the product.” The drug company would get paid, and would avoid all the expenses of trying to push a new product (which you don’t want with a last-resort antibiotic, anyway). Society would get a new drug, and public-health officials would be able to control how it was promoted and used.

It's not a brand-new idea, Surowiecki says. "In the seventeen-hundreds, the British government successfully used a prize to find a method for measuring longitude at sea." But the prize idea has recently become more widely used.

In the past couple of decades, they've become more common, with prizes being offered for things like innovations in private space flight and an arsenic filter for safe drinking water. The Obama Administration has been especially active in this area, offering more than a hundred and fifty prizes for a range of technological breakthroughs. Economists on both the left and the right see them as a useful way to spark innovation. They’re cost-effective, since you have to pay only if the product works. They’re well suited to encouraging investment in public goods—like antibiotics and vaccines—where the benefits of an innovation aren’t reaped only by those who use it. (My family is safer if yours is vaccinated.) They rely on existing infrastructure. And, in economic jargon, they harness market forces by “pulling” research into neglected areas.

The up-front costs of a prize system would be substantial—a recent report commissioned by the F.D.A. estimated that it would cost a billion dollars to get a great new antibiotic, factoring in tax credits. But we’d save lives by developing the drugs we need and taking measures against future disaster. The alternative is pretty grim: a system that, when it comes to some fierce mortal perils, is leaving a lot of blood on the floor.

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