Free Market Policies Needed To Incentivize Creation Of New Life-Saving Treatments

Free Market Policies Needed To Incentivize Creation Of New Life-Saving Treatments

The deaths of two patients at the Ronald Reagan UCLA Medical Center in early 2015 were blamed in part on a drug-resistant superbug. Two years earlier, the Centers for Disease Control and Prevention predicted that a “nightmare” was coming in the form of the killer bacteria carbapenem-resistant Enterobacteriaceae, also known as CRE. The bad dream was a grave reality for those patients who had gone to the hospital to merely undergo endoscopies and were likely infected by CRE from equipment that hadn’t been thoroughly cleaned.

“Our strongest antibiotics don’t work and patients are left with potentially untreatable infections,” Director Dr. Tom Frieden said when the CDC issued its warning. He asked doctors, hospitals and public health officials to “work together” to “stop these infections from spreading.”

The 2014 Report to the President expressed a similar concern:

“The evolution of antibiotic resistance is now occurring at an alarming rate and is outpacing the development of new countermeasures capable of thwarting infections in humans. This situation threatens patient care, economic growth, public health, agriculture, economic security and national security.”

For those thinking this sort of thing shouldn’t be happening when medical science is more advanced than can almost be conceived, be assured that it is. And unless there are public policy interventions, it’s likely to get worse.

“More and more microorganisms will continue to gain resistance to the current drug therapies because (antimicrobial resistance, or AMR) is basic evolution,” Wayne Winegarden writes in the Pacific Research Institute’s newly-released report “Incenting the Development of Antimicrobial Medicines to Address the Problem of Drug-Resistant Infections.”

The International Federation of Pharmaceutical Manufacturers says the problem is caused by “a dearth of new antibiotic medicines.” At the same time that there’s been an increase in AMR, there has been “a sharp decline in the development of new antibiotic medicines.” The group reports that only two new classes of antibiotics have been discovered in the last three decades compared to 11 in the previous 50 years.

The answers to many medical problems are still not within reach of researchers. But the hazards of AMR can be diminished.

Winegarden suggests we begin with public health campaigns that encourage handwashing, which he calls a highly effective and low-cost way to reduce the spread of infection. He further recommends policy that would address the problem of antibiotic overuse and greater use of vaccines to cut the incidents of infection.

But Winegarden’s primary concern is establishing the correct incentives for developing new antimicrobial medicines that would be effective against AMR microorganisms. He’s specifically referring to policies “based on a thorough understanding of the disincentives that are currently inhibiting their development.”

“These disincentives are well-recognized,” he writes. “Despite the medical need, and despite the generally strong return on investment for many other drug classes, the return on investment for developing new antimicrobial medicines (particularly antibiotics) is too low.”

Producing a new drug is a grinding and expensive endeavor. It can take 10 to 15 years to develop a single prescription drug that is introduced to the market, and a company can spend as much as $5.5 billion on research and development for each medication that is eventually approved and prescribed. Less than 2 percent of all projects launched to create new drugs succeed. This is not an environment in which pharmaceutical companies can get too amped up about pursuing new treatments.

Yet new drug approvals increased over the last decade. Don’t look for a surge of antimicrobial drugs in that pipeline, though. Winegarden says that particular drug class is among several that “face unique impediments” that serve as disincentives for innovation.

To overcome the steep hill that impedes the development of new AMR drugs, lawmakers must implement policies that unleash the incentives of the free market. Policymakers also should look at the 1983 federal Orphan Drug Act and its market-oriented reforms that increased the number of drugs developed to treat rare diseases. More than 400 have been introduced to the market since the law was enacted, compared to fewer than 10 in the 1970s.

Put another way, government needs to remove its anchors from the process and let the market do what it does so well. In this case, that’s restoring patients’ health, enriching innovative companies that create jobs, and inspiring biotech start-ups such as the group of Stanford undergraduates that has been capitalized to develop new antibiotics. If the proper incentives are in place, the needed treatments will follow.