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Economic incentives for the development of new antibiotics : Report commissioned by the Public Health Agency of Sweden

By Enrico Baraldi, Francesco Ciabuschi, Simone Callegari and Olof Lindahl


This report responds to a request by the Public Health Agency of Sweden (Folkhälsomyndigheten) concerning which incentives for antibiotics research and development (R&D) Sweden should take into consideration for potential public investments. Based on discussions and interviews with experts, feedback from stakeholders (i.e. potential recipients of Swedish incentives), company case studies and computer-based Monte Carlo simulations, this report provides a set of recommendations about the economic incentives that can be relevant for Sweden. The incentives identified for Sweden’s portfolio meet the following criteria: improving Sweden’s visibility in the antibiotics field, reinforcing Sweden’s national R&D infrastructure in this area, leveraging Sweden’s strengths and traditions, limiting the public expenditure per incentive, permitting rapid implementation and effects, providing highly needed support to the antibiotic pipeline in unique ways, and granting Sweden a key contribution and thus influence on the design and direction of each incentive. Based on these criteria, a Market Entry Reward (MER) was not considered a viable alternative for Sweden if implemented by Sweden alone, especially because of its demanding financial engagement (close to 1 B USD), which is necessary for this incentive to produce relevant effects on the antibiotics R&D pipeline. However, if Sweden were to decide to pilot an MER, it should focus on a fully delinked MER, which entirely substitutes market sales with lump sums paid on a yearly basis. An MER should moreover be financed primarily from the healthcare budget to avoid crowding out other incentives. A fully delinked MER would allow testing several features of this incentive model, such as the evaluation procedures to set the overall amount of the MER, the definition of the unit prizes to be paid by local healthcare facilities to the central government, and periodic reviews to reassess the amount of yearly lump-sum payments according to the confirmed therapeutic efficacy of the antibiotic. If Sweden were to collaborate with other countries, such as the G20 group or the 28 EU members, a reasonable amount for its share is 6 or 23 M USD, respectively, for a partially delinked MER and 9 or 34 M USD, respectively, for a fully delinked MER. There are, however, ways to combine push and pull incentives, which are quicker and more efficient than an MER, namely combinations of grants with milestone prizes, which are rewards paid to developers upon the successful completion of key R&D steps (e.g. Phase 1 clinical studies). In addition to producing better effects for the money spent, a combination of milestone prizes and grants also prevents large MERs from crowding out push investments as well as recipients such as small- and medium-sized firms (SMEs), who usually cannot wait for a reward that is delayed until the final approval of an antibiotic. The recommended portfolio of incentives for Sweden includes three incentives: grants, milestone prizes and Pipeline Coordinators, to be used in combination with each other as a way to cover the antibiotics R&D pipeline and achieve important synergies. The following features should be considered when implementing and funding the three selected incentives: 1) Grants should be dedicated to early R&D projects (no later than Phase 2) and to reinforcing the national R&D infrastructure, with a longer-term perspective than the current 3-year timeframe. In this regard, Sweden should maintain and possibly increase its current yearly investments in antibiotics R&D grants of approximately 7 M USD/year (60 M SEK) over several years. These investments will pay off in the long run, both in terms of molecules that will enter the future R&D pipeline; and as a stock of competencies spread over an infrastructure of specialised R&D centres that can be leveraged for future antibiotics research. These competences must be built up immediately and the seeds for future R&D projects need to be planted as soon as possible. 2) Two types of milestone prizes should be in focus for Sweden: first, a prize awarding a sum between 10 and 20 M USD at the end of Clinical Phase 1 to highly innovative molecules addressing specific pathogens and, second, a prize for projects successfully completing preclinical steps. Establishing a prize at the end of Clinical Phase 1 is a much needed and unique initiative, with significant effects on the early R&D pipeline, granting also strong international visibility to Sweden. Sweden could also take major responsibility for such a milestone prize by covering a relatively large share. The other recommended milestone prize, awarded at the end of the preclinical steps, would help refill the clinical pipeline and would therefore have more of a long-term effect. 3) Pipeline Coordinators, that is, organizations that take an active role in selecting and supporting a portfolio of antibiotics R&D projects in various ways, are the last recommended incentive. Selecting among currently existing Pipeline Coordinators rather than creating a new one, Sweden should fund two types of such organizations: R&D Collaborations, which create collaboration platforms to perform early development activities for the antibiotic projects they support, and Non-Profit Developers, who conduct their own antibiotic projects with the aim of bringing antibiotics to market but without pursuing profit goals. The first type of Pipeline Coordinator, R&D Collaborations, is relevant for a Swedish public investment because they are potentially the most efficient incentive in making R&D projects profitable. However, to fully exploit this potential, R&D Collaborations must be refined to become more flexible, reduce bureaucratic burden and avoid conflicts between participants. Non-Profit Developers provide the most extensive support to selected products by intervening across the entire antibiotic pipeline to ensure products reach the market. Moreover, this model strongly promotes both global availability and responsible use (stewardship). Therefore, Sweden may fund Non-Profit Developers through its international aid budget and in this way make important contributions to global health. Both types of Pipeline Coordinators also offer the advantage that they can help connect Swedish antibiotics R&D centres to international platforms, which reinforce the effects of infrastructure-related grants. Moreover, all forms of Pipeline Coordinators are incentive models that can be used as tools to manage the other two incentives (grants and milestone prizes). In this capacity, they can, for instance, evaluate grant applications and the antibiotic projects eligible for milestone prizes, which require a deep insight into the details of a drug development project. A fourth model, regulatory simplifications, which radically cut costs and times for Clinical Phase 3, can also be relevant for Sweden due to its contained costs, rapid implementation and effects and connection with Sweden’s expertise. However, this incentive requires further analysis to fully grasp its implications for regulators and patient safety before being recommended for implementation. The three incentives recommended by this report – grants, milestone prizes and Pipeline Coordinators – should be used in combination to exploit the synergies between them and their ability to push and pull molecules in different phases of the R&D pipeline. For instance, when grants and milestones are used together, the public investment per approved new antibiotic is lower than the combined spending if the two incentives were used in isolation. If it is not possible to introduce and use the three incentives simultaneously, the following priorities should be applied: first of all, grants need to be kept at current levels and possibly increased to fund both single antibiotic projects and competence development in the R&D infrastructure, while starting to invest in a Non-Profit Developer and a milestone prize at the end of Phase 1, followed by the development and funding of R&D Collaborations and, finally, a preclinical milestone prize

Topics: Health Care Service and Management, Health Policy and Services and Health Economy, Hälso- och sjukvårdsorganisation, hälsopolitik och hälsoekonomi
Year: 2019
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