Repairing the Broken Market for Antibiotic Innovation

11 Pages Posted: 9 Aug 2015 Last revised: 21 Aug 2015

See all articles by Kevin Outterson

Kevin Outterson

Boston University School of Law

John Powers

George Washington University

Gregory Daniel

Brookings Institution - Engelberg Center for Health Care Reform

Mark B. McClellan

Brookings Institution; Council of Economic Advisors; National Bureau of Economic Research (NBER)

Date Written: February 1, 2015

Abstract

Multidrug-resistant bacterial diseases pose serious and growing threats to human health. While innovation is important to all areas of health research, it is uniquely important in antibiotics. Resistance destroys the fruit of prior research, making it necessary to constantly innovate to avoid falling back into a pre-antibiotic era. But investment is declining in antibiotics, driven by competition from older antibiotics, the cost and uncertainty of the development process, and limited reimbursement incentives. Good public health practices curb inappropriate antibiotic use, making return on investment challenging in payment systems based on sales volume. We assess the impact of recent initiatives to improve antibiotic innovation, reflecting experience with all sixty-seven new molecular entity antibiotics approved by the Food and Drug Administration since 1980. Our analysis incorporates data and insights derived from several multi-stakeholder initiatives under way involving governments and the private sector on both sides of the Atlantic. We propose three specific reforms that could revitalize innovations that protect public health, while promoting long-term sustainability: increased incentives for antibiotic research and development, surveillance, and stewardship; greater targeting of incentives to high-priority public health needs, including reimbursement that is delinked from volume of drug use; and enhanced global collaboration, including a global treaty.

Keywords: antibiotic resistance, innovation, prize, delinkage

JEL Classification: I12, I19, K32, K39

Suggested Citation

Outterson, Kevin and Powers, John and Daniel, Gregory and McClellan, Mark B., Repairing the Broken Market for Antibiotic Innovation (February 1, 2015). Health Affairs, Vol. 34, No. 2, 2015, Boston Univ. School of Law, Law and Economics Research Paper No. 15-32, Available at SSRN: https://ssrn.com/abstract=2641112

Kevin Outterson (Contact Author)

Boston University School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States

John Powers

George Washington University ( email )

2121 I Street NW
Washington, DC 20052
United States

Gregory Daniel

Brookings Institution - Engelberg Center for Health Care Reform ( email )

1775 Massachusetts Ave., NW
Washington, DC 20036
United States

Mark B. McClellan

Brookings Institution ( email )

1775 Massachusetts Ave., NW
Washington, DC 20036
United States

Council of Economic Advisors ( email )

Eisenhower Executive Office Building
17th and Pennsylvania Avenue, NW
Washington, DC 20502
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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