Duke-Margolis Proposes Economic Incentives for Antimicrobial Drugs

News Update

Duke-Margolis Proposes Economic Incentives for Antimicrobial Drugs


August 3, 2017

Read the JAMA viewpoint.

Read coverage from the University of Minnesota's Center for Infectious Disease Research and Policy

Today, the Robert J. Margolis, MD, Center for Health Policy at Duke University released a paper describing U.S. policy approaches that could provide better economic incentives to antimicrobial developers that successfully bring effective drugs to the market, providing a societal benefit that exceeds the cost of the incentive.

Resistance to current antimicrobial drugs is a growing source of morbidity, mortality, and healthcare costs. Challenging market dynamics have led to a weak pipeline of drug candidates to respond to these threats. Combined, these two trends represent a significant and growing threat to US and global health preparedness and lead to direct and indirect costs estimated at more than $35 billion annually.

The Priority Antimicrobial Value and Entry (PAVE) Award proposal, formulated by a team led by Center deputy director Gregory Daniel, PhD, MPH, combines a market entry reward with population-based payments that phase in over time. The market entry reward provides public funds over early years of marketing after FDA approval, as an incentive to antimicrobial developers to bring high-priority antimicrobials to market for unmet medical needs. To receive the full payments, the developer must work with health plans and providers to get revenue from payment contracts that are linked to value and appropriate use of the antimicrobial in practice, not volume-based payments that lead to overuse and diminished effectiveness.

“New antibiotics that treat high priority multi-drug resistant infections should be used sparingly to dampen resistance development. The PAVE Award supports stewardship by providing payments to manufacturers of these novel antibiotics regardless of how often they get used, effectively ‘delinking’ ROI from volume of use. This model also rewards availability and appropriate use of effective antimicrobials and addresses the fundamental need for public investment in new antibiotics, while reinforcing the volume to value shift in health care payments, and leveraging, rather than replacing, private financing,” said Daniel. “Our proposal can complement and build upon approaches supported by private foundations, other countries, and multinational organizations to further generate global support for the development of priority antimicrobials.”

“Antimicrobials for high-priority, resistant organisms have a public health value for Americans that far exceeds the fee-for-service payment for the patients who actually have resistant infections. Our proposal will stem the spread of resistant microbes before they spread,” said Center director Mark McClellan, MD, PhD. “This proposal builds on the critical role of private health plans and providers in the U.S. health care system, and it limits the use of public funds by augmenting rather than replacing private spending and health care innovation.”

The recommendations reflect work guided by an advisory group that includes representatives from private and public payers, pharmaceutical companies of all sizes, professional societies, academic researchers, think tanks, government agencies and patient advocacy organizations, as well as through interactions with stakeholders during an expert workshop and public meeting. The proposal is based on key principles as part of a comprehensive strategy: promote innovation, access, and stewardship; be sustainable and predictable, leverage public money with private funds; provide rapid access to funds upon market entry; and align with broader shifts in the U.S. healthcare system to value and quality.

Read the full paper