Commercial, Reimbursement Hurdles Need To Be Addressed By Antimicrobial Resistance Efforts

Melinta describes difficulties launching its new antibiotics at BIO CEO & Investor Conference; companies and other stakeholders urge Congress to enact package of incentives to reinvigorate antibiotic pipeline.

US FDA Commissioner Scott Gottlieb’s proposal for a subscription model for hospital purchasing of antibiotics could help shore up the market, but industry experts think additional incentives are needed.

Reimbursement for antibiotics, particularly at hospitals, is among the factors limiting the antibiotic market and holding back antimicrobial research and development.

Speaking on a Feb. 12 panel at the BIO CEO & Investor Conference in New York, Gregory Frank, director, infectious disease policy at the Biotechnology Innovation Organization (BIO), said ideas for new incentives fall into two buckets, changes in reimbursement and "pull incentives," in which companies receive a financial reward or monetary payment for investing in antimicrobial development.

Last year, Gottlieb proposed a subscription reimbursement model for the purchase of antibiotics by hospitals to replace the pay-per-use model. (Also see ""Site License" Reimbursement Model For Limited Use Antibacterials Being Explored By US FDA, CMS" - Pink Sheet, 30 Jul, 2018.)

Frank asked the panelists if this site licensing was a way forward. Although they feel it is a good idea, they noted its limitations. 

"It's a very interesting idea and certainly we're pleased that Commissioner Gottlieb sees the threat and understands some of the challenges," Melinta Therapeutics Inc.  interim CEO John Johnson said. "I think there's a lot of details that would have to be worked out and a lot of discussions with hospitals that would take quite some time to get it through."

Amplyx Pharmaceuticals Inc. President and CEO Ciara Kennedy said a licensing model could be implemented more readily in the UK, which has a system where it can be mandated. But she said she could easily see hospitals in the US opt out of licensing. 

"I think it's seen as a bit of a band aid," Heather Behanna, member of the board of directors of Entasis Therapeutics Holdings Inc., said. She added that if people truly believed this was going to happen near-term and would be meaningful to companies it would be reflected in the stocks of public companies already as a signal that the government is committed to this.

Johnson said reimbursement carveouts from the Diagnostic Related Group (DRG) reimbursement system would be the way to go. Hospital treatment is reimbursed according the DRG code for a patient diagnosis established at admission. Under a DRG carve-out, the cost of the antibiotic would be excluded from the DRG payment.

Kevin Outterson, executive director and principal investigator of CARB-X, a Boston University-based accelerator that funds preclinical companies in the antimicrobial space up to the end of Phase I, noted the problems with the current reimbursement system. "If a hospital gets $15,000 for a bundled case or DRG and they have a choice between a $100 antibiotic or a $10,000 new antibiotic, if they chose the new antibiotic the hospital will be guaranteed to lose money on that patient and maybe half a dozen others," he said.

Companies have advocated for DRG carve-outs or a new reimbursement mechanism for qualified antibiotics since the passage of the Generating Antibiotic Incentives Now (GAIN) Act, which was part of the reauthorization of Prescription Drug User Fee Act (PDUFA V). The legislation established a new Qualified Infectious Disease Product (QIDP) designation for antibiotics that treat serious or life-threatening infections, fast tracking their review and allowing manufacturers to apply for extended marketing exclusivity upon approval.

A DRG carve-out "will probably not get us all the way there," Frank said. "But I do think it has to be part of the comprehensive approach."

Hospital Hurdles

Johnson noted that hospital pharmacies have intense cost pressure and can regard a drug that costs $1,000 per day to be a "budget buster." He said it takes at least six months on average for most hospitals to put a product on their formulary. A product must then go before a stewardship committee and in some cases an antibiotic subcommittee, and then get tested and validated by a micro lab. And once on the formulary it can sometimes take up to a year for a hospital to get your product onto their computerized order entry system, he said.

"That first year of launch in a hospital is really getting through all these logistical barriers," Johnson stated. "Even once you do, you still have the stewardship guidelines, which are important but sometimes stewardship and cost aren't always in sync and stewardship can be a word for cost containment in some places."

In the outpatient setting, he said prior authorization is often needed for a new therapy and in the case where the antibiotic is an acute therapy, "if you can't get through that prior authorization quickly, you lose that patient."

Amplyx's Kennedy commented that developing a product the right way doesn't necessarily mean it will be automatically available for patients who need it. "That is soul destroying when you are in this space," she said.

More Is Still Needed

The industry has kept up its call for more incentives, especially “pull” incentives like market-entry rewards, as well as “push” incentives like R&D funding. (Also see "New Report Calls For Pushing And Pulling In Global Fight Against Superbugs" - Scrip, 24 Jan, 2018.) The dilemma companies face has led for a renewed call for Congress to enact new incentives, including reimbursement changes and financial rewards, to bolster the antibiotic pipeline. 

"This year we are at a crossroads,” Frank said. "We need to build on incentives."

Frank stated that previous incentives to support R&D, such as the 2012 GAIN Act, "have simply delayed the inevitable." He noted that several companies with approved products found they were not able to raise funds to sustain commercialization and this year other companies may be departing the space.

Commercial Exits

At the end of 2018, two pure-play antibiotic manufacturers closed their research and development programs, casting a spotlight on the immense difficulties antibiotic developers face in developing and commercializing new products.

"If a company like us that has four molecules out there in the market today driving revenue has to exit discovery, what does that mean for others down the line," Melinta interim CEO John Johnson said.

Achaogen Inc. had a newly approved antibiotic, Zemdri (plazomicin), but announced the elimination of 80 positions, approximately 28% of its workforce, in July and followed with a restructuring plan in November to cut expenses by 35%-40%. It also initiated a strategic review to determine whether a sale of the company is feasible, as Zemdri sales are not enough to fund operations. (Also see "Finance Watch: Alphamab's $100m Series A Continues Theme Of Big Investments In China Biopharma" - Scrip, 23 Nov, 2018.) The company had attempted to use one of the new regulatory incentives – the limited population antibiotic drug (LPAD) pathway – for an additional indication for bloodstream infections. (Also see "Achaogen Questioning Whether Others Will Pursue LPAD Pathway After Zemdri Misses Out " - Pink Sheet, 26 Jun, 2018.)

Also in November, Melinta announced it was reducing its workforce and exiting R&D.

Melinta's action is a dramatic turn from the beginning of 2018 when it was preparing to launch its fourth antibiotic. Then-CEO Daniel Wechsler acknowledged the challenge of commercializing new, expensive antibiotics in a highly-genericized market but said the unmet need for novel antibiotics and smart pricing could be a winning business strategy for a focused company. (Also see "Melinta: A Pure-Play Antibiotics Specialist Rises" - Scrip, 23 Jan, 2018.)

Wechsler had a short stint at Melinta. Appointed CEO in October 2017, he was replaced by interim CEO John Johnson the following October.

Johnson described the difficulties the company faced launching its products, including Baxdela (delafloxacin) for acute bacterial skin and skin structure infections. Melinta also markets three antibiotics it acquired from The Medicines Co. in 2017, Vabomere (vaborbactam/meropenem), Orbactive (oritavancin) and Minocin IV (minocycline).

"If a company like us that has four molecules out there in the market today driving revenue has to exit discovery, what does that mean for others down the line," Johnson said at the BIO conference.

Larger firms have also largely exited the anti-infective space, including The Medicines Co. and Novartis AG most recently. (Also see "Finance Watch: Investment In Novel Antibacterials Gets A New Boost With Qpex Launch" - Scrip, 22 Oct, 2018.) An ecosystem of start-ups has sprung up with backing from public and private investors, and grants from groups like HHS' Biomedical Advanced Research and Development Authority, the public-private venture CARB-X, the biotech alliance BEAM and the industry funded REPAIR Impact Fund. (Also see "REPAIR Is Trying To Fix The Antibiotic Gap Left By Industry" - Scrip, 12 Sep, 2018.)

Plea To Congress

Companies and other stakeholders have joined forces to encourage Congress to enact a package of incentives in 2019 to "jumpstart the development of critically needed antibiotics."

They sent a Feb. 5 letter to Senators Lamar Alexander and Patty Murray, chair and ranking member of the Committee on Health, Education, Labor and Pensions, and Chuck Grassley and Ron Wyden, chair and ranking member of the Committee on Finance, describing the challenges antibiotic developers face. The signatories include Achaogen, BIO, GlaxoSmithKline PLC, Merck & Co. Inc., Pfizer Inc., the Infectious Diseases Society of America, the Antimicrobials Working Group (an organization of 14 antimicrobial developers), and others. 

They point out that nearly all large pharmaceutical companies have left the antibiotics market, and the remaining small biotech firms are struggling to raise private funds. They say it is difficult to recoup development costs and make a return on investment as antibiotics are generally used for a short duration and sparingly to preserve their effectiveness and slow the development of resistance. In addition, they note that antibiotics are most frequently administered in hospitals where "reimbursement policy creates an incentive to not use the most clinically appropriate antibiotic."

The stakeholders say incentives should be paid after FDA approval, rewarding only successful development of novel antibiotics that address the greatest public health need. These incentives must be substantial and viewed as highly valuable to private markets, they state. In addition, they say economic incentives should provide predictability for drug developers so they can count on the incentive being available if a new drug meets the eligibility criteria.

Five Years Of Recommendations

Antimicrobial resistance has been a growing crisis. According to the Centers for Disease Control and Prevention, at least two million people are infected with antibiotic-resistant bacteria each year in the US, and a least 23,000 people die as a result.

"This is the year where we need to get our act together and address antimicrobial resistance," BIO's Gregory Frank said.

At the same time there is a dearth of new antibiotics in the pipeline. Frank noted that the Pew Charitable Trust estimates there are about 70 antibacterials in Phase I to Phase III development compared to 650 oncology products in Phase II and III.

Over the last five years, industry stakeholders have issued a slew of reports and pledges to tackle antibiotic resistance and incentivize development of new antibiotics.

In September 2014, the President's Council of Advisors on Science and Technology (PCAST) issued a report on Combating Antibiotic Resistance, which recommended providing companies with a financial reward, such as a one-time lump payment, for bringing an antibiotic to market. Other recommendations included providing a tradable voucher that extends the patent life of another drug and imposing an antibiotic usage fee, a surcharge on the cost of each antibiotic that would go into a fund for antibiotic incentives. (Also see "How To Spur Antibiotic Development? Higher Reimbursement, Govt. Funding Proposed By PCAST" - Pink Sheet, 18 Sep, 2014.)

The United Nations General Assembly also drew attention to the issue. It held a high-level meeting on antimicrobial resistance in September 2016 at which the 193 member countries signed a political declaration committing to develop national action plans, programs and policy initiatives to fight antimicrobial resistance. (Also see "Antimicrobial Resistance: Billions Needed To Encourage New Drugs" - Pink Sheet, 22 Sep, 2016.) 

But the BIO panel noted that the difficult commercial experiences of antibiotic manufacturers show that more urgent action is necessary. As the joint letter to Congress advocated, "this is the year where we need to get our act together and address antimicrobial resistance," Frank said.