Presidential Advisory Council on Combating Antibiotic-Resistant Bacteria unanimously endorses delinkage

paccarb_logo.jpgOn Thursday, the Presidential Advisory Council on Combating Antibiotic-Resistant Bacteria unanimously endorsed a report that included very powerful recommendations on delinkage. This is a link to the report that was approved.

This from the report:

  • Adoption of some form of a delinkage model as a pull incentive.
    Delinkage is a proposed model to incentivize the development of new drug products in which profitability is separated from sales volume. The pull incentives most likely to be effective in the U.S. market are all variations on the delinkage models proposed by DRIVE-AB and the Duke-Margolis Center. A core feature of this model is an agreed-upon payment for the delivery of a given antibiotic to the marketplace—or an MER—rather than a payment based on the use of the product. The value or price of the MER is benchmarked (indexed) to reflect the level of public health need that would be addressed by the new antibiotic product. Different approaches for setting the value of the MER should be debated—recent work has suggested that total values may need to be $1 billion to $2 billion or more. Fixed value based on desired characteristics of the drug will be the easiest to measure. Approaches based on assessing utility in the clinic are desirable but will be confounded by the limited use that is both expected and desirable with these products. Receipt of the MER should be tied to restrictions on sales and marketing through use of a delinkage model. Plausible options for paying for pull incentives include establishment of an antibiotic incentive fund (AIF) supported by an antibiotic usage fee, by auctioning transferable exclusivity vouchers, or by allowing registration of a new antibiotic to earn a transferable exclusivity voucher. Government appropriations also could be considered, but experience shows that these are unpredictable and likely not sustainable. Under a delinkage model, the drug developer retains all intellectual property (IP) and has responsibility for approval, manufacturing, and sales of the antimicrobial. However, by accepting MERs as payments from the AIF, the company would have to agree to forgo profits based on volume of sales and to forgo active marketing of the product. The major advantage of this approach is that government could prioritize health products for unmet medical need. Disadvantages include the political challenge of committing to funding for new products, defining the value benchmarks, and allocating the cost of the delinkage payments to the consumer market.

  • For pull incentives, development by CMS and the Treasury Department of value metrics for antibiotics and diagnostics, the required size of delinked MER rewards, and options for plausible business models for antibiotics, including delinkage, in consultation with FDA and CDC, and through collaboration with public health experts and the international community.

I have a comment on the report here, on delinkage.org, which makes the following comments:

The financing recommendations, which include transferable patent extensions, were problematic, the but the new incentive mechanisms proposed were good.

Professor Kevin Outterson and BARDA played an important role in advancing delinkage. The industry pushed for off-budget financing via patent extensions, unfortunately, but that is something the Congress is unlikely to endorse. A better approach is found in S.771 and HR 1776. (See: Delinkage.Org report here)

The endorsement of delinking R&D rewards from units sold is an important step toward broader reforms on drug pricing that are needed.

In the AMR case, industry backed delinkage because they thought returns would be higher than what they could get normally. But delinkage is also very important in introducing budget constraints and expanded access to rewards for drugs in general.

The former CEO of GSK suggested another early application of delinkage could be for rare diseases where prices of products make zero sense, and society wants to ensure robust innovation without high prices. (more here).