A better business model for antibiotics

For the past couple of decades antibiotics have generally been a low margin, low revenue business that big pharma has stayed away from. Lack of new drug development activity combined with an increase in antibiotic resistance and the rise of “superbugs” are leading us rapidly to a frightening place where we lack effective drugs to stop many dangerous infections.

A Wall Street Journal article (Drug makers tiptoe back into antibiotic R&D) provides the welcome news that drug makers are starting to invest in this area again. One reason: they are hopeful that when the new products get to market there will be a greater willingness to pay than there has been historically. Antibiotics can have a big payoff in the form of improved quality and length of life and avoided medical costs. Curing an infection in one person can also prevent others from getting it.

The article speculates about reimbursement from health plans and whether big insurance companies will be willing to pay more for new antibiotics than they have for old ones. The answer may be yes, but I’m not sure it’s the relevant question. I’m reasonably optimistic that in the new world of global capitation, accountable care organizations, and other methods for placing risk on providers that the providers themselves will be willing to pay because it will be a net positive for them financially.

There’s also a brief mention of introducing a licensing model for drugs based on number of patients and indications rather than quantity of product. I think that’s a great idea and have written about it in the past.

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By David E. Williams of the Health Business Group.

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