The legal ecology of
resistance:
why normal IP rules should be
adjusted for antibiotics
Oxford 25 April 2014
Kevin Outterson
mko@bu.edu
Funding & Disclaimer
• RWJF Public Health Law Grant, The Legal Ecology of
Resistance (2009-2011)
• DHHS/FDA Incentives for the Development of New Drugs,
Vaccines, and Rapid Diagnostics for Bacterial Diseases, SP 11003 (2011-present)
• Member, CDC Antimicrobial Resistance Working Group
(2011-present)
• Visiting Fellow, Royal Institute of International Affairs
(Chatham House) Antimicrobial Resistance Working Group
(2013-present)
• Kaufman Family Foundation, Innovation & Antimicrobial
Resistance (2012 – present)
• EU/IMI/DRIVE-AB (consultant, 2014 – present)
But these comments today are my own, and do not necessarily reflect the views
of any funder or agency
Legal ecology of AMR
TYPE
CONSERVATION
PRODUCTION
Property
Intellectual property (IP) used as
conservation tools to privately
constrain demand
Intellectual property (IP) used as
incentives to bring new antibiotics to
market
Regulation
Public health infection control and
antibiotic stewardship programs
regulate demand for antibiotics
FDA regulations relaxed to speed
approval of new antibiotics. Tax
subsidies support R&D
Contract
Prizes, grants, and value-based
reimbursement support antibiotic
conservation.
Prizes, grants, and value-based
reimbursement support new
antibiotic production.
Tort
Patients sue for hospital-associated
infections, increasing institutional
incentives to promote safety through
antibiotic conservation
Federal law designed to preempt
state tort law, waiving drug company
tort liability for antibiotics
Source: Kesselheim and Outterson, 2010
Note: IP collectively refers to Patents, Data Exclusivity (DE), Marketing Exclusivity (ME), Patent Term Adjustments (PTAs),
Patent Term Extensions (PTEs), and Supplementary Protection Certificates (SPCs). Even though these are treated in a
similar fashion in the model, they vary in terms of purview, structure, and expected impacts.
Outterson, Legal Ecology of Resistance, Cardozo L Rev 2010; Outterson, Vanishing Public
Domain, U Pitt L Rev 2005.
ABX exceptionalism
ABX exceptionalism
Rivalry
Innovation
Valuation
Boundaries
Generics
Competition
Outterson et al., New Business Models for Antibiotics, Chatham House 2014; Outterson et al., Approvals and Withdrawals of
Antibiotics, J Law Med & Ethics 2013; Kesselheim & Outterson, Improving Antibiotic Markets for Long Term Sustainability,
Yale J Health Policy, Law & Ethics 2011; Kesselheim & Outterson, Health Affairs 2010; Outterson, Legal Ecology of Resistance,
Cardozo L Rev 2010; Outterson et al., Will Longer Antimicrobial Patents Improve Global Public Health, Lancet ID 2007;
Outterson, Vanishing Public Domain, U Pitt L Rev 2005.
1. Rivalry
Rivalry
2. Innovation
Spellberg/IDSA. House Energy & Commerce Comm., June 9, 2010
Outterson, Powers, Seoane-Vazquez, Rodriguez-Monguio, Kesselheim
JLME 2013
Ex. 4
New Systemic Antiinfectives Not Withdrawn in the U.S. as of August 1, 2013, by
Decade of FDA Approval, 1980-2009
40
35
5
30
25
20
15
19
2
4
5
13
10
5
13
13
1980s
1990s
9
0
Systemic antibiotics
Antivirals
2000s
Other antiinfectives
Outterson, Powers, Seoane-Vazquez, Rodriguez-Monguio, Kesselheim
JLME 2013
Systemic Antibacterials Approved by the FDA
(1980-2009).
Marketed Drugs, Linear Trend
5
CUSFTA
CAFC
Bayh-Dole Act
TRIPS
Bioshield
ODA
Ped Excl.
OB
TRIPS
India +
AUSFTA
4
3 3
3
2
2
1
0
2
1
1 1
0
1 1
1
0
1
2
2
1
0
1 1
0
1
0
1
0
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
0
3
2
1
0
3
Sec.505
Outterson, Powers, Seoane-Vazquez, Rodriguez-Monguio, Kesselheim JLME 2013
New cardiovascular system drugs approved by the FDA
(1980-2009), marketed drugs & linear trend
10
9
8
8
7
7
6
5
5
4 4
4
4
3
3
3
2
2
4
2
4
3
3
2 2
2
3
2
1 1 1 1
0
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
0
3
2
1 1
1
0
3
New antineoplastic & immunomodulating NME agents approved by
the FDA (1980-2009), marketed drugs & linear trend
9
8
7
6
5
4
3
2
1
0
Conventional wisdom:
Short course of treatment is
why companies can’t make
money on antibiotics
Short course of treatment is NOT the problem
9
8
7
5
7
5
5
4
3
2
1
0
2
1
1
3
3
1
5
4
3
2
8
5
5
4
3
2
1
0
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
10
Outterson, Powers, Seoane-Vazquez, Rodriguez-Monguio, Kesselheim. Approvals and
withdrawals of new antibiotics and other antiinfectives in the Unites States, 1980-2009. Journal
of Law, Medicine & Ethics 2013.
Legal ecology of AMR
TYPE
CONSERVATION
PRODUCTION
Property
Intellectual property (IP) used as
conservation tools to privately
constrain demand
Intellectual property (IP) used as
incentives to bring new antibiotics to
market
Regulation
Public health infection control and
antibiotic stewardship programs
regulate demand for antibiotics
FDA regulations relaxed to speed
approval of new antibiotics. Tax
subsidies support R&D
Contract
Prizes, grants, and value-based
reimbursement support antibiotic
conservation.
Prizes, grants, and value-based
reimbursement support new
antibiotic production.
Tort
Patients sue for hospital-associated
infections, increasing institutional
incentives to promote safety through
antibiotic conservation
Federal law designed to preempt
state tort law, waiving drug company
tort liability for antibiotics
Source: Kesselheim and Outterson, 2010
Note: IP collectively refers to Patents, Data Exclusivity (DE), Marketing Exclusivity (ME), Patent Term Adjustments (PTAs),
Patent Term Extensions (PTEs), and Supplementary Protection Certificates (SPCs). Even though these are treated in a
similar fashion in the model, they vary in terms of purview, structure, and expected impacts.
3. Valuation
Quandaries
• Best clinical practices undercut the market for
new molecules
From: National Burden of Invasive Methicillin-Resistant Staphylococcus aureus Infections, United States, 2011
JAMA Intern Med. 2013;173(21):1970-1978. doi:10.1001/jamainternmed.2013.10423
Figure Legend:
National Estimated Incidence Rates of Invasive MRSA Infections, Stratified by Epidemiologic CategoryaData are given for
methicillin-resistant Staphylococcus aureus (MRSA) infections reported to the Emerging Infections Program–Active Bacterial Core
surveillance (United States, 2005-2011).aDefined as MSRA isolated from a normally sterile source.
Date of download: 2/25/2014
Copyright © 2014 American Medical
Association. All rights reserved.
Quandaries
• Best clinical practices undercut the market for
new molecules
• Financial incentives across the supply chain often
are at odds with best clinical practices
• Companies have a lower eNPV for abx, generally
underinvest in sector
– New abx chase larger markets (UTIs, otitis media,
cSSSIs, now MRSA, broader spectrum), neglecting
highest risks (GN) and dx
Private eNPV by Indication
• Private eNPV variable
across indications
• CUTI has the highest
private eNPV & HABP
the lowest
• Large variation in
private eNPV for all
indications
• Lower bound private
eNPV < $0 for all
except ABSSSI & CUTI
Private ENPV (in $ million), by Indication
HABP
CUTI
CIAI
CABP
ABSSSI
ABOM
-$50.0
$0.0
ABOM
Private ENPV $60.8
$50.0 $100.0 $150.0 $200.0 $250.0
ABSSSI
$70.5
CABP
$48.6
CIAI
$54.9
CUTI
$146.6
Private ENPV
Note: Error bars represent 90% confidence bounds around the
mean value
Source: Preliminary data from ERG analysis for HHS (pending, 2014)
HABP
$31.6
Further quandaries
• Companies can’t raise prices
Social v. private value
Further quandaries
• Companies can’t raise prices
• Companies can’t ethically boost volumes
• Powerful new antibiotics face tightly regulated
utilization (much slower adoption, appropriately)
• NI trials and narrow definition of inventive step
allow market entry of numerous abx with
limited marginal utility and modest safety data
Withdrawn NME
antibiotics 1980-2009
• 26 out of 61 NMEs withdrawn (more than triple
the rate of all other NMEs)
• Few had priority review status (n=2)
• Few were ever commercially successful (n=3)
• Many were follow on cephalosporins (n=10) and
fluoroquinolones (n=9)
• Six had safety-related withdrawals
Outterson, Powers, Seoane-Vazquez, Rodriguez-Monguio, Kesselheim. Approvals and
withdrawals of new antibiotics and other antiinfectives in the Unites States, 1980-2009.
Journal of Law, Medicine & Ethics 2013.
Further quandaries
• Companies can’t raise prices
• Companies can’t ethically boost volumes
• Powerful new antibiotics face tightly regulated
utilization (much slower adoption, appropriately)
• NI trials and narrow definition of inventive step
allow market entry of numerous abx with limited
marginal utility and modest safety data
• Resistance is too slow
• Everyone is underinvesting in the sector, including
NIH
US NIH Research Spending on Antimicrobial Resistance Research
(FY 2010 – 2015, adjusted annually for US CPI, FY2010 base)
$450
$400
$350
$300
$250
ARRA
NIAID
$200
$150
$100
$50
$0
FY 2010
FY 2011
FY 2012
FY 2013
FY 2014 (est)
FY 2015 (est)
Source: NIH Research Portfolio Online Reporting Tool, Estimates of Funding for Various Research,
Condition, and Disease Categories (RCDC) (March 7, 2014)
http://report.nih.gov/categorical_spending.aspx. From Outterson et al, Chatham House (pending
2014)
4. Boundaries
Boundary issues
• Resistance spreads within and across
drug classes in many pathogens
• Makes coordination by molecule more
difficult (overlapping property rights)
• Property rights become indistinct;
science may or may not improve the
clarity (cf. Bessen & Meurer)
• Makes voluntary models more difficult
(free riders, inability to fully exclude)
Ecological models
• Rare in patent law, but growing
prominence in abx theory with
complex, overlapping relationships
• Examples:
–Pollution
–Common pools
–Microbiome
Eco 1: pollution
• Pollution via transfers
–Increases costs to competitors
–Germ sheds
–Legal tools: regulation; liability rules;
contract; tradeable permits
Eco 1: pollution
• Pollution via transfers
–Increases costs to competitors
–Germ sheds
–Legal tools: regulation; liability rules;
contract; tradeable permits
• Follow-on molecules
• Pigovian taxes on agricultural use (Hollis,
NEJM 2014)
Eco 2: common pools
• Valuable, exhaustible resources
• Uncoordinated withdrawals
• Huge potential gains from cooperation
• Example: fisheries, buffalo
Spellberg/IDSA. House Energy & Commerce Comm., June 9, 2010
Cod aquaculture
1950-2007
Spellberg/IDSA. House Energy & Commerce Comm., June 9, 2010
Buffalo hunting
Based on data kindly provided by M.S. Taylor
The pre-1870
business model
After 1870
Hides
Skulls
The
th
20
Century Model
Eco 3: microbiome
5. Generics
H1. Patent holder waste
Time-limited property rights (patents) may
be particularly inappropriate (tort of waste)
–Over marketing
–Sub-therapeutic animal uses
–Label extensions to CAP/cSSSI/AOM
–Narrow v. broad spectrum
–Dx + Rx
Outterson K, et al., LID 2007; 7:559-566; Outterson K, Cardozo L Rev 2010;
31: ; Kesselheim AS, Outterson K, Health Affairs 2010; 29(9):1689-96.
Patent holder waste?
Volume effects of genericisation of
several large antibiotics
60,000
50,000
40,000
30,000
Generic Ceftriaxone
Branded Ceftriaxone
20,000
10,000
0
Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Source: GSK & OHE
Volume effects of genericisation of
several large antibiotics
18,000
16,000
14,000
12,000
10,000
Generic Vancomycin
8,000
6,000
4,000
2,000
0
Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Source: GSK & OHE
Branded Vancomycin
Volume effects of genericisation of
several large antibiotics
140,000
120,000
100,000
80,000
Generic Azithromycin
60,000
40,000
20,000
0
Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Source: GSK & OHE
Branded Azithromycin
Volume effects of genericisation of
several large antibiotics
500,000
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Source: GSK & OHE
Generic Clarithromycin
Branded Clarithromycin
Volume effects of genericisation of
several large antibiotics
250,000
200,000
150,000
Generic Levofloxacin
100,000
50,000
0
Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Source: GSK & OHE
Branded Levofloxacin
Volume effects of genericisation of
several large antibiotics
1,000,000
900,000
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Source: GSK & OHE
Generic Ciprofloxacin
Branded Ciprofloxacin
Volume effects of genericisation of
several large antibiotics
1,800,000
1,600,000
1,400,000
1,200,000
1,000,000
Generic Amoxicillin+Clavulanic acid
800,000
Branded Amoxicillin+Clavulanic acid
600,000
400,000
200,000
0
Mat
Dec
1999
Mat
Dec
2000
Mat
Dec
2001
Mat
Dec
2002
Mat
Dec
2003
Mat
Dec
2004
Source: GSK & OHE
Mat
Dec
2005
Mat
Dec
2006
Mat
Dec
2007
Mat
Dec
2008
Mat
Dec
2009
Mat
Dec
2010
Volume effects of genericisation of
several large antibiotics
2,000,000
1,800,000
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec Mat Dec
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Source: GSK & OHE
Generic Amoxicillin
Branded Amoxicillin
6. Competition
Competition
• Competition may drive socially inappropriate
resistance
• Appropriate conservation may require market
coordination by companies across one more
classes
• The unit of coordination may be all bacteria
• Viruses, fungi, molds & parasites may all be
different, depending on the science
New Business Models
Process to date
• CH Roundtable October 2013
–Explored 9 models
–Working Paper 1 published Jan. 2014,
available on Chatham House website
Delinkage models
Global • Prize Fund
• aHIF
• SAR
• LPAD Plus
• CMS P4P
• Global Licenses
• RADARS
• GSK
• Capitation
• AQC
US
Public
Outterson et al. Chatham House WP 1 (Jan. 2014)
Private
Process to date
• CH Roundtable October 2013
–Explored 9 models
–Working Paper 1 published Jan. 2014,
available on Chatham House website
• Expanded WG Summer 2014
–Moved to functional analysis
–Report due October 2014 for IMI kickoff
Key delinkage elements
• Delink revenues from sales volume;
• Increase total incentives for antibiotics;
• Permit long-term coordination by
stakeholders; and
• Preserve access without regard to
ability to pay.
Kesselheim AS Outterson K. Health Affairs 2010; Yale J.
Health Policy, Law & Ethics 2011; Chatham House 10.2.13
Design parameters
• Simultaneously solve for both
production and conservation
• Begin with inpatient & OPAT abx
• The ecology of resistance is a complex
system – the solutions might also
require complex, integrative designs
• Common pool resource coordination
issues
Design questions 1
• Who has the best information?
• Who is best positioned to change
behavior?
• Who do we need to incentivize?
• What data do we want to collect?
• How do we measure success?
Design questions 2
• Are returns to abx R&D declining? (if
so, conservation is more valuable)
• Will cross-resistance undermine
company-based conservation? (if so,
less voluntary)
Design questions 3
• Funding/OECD rbx
• Setting & measuring realistic global
conservation targets
–Industry capture
–Info on health impact & efficacy
Design questions 4
• Price/access for LMI patients
• IP ownership & coordination
Functional elements
1)
2)
3)
4)
5)
6)
Structuring the reward
Geographic scope
Product scope
Financing
IP ownership
Control over marketing & utilization
Source: Chatham House Inception Report (pending, 2014)
Functional elements
Some personal, tentative observations
Source: Chatham House Inception Report (pending, 2014)
Functional elements
1)
2)
3)
4)
5)
6)
Structuring the reward
Geographic scope
Product scope
Financing
IP ownership
Control over marketing & utilization
Source: Chatham House Inception Report (pending, 2014)
Reward
• Social value greatly exceeds private
value
• 5% global boost = US$ 1.5b/year
• Paid over 10 years
• 5 high-quality molecules over a decade
= US$300mm/molecule/year
Functional elements
1)
2)
3)
4)
5)
6)
Structuring the reward
Geographic scope
Product scope
Financing
IP ownership
Control over marketing & utilization
Source: Chatham House Inception Report (pending, 2014)
Product scope
•
•
•
•
All abx, or just higher quality abx?
History of poor NME quality in abx
Recent experience with GAIN Act
Match the incentive to the problem
Functional elements
1)
2)
3)
4)
5)
6)
Structuring the reward
Geographic scope
Product scope
Financing
IP ownership
Control over marketing & utilization
Source: Chatham House Inception Report (pending, 2014)
Financing
• Pre-clinical PPP model
• Clinical regulatory cost reduction & orphan
drug model
• Post-authorization delinkage (rbx system)
Source: Chatham House Inception Report (pending, 2014)
The legal ecology of
resistance:
why normal IP rules should be
adjusted for antibiotics
Oxford 25 April 2014
Kevin Outterson
mko@bu.edu
