New Pricing Policies Needed To Curb AMR Impact, States Industry Alliance Report

Medicines For Europe Echoes Report Recommendations

22 February 2023

Executive Summary

The AMR Industry Alliance has put forward six different policy proposals which it says could minimize the global impact of antimicrobial resistance.

A recent report has highlighted several market reforms needed to secure essential antibiotics against the threat of antimicrobial resistance, by strengthening the sustainability of the off-patent antibiotic supply chain. The AMR Industry Alliance, the organization behind the report, describes AMR as “one of the major health threats facing the world today.”

Research indicates that the occurrence of antibiotic shortages is increasing worldwide, and “evidence from the literature and [the Alliance’s] interviews points towards a greater risk of supply challenges for antibiotics than for many other classes of medicine.” In the US, anti-infectives are 42% more likely to be in short supply than all other drugs.

These shortages can directly contribute to the spread of AMR, as physicians may be forced to substitute a preferred narrow-spectrum antibiotic for a broad-spectrum alternative, “which runs counter to the principles of antimicrobial stewardship and can drive increased resistance.”

Shortages can also have devastating impacts on the wider medical ecosystem. Beside the obvious negative impact on patient health outcomes, there are also financial consequences for health systems, such as additional costs associated with using more expensive alternatives when an off-patent antibiotic is not available.

The “increasing dysfunctionality” of the global antibiotics market and its impact on AMR was called out late last year by Sandoz Inc. CEO Richard Saynor. (Also see “Sandoz Pushes Back On AMR And ‘Dysfunctional’ Antibiotics Market” – Generics Bulletin, 23 Nov, 2022.)

The Alliance has identified five interconnected root causes that contribute to the unsustainable supply of off-patent antibiotics:

1. The global supply chain is fragile, and there are difficulties in the production of antibiotics.
2. Demand is often unpredictable and meeting national and local fluctuations in demand is challenging, particularly given the underdevelopment of surveillance systems and limited access to reliable diagnostics in many low- and middle-income countries.
3. Commercial returns across the supply chain are low, from raw materials through to finished products. Evidence increasingly indicated that these low commercial returns are contributing to antibiotic supply unsustainability at a global level, partially stemming from unsustainable pricing and procurement policies in specific countries.
4. Few off-patent antibiotic manufacturers and active pharmaceutical ingredient suppliers remain globally due to the untenable commercial conditions.
5. Inefficiencies in supply chain management, distribution and communication also contribute to unsustainability.

Examples of recent shortages include: benzathine penicillin G in 39 countries, which fell into shortage as only four companies produce the necessary API and production levels had been kept low due to a lack of profitability; a worldwide shortage of piperacillin-tazobactam, following an explosion at one of the few factories producing raw material for factories supplying the API; and cefazolin in Japan and India, due to the impact of price caps, decreased production and increased demand.

Six Proposed Policies Could Minimize AMR Impact

Having identified five key causes of generic antibiotic shortages, the Alliance identified six different policy solutions which could help to remedy the situation.

It started by suggesting that pricing approaches recognize the value of off-patent drugs, maintaining that “a more innovative payment mechanism that recognizes the value of an antibiotic’s continued future availability could reduce the risk of shortages.” Health systems, the Alliance said, need to find a balance between realizing cost saving from off-patent antibiotics and addressing the need for these drugs’ prices to remain financially sustainable in order to ensure supply. The low price levels of these drugs can make them commercially unattractive for manufacturers, to the point of being unsustainable.

De-linked subscription payment models may also be beneficial, as guaranteeing a minimum level of commercial returns would address a fundamental root cause of supply chain unsustainability. Basing payment on the value of the continued availability of an existing antibiotic, rather than sales volumes, would make the commercial environment more sustainable for commercial suppliers.

“We could expect that consequently fewer suppliers would be incentivized to discontinue production, as they would instead be incentivized to achieve security of supply,” said the Alliance.

Sustainable tender policies, requiring supply security and multiple winners, have also been suggested. In other cases, ensuring that tender contracts are awarded to multiple suppliers, thereby “promoting more long-term competition in the off-patent antibiotics market” could be a more appropriate solution. Each tender winner would need to have a significant market share that generates viable returns in order for the market to be sustainable.

Reducing financial disincentives to market entry (and re-entry) “could encourage more manufacturers to restart or maintain their supply.” Many health authorities currently apply additional penalties – in instances of shortage – and fees – in instances of re-filing in a market from which the supplier has previously withdrawn or registering an off-patent antibiotic in a new market. These costs make it less attractive for suppliers to enter the market at all and mitigating them would help make the space more sustainable. (Also see “Lack Of Incentives Threatens AMR Investment” – Generics Bulletin, 14 Feb, 2022.)

The fifth suggestion was to improve demand forecasting through better use of diagnostic and surveillance data, to ensure that appropriate antibiotics are available for physicians to use in order to provide their patients with the best possible treatment while also slowing the spread of AMR. Data and diagnostic tools can be used proactively to predict demands, reducing risk for manufacturers and payers, and forecast any AMR trends.

“A more innovative payment mechanism that recognizes the value of an antibiotic’s continued future availability could reduce the risk of shortages.”

Finally the Alliance recommended that communication on supply chain structures be improved. Marketing authorization holders are generally transparent about their supply chains, the Alliance said, although regulatory agencies “may not always share the data with other agencies within their governments. With improved communication and supply chain knowledge, policymakers can implement mitigation strategies as the risk of shortages rises.”

The group cautioned that any policy interventions which aim to improve supply chain communication and transparency should consider the risks of sharing information and implementing safeguards, particularly when it comes to sensitive financial, proprietary or anti-competitive information.

“This puts companies at risk of being driven out of the market through competitor actions,” it said, “leading to more consolidation and thus is counter-productive to the goal of retaining existing suppliers and attracting new suppliers. A multi-faceted approach may be required to ensure sustainability is achieved via increased communication, with reforms to procurement occurring in tandem.”

Onus On HICs To Fix Failing Markets

The Alliance added that it expects different solutions to be applicable depending on both the geography and the antibiotic in question. It noted that “the onus of addressing the underlying market failure in the off-patent antibiotic market lies with high-income countries” which can afford to pay prices that reflect the value of a sustainable supply of essential antibiotics.

Healthy competition could be incentivized in LMICs by removing disincentives and regulations that prevent manufacturers from establishing or maintaining a presence in those markets, as well as improving the predictability of demand by reducing rates of self-medication and improving surveillance and forecasting systems.

Charles Gore, executive director of the Medicines Patent Pool, recently told Generics Bulletin that the organization is considering its potential role in the off-patent antibiotics space and how it can make these products “interesting” for the generics market. (Also see “Medicines Patent Pool Centers On Consolidation In Its New Three-Year Strategy” – Generics Bulletin, 20 Feb, 2023.)

Medicines For Europe Welcomes Proposals

The Alliance’s proposals have been welcomed by Medicines for Europe, as the trade group noted that recent shortages of essential antibiotics in Europe have renewed the urgency to reform the pricing and industrial infrastructure for these medicines. (Also see “Medicines for Europe Calls Out Threat Of Generics Supply Consolidation In EU Market” – Generics Bulletin, 9 Feb, 2023.)

The organization said that pricing policies for off-patent antibiotics must urgently be reviewed so that they remain viable to produce and supply. It highlighted the report’s emphasis on new pricing policies that reflect product value rather than just lowest price, sustainable tender policies with multiple winners and improved health forecasting as particularly important.

Adrian van den Hoven, director general of Medicines for Europe, said: “Antibiotic shortages this winter were a perfect example of the policy gaps that make the supply of antibiotics so fragile. For years, policies have been based on the lowest price only, with restrictive tender rules. Both policies have fueled market consolidation making it difficult to respond to sudden demand surges. We also need better disease forecasting in Europe to better plan manufacturing ahead of infectious seasons. These issues must be addressed in the upcoming revision of the EU pharmaceutical legislation to combat AMR.”