The legal ecology of resistance:

why normal IP rules should be adjusted for

antibiotics

Kevin Outtersonmko@bu.edu

Oxford 25 April 2014

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 11-003 (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 AMRTYPE 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, 2010Note: 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 exceptionalismRivalry

InnovationValuation

BoundariesGenerics

CompetitionOutterson 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

Outterson, Powers, Seoane-Vazquez, Rodriguez-Monguio, Kesselheim JLME 2013

Systemic Antibacterials Approved by the FDA (1980-2009).Marketed Drugs, Linear Trend

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Bayh-Dole Act

CAFCODA

CUSFTA TRIPS

OB Ped Excl.

Bioshield

TRIPS India + AUSFTA

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

New antineoplastic & immunomodulating NME agents approved by the FDA (1980-2009), marketed drugs &

linear trendShort course of treatment is NOT the problem

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.

Conventional wisdom:

Short course of treatment is why companies can’t make money on

antibiotics

Legal ecology of AMRTYPE 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, 2010Note: 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

Date of download: 2/25/2014Copyright © 2014 American Medical Association.

All rights reserved.

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

National Estimated Incidence Rates of Invasive MRSA Infections, Stratified by Epidemiologic Category aData 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.

Figure Legend:

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

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ABOM

ABSSSI

CABP

CIAI

CUTI

HABP

ABOM ABSSSI CABP CIAI CUTI HABPPrivate ENPV $60.8 $70.5 $48.6 $54.9 $146.6 $31.6

Private ENPV (in $ million), by Indication

Private ENPV

Note: Error bars represent 90% confidence bounds around the mean value

Source: Preliminary data from ERG analysis for HHS (pending, 2014)

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)

FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 (est) FY 2015 (est)$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

ARRANIAID

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

• 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 1: pollution

• Valuable, exhaustible resources

• Uncoordinated withdrawals• Huge potential gains from cooperation

• Example: fisheries, buffalo

Eco 2: common pools

Spellberg/IDSA. House Energy & Commerce Comm., June 9, 2010

Cod aquaculture1950-2007

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 20th 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

Mat Dec 1999

Mat Dec 2000

Mat Dec 2001

Mat Dec 2002

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Mat Dec 2005

Mat Dec 2006

Mat Dec 2007

Mat Dec 2008

Mat Dec 2009

Mat Dec 2010

0

10,000

20,000

30,000

40,000

50,000

60,000

Generic CeftriaxoneBranded Ceftriaxone

Source: GSK & OHE

Mat Dec 1999

Mat Dec 2000

Mat Dec 2001

Mat Dec 2002

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Generic VancomycinBranded Vancomycin

Volume effects of genericisation of several large antibiotics

Source: GSK & OHE

Mat Dec 1999

Mat Dec 2000

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Mat Dec 2007

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Generic AzithromycinBranded Azithromycin

Volume effects of genericisation of several large antibiotics

Source: GSK & OHE

Mat Dec 1999

Mat Dec 2000

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Generic ClarithromycinBranded Clarithromycin

Volume effects of genericisation of several large antibiotics

Source: GSK & OHE

Mat Dec 1999

Mat Dec 2000

Mat Dec 2001

Mat Dec 2002

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Mat Dec 2005

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Generic LevofloxacinBranded Levofloxacin

Volume effects of genericisation of several large antibiotics

Source: GSK & OHE

Mat Dec 1999

Mat Dec 2000

Mat Dec 2001

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Generic CiprofloxacinBranded Ciprofloxacin

Volume effects of genericisation of several large antibiotics

Source: GSK & OHE

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Mat Dec 2000

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Generic Amoxicillin+Clavulanic acidBranded Amoxicillin+Clavulanic acid

Source: GSK & OHE

Volume effects of genericisation of several large antibiotics

Mat Dec 1999

Mat Dec 2000

Mat Dec 2001

Mat Dec 2002

Mat Dec 2003

Mat Dec 2004

Mat Dec 2005

Mat Dec 2006

Mat Dec 2007

Mat Dec 2008

Mat Dec 2009

Mat Dec 2010

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200,000

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2,000,000

Generic AmoxicillinBranded Amoxicillin

Source: GSK & OHE

Volume effects of genericisation of several large antibiotics

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

• Prize Fund• aHIF• SAR

• Global Licenses• RADARS• GSK

• LPAD Plus• CMS P4P

• Capitation• AQC

Public Private

US

Global

Outterson et al. Chatham House WP 1 (Jan. 2014)

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 elements1) Structuring the reward2) Geographic scope3) Product scope4) Financing5) IP ownership6) Control over marketing &

utilizationSource: Chatham House Inception Report (pending, 2014)

Functional elements

Some personal, tentative observations

Source: Chatham House Inception Report (pending, 2014)

Functional elements1) Structuring the reward2) Geographic scope3) Product scope4) Financing5) IP ownership6) Control over marketing &

utilizationSource: 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 elements1) Structuring the reward2) Geographic scope3) Product scope4) Financing5) IP ownership6) Control over marketing &

utilizationSource: 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 elements1) Structuring the reward2) Geographic scope3) Product scope4) Financing5) IP ownership6) Control over marketing &

utilizationSource: 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

Kevin Outtersonmko@bu.edu

Oxford 25 April 2014