Transferrable Market Exclusivity Extensions to Promote Antibiotic Development: An Economic Analysis

Abstract

Background

To address the growing threat of multidrug-resistant organisms, policymakers are seeking ideas to promote development of novel antibiotics. In 2018, the REVAMP Act was proposed in Congress to reward manufacturers of certain novel antibiotics with transferrable market exclusivity vouchers.

Methods

We estimated the economic impact of this proposal by identifying antimicrobial drugs approved by the FDA from 2007–2016 that would likely have qualified for an exclusivity voucher and matching each drug to the highest-revenue fast-track drug facing generic entry within 4 years after the antibiotic was approved. Assuming a spending decrease of 75% after generic entry, we calculated the per-drug and total societal costs of these transferrable market exclusivity extensions over a decade.

Results

We identified 10 antimicrobials that would have qualified for an exclusivity voucher, each of which was matched with 1 of 17 fast-track drugs facing generic entry through July 2019. These 10 drugs had a median annual revenue before generic entry of $249 million (range, $26 million–$2.7 billion). Accounting for a 75% spending reduction after generic entry, the median excess spending associated with 12 months of extended exclusivity was $187 million, for a total of $4.5 billion over 10 years.

Conclusions

While market exclusivity extensions are a politically appealing mechanism to encourage novel antibiotic development, this approach would cost public and private payers billions of dollars over the next decade.

antibiotic resistance, health policy, market exclusivity extensions, prescription drug cost

In an era in which antimicrobial resistance has made some antibiotics less effective, policymakers have suggested numerous approaches to promote research and development of novel antibiotic drugs [1]. Market exclusivity extensions, which delay generic competition and allow high brand-name prices to persist, have been proposed and enacted over the last 3 decades to promote innovation in many different types of drug development [2]. For example, the Pediatric Exclusivity Program, passed by Congress in 1997, offers manufacturers 6 months of extended exclusivity for studying their drugs in pediatric populations [3]. However, such policies also come at great cost to society and lead to nonadherence by preventing reductions in out-of-pocket costs that would result from introduction of timely generic competition [3–5].

The Re-Valuing Anti-Microbial Products (REVAMP) Act was introduced in the US House of Representatives in June 2018 with the goal of incentivizing pharmaceutical companies to develop new antibiotic drugs, specifically those targeting multidrug-resistant pathogens [6]. The REVAMP Act offered manufacturers that gain US Food and Drug Administration (FDA) approval for specific novel antibiotics a 12-month transferrable market exclusivity extension voucher that could be applied to an existing brand-name drug or sold to another manufacturer. The legislators and proponents of the bill argued that these vouchers would provide a financial incentive necessary for manufacturers to invest in new antibiotic development [7]. Notably, the proposed transferrable exclusivity vouchers would be distinct from the existing Tropical Disease Priority Review Voucher Program, which, since 2007, has allowed sponsors of certain antimicrobial drugs to expedite the FDA review of a different drug that would otherwise not qualify for the FDA’s priority review program [8].

To understand the economic implications of the REVAMP Act, we estimated how it would have affected brand-name drug spending if applied to antibiotics approved by the FDA from 2007 through 2016.

METHODS

Identification of Antimicrobial Cohort

We used the publicly available Drugs@FDA database to identify antimicrobials approved via a New Drug Application or Biologics License Application from 2007 through 2016. We then aimed to include only those antimicrobials that likely would have qualified for an exclusivity voucher under the REVAMP Act. The most recent version of the Act would grant vouchers to “critical need” antimicrobials that target “multi-drug resistant bacterial or fungal pathogens” for which there is “unmet medical need” [6].

To simulate these qualifying criteria, we excluded antiviral and antiparasitic drugs, those with local rather than systemic routes of administration, antimicrobials aimed at treating bioterrorism threats, and products with no activity against drug-resistant pathogens (based on the indication listed in the initial FDA label). For drugs approved after 2012, we only included drugs that received a Qualified Infectious Disease Product (QIDP) designation by the FDA, which identifies antibacterial and antifungal drugs that treat serious or life-threatening infections [9].

Identification of Drugs Qualifying for Market Exclusivity Extensions

Next, we identified a list of drugs that would have been able to purchase an exclusivity extension voucher from the antimicrobial manufacturer under the rules proposed in the REVAMP Act. The most recent bill specifies that such drugs must be (1) a new small molecule, (2) designated fast-track status by the FDA, and (3) face generic entry within 4 years [6]. We started with a list of all drugs granted fast-track status by the FDA since 1990 [10–12]. We then used the FDA list of first generic approvals from 2008 to 2018 to identify those fast-track drugs that faced new generic competition [13].

Because specific qualification criteria defined in the most recent draft of the REVAMP proposal could be altered in future versions of the bill, we performed a secondary analysis in which we eliminated the requirement that the drugs purchasing market exclusivity extension vouchers needed to have been granted fast-track status by the FDA. For this secondary analysis, we identified top-selling drugs in each year from 2008 through 2017 using industry reports [14–18]. We similarly only included only top-selling drugs that faced new generic competition from 2008 to 2018 [13].

Cost Analysis

We estimated the cost of transferrable exclusivity extensions from a societal prospective using annual sales revenue. For each of the identified drugs facing generic entry, we obtained annual US sales revenue for the year prior to generic entry using manufacturer financial reports or industry reports. All annual revenues were converted to 2018 US dollars (USD) using the Consumer Price Index for All Urban Consumers [19].

To estimate the cost of a transferrable exclusivity voucher, we assumed that, for each qualifying antimicrobial drug, the voucher would be sold to the eligible drug with the highest annual revenue that faced generic entry within 4 years after the antimicrobial was approved (as stipulated in the most recent REVAMP bill) [6]. For each of the drugs receiving an exclusivity extension, we assumed total spending after generic entry would decrease by 75%, based on industry and government reports [20, 21]. As a result, the excess spending associated with a 1-year exclusivity extension was assumed to be three-quarters of the drug’s annual revenue in the year prior to generic entry. In sensitivity analyses, we varied the expected fall in spending after generic entry from 50% to 80%, similar to prior studies [5].

RESULTS

We identified 40 new antimicrobial products approved from 2007 through 2016. After excluding 17 antivirals, 3 antiparasitics, 6 drugs with local route of administration, 2 bioterrorism countermeasures, and 2 antibiotics that did not target drug-resistant pathogens, 10 antibiotics remained that would likely have qualified for an exclusivity voucher (Table 1). All 6 of the products approved after 2012 received the FDA’s QIDP designation.

Table 1.

Antimicrobial Drugs Approved from 2007 to 2016 That Would Likely Qualify for Transferrable Exclusivity Vouchers

Antibiotic: Generic Name (Brand Name)	Date of FDA Approval	Approved Indication
Doripenem (Doribax)	12 October 2007	Intra-abdominal and urinary infections
Telavancin (Vibativ)	11 September 2009	Skin and soft tissue infections
Ceftaroline (Teflaro)	29 October 2010	Skin and soft tissue infections; community-acquired pneumonia
Bedaquiline (Sirturo)	28 February 2012	Multidrug-resistant tuberculosis
Dalbavancin (Dalvance)a	23 May 2014	Skin and soft tissue infections
Tedizolid (Sivextro)a	20 June 2014	Skin and soft tissue infections
Oritavancin (Orbactiv)a	6 August 2014	Skin and soft tissue infections
Ceftolozane / tazobactam (Zerbaxa)a	19 December 2014	Intra-abdominal and urinary infections
Avibactam / ceftazidime (Avycaz)a	25 February 2015	Intra-abdominal and urinary infections
Isavuconazole (Cresemba)a	6 March 2015	Invasive aspergillosis and mucormycosis

Abbreviations: FDA, Food and Drug Administration; QIDP, Qualified Infectious Disease Product.

^aGranted QIDP designation by the FDA.

Out of 162 drugs approved from 1990 through 2016 and granted fast-track status by the FDA, 23 drugs faced new generic competition between 2008 and 2018. We excluded 6 drugs for which we were unable to identify annual revenue data. Of the remaining 17 drugs, the median annual revenue in the year preceding generic entry (adjusted to 2018 USD) was $171 million (range, $20 million to $2.7 billion).

We then matched each antimicrobial in the cohort to the fast-track drug with the highest revenue losing exclusivity within 4 years of the antimicrobial’s approval date (Table 2). These 10 drugs faced generic entry a median of 3.3 years after the approval of the antimicrobial drug, with a median revenue of $249 million (range, $26 million to $2.7 billion). Accounting for a 75% spending reduction after generic entry, the median spending associated with an exclusivity voucher was $187 million (range, $20 million to $2.0 billion). Total spending associated with a 1-year exclusivity extension for all 10 drugs was $4.5 billion. This ranged from $3.0 billion to $4.8 billion when the spending reduction after generic entry ranged from 50% to 80%.

Table 2.

REVAMP Cost Model Linking Approved Antimicrobial Drugs to Fast-track Drugs Facing New Generic Competition, 2007–2018

Antimicrobial Drug: Generic Name (Brand Name)	Matched Fast Track Drug: Generic Name (Brand Name)	Generic Entry Date	Annual Revenue in Year Prior to Generic Entry, Million US$	Societal Cost of 1-Year Exclusivity Extension,a Million US$
Doripenem (Doribax)	Oxaliplatin (Eloxatine)	August 2009	1625	1219
Telavancin (Vibativ)	Decitabine (Dacogen)	July 2013	284	213
Ceftaroline (Teflaro)	Azacitidine (Vidaza)	September 2013	414	310
Bedaquiline (Sirturo)	Imatinib (Gleevec)	February 2016	2684	2013
Dalbavancin (Dalvance)	Tenofovir (Viread)	December 2019	527	395
Tedizolid (Sivextro)	Rotinivir (Norvir)	March 2018	214	160
Oritavancin (Orbactiv)	Efavirenz (Sustiva)	May 2017	116	87
Ceftolozane, Tazobactam (Zerbaxa)	Clolar (Clofarabine)	May 2019	70	53
Avibactam, Ceftazidime (Avycaz)	Erlotinib (Tarceva)	April 2018	36	27
Isavuconazole (Cresemba)	Capsofungin (Cancidas)	October 2017	26	20
Total	…	…	5996	4497
Median (IQR)	…	…	249 (82, 498)	187 (61, 374)

Abbreviations: IQR, interquartile range; REVAMP, Re-Valuing Anti-Microbial Products.

^aAssuming 75% reduction in spending following generic entry.

In our secondary analysis that did not limit the application of exclusivity vouchers to fast-track drugs, we identified 179 top-selling drugs from 2008 through 2017, of which 84 drugs faced new generic competition between 2008 and 2018. The median annual revenue for these 84 drugs in the year prior to loss of exclusivity was $1.0 billion (range, $138 million to $7.4 billion). When we matched each qualifying antimicrobial to the drug with the highest revenue that lost exclusivity within 4 years of the antimicrobial approval date (Table 3), the median annual revenue for these 10 drugs was $3.2 billion (range, $1.7 billion to $7.4 billion). The total additional spending associated with a 1-year exclusivity extension for all 10 drugs was $26.9 billion. These blockbuster drugs faced generic competition a median of 1.7 years after the corresponding antimicrobial was approved.

Table 3.

REVAMP Cost Model Linking Approved Antimicrobial Drugs to Blockbuster Drugs Facing New Generic Competition, 2007–2018

Antibiotic: Brand Name (Generic Name)	Matched Blockbuster Drug: Brand Name (Generic Name)	Generic Entry Date	Annual Revenue in Year Prior to Generic Entry, Million US$	Societal Cost of 1-Year Exclusivity Extension,a Million US$
Doripenem (Doribax)	Lansoprazole (Prevacid)	November 2009	3476	2607
Telavancin (Vibativ)	Clopidogrel (Plavix)	May 2012	7392	5544
Ceftaroline (Teflaro)	Atorvastatin (Lipitor)	November 2011	6137	4603
Bedaquiline (Sirturo)	Duloxetine (Cymbalta)	December 2013	4269	3202
Dalbavancin (Dalvance)	Glatiramer (Copaxone)	April 2015	3288	2466
Tedizolid (Sivextro)	Rosuvastatin (Crestor)	April 2016	3013	2260
Oritavancin (Orbactiv)	Imatinib (Gleevec)	February 2016	2684	2013
Ceftolozane, Tazobactam (Zerbaxa)	Tenofovir disoproxil fumarate, emtricitabine (Truvada)	August 2018	2321	1741
Avibactam, Ceftazidime (Avycaz)	Aripiprazole (Abilify)	April 2015	1667	1251
Isavuconazole (Cresemba)	Ezetimibe (Zetia)	December 2016	1661	1246
Total	…	…	35 910	26 932
Median (IQR)	…	…	3151 (2412, 4071)	2363 (1809, 3053)

Abbreviations: IQR, interquartile range; REVAMP, Re-Valuing Anti-Microbial Products.

^aAssuming 75% reduction in spending following generic entry.

DISCUSSION

Had the REVAMP Act been in enacted in 2007, transferrable market exclusivity extension vouchers associated with 10 antimicrobial products approved in the last decade would have cost public and private payers $4.5 billion, with a median of $187 million per each drug granted an exclusivity extension. The REVAMP Act was not advanced to a full vote in the last Congress; however,similar proposals are likely to resurface in the future.

This cost estimate relies on several requirements specifically outlined in the most recent version of the REVAMP Act, including that only drugs granted fast-track status by the FDA would be eligible to purchase an exclusivity voucher [6]. While this stipulation ensures that the exclusivity extensions are not applied to noninnovative drugs with limited clinical benefit, it may also reduce the value of the vouchers and limit the impact of this policy on private investment in antibiotic development [22]. However, we found that removing this requirement and allowing vouchers to be purchased by any top-selling drug would increase the societal cost by 5-fold, resulting in $27 billion excess spending over 10 years. By contrast, varying the assumed reduction in spending after generic entry from 50% to 80% led to only modest relative changes in total spending, from $3 to $5 billion.

The results of this study are consistent with past studies of the existing pediatric exclusivity program and a proposed rare-disease drug exclusivity extension showing that the exclusivity extensions offered high returns to manufacturers, particularly those of blockbuster drugs [3–5]. For both these programs, market exclusivity extensions were not transferrable. The REVAMP Act is particularly costly because the proposed transferrable exclusivity vouchers would most likely be purchased by manufacturers of high-revenue drugs and would add to the other strategies that manufacturers routinely use to protect and extend their drugs’ market exclusivity periods around the time of predicted generic entry [23].

Exclusivity extensions are a popular policy mechanism for legislators to enact incentives for needed research and development relating to new antibiotics because they do not require a spending line item when passed by Congress [2]. Similar exclusivity extension programs have been proposed to promote research in rare diseases and elderly populations [4, 24]. However, this study shows that this incentive mechanism may actually be quite costly from a societal perspective. Additionally, our results and those from previous studies demonstrate that the financial reward provided varies widely and is not related to a drug’s societal value or innovativeness [3, 4, 22]. Transferrable exclusivity vouchers also introduce inefficiency, since manufacturers purchasing the vouchers will bid less than 100% of the expected additional revenue for extended exclusivity; this results in a higher financial cost to society, compared with the reward offered to antibiotic developers [22].

Alternative policy approaches to promote development of antibiotics for drug-resistant organisms can be divided into 3 main approaches: regulatory streamlining, “push” incentives, and “pull” incentives [25, 26]. Congress has already passed 2 laws that create an expedited regulatory pathway and reduce the expected size of clinical trials used to approve certain high-value antibiotics: the Generating Antibiotic Incentives Now (GAIN) Act, passed in the FDA Safety and Innovation Act of 2012, and the Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD Pathway), passed in the 21st Century Cures Act of 2016. However, neither of these regulatory changes has yet led to a measurable impact on drug development, and large pharmaceutical manufacturers and private investors continue to face challenges in the way antibiotics are reimbursed in the US market, leading policymakers to argue that additional financial “pull” or “push” incentives are needed [27, 28].

“Pull” incentives, which include transferrable market exclusivity vouchers, aim to reward investment by assuring future revenue. Other proposed “pull” incentives include direct market entry prizes to manufacturers, which could fully or partially delink revenue from the volume of sales [29]. However, the direct payments necessary to incentivize investment in antibiotic development are estimated to exceed $1 billion, which makes them politically unpalatable and financially unsustainable unless they are accompanied by a method of revenue generation, such as a tax on existing generic antibiotics [25, 29].

By contrast, “push” incentives include direct or indirect federal funding of research for novel antibiotic development or clinical trials—for example, through the National Institutes of Health. As another alternative, public–private collaborations have been widely proposed—and in some cases enacted—as a means to provide the necessary investments [30, 31].

Our analysis has several limitations, the most obvious of which is that we used historical data to model the effects of legislation that would apply to future drug approvals, and several unmeasurable factors may affect how transferrable vouchers would be applied and utilized. For example, it is possible that, due to a strict interpretation of the law, not all 10 antimicrobial products would have qualified for exclusivity extensions, resulting in a lower overall cost. However, if the vouchers successfully incentivize the development of additional qualifying antibiotics, it seems likely that the maximum 10 vouchers allowed under the REVAMP Act would be utilized within the next decade. Our methodology approximates the real-world effects of this proposed law, which will help inform future discussions among policymakers who might consider returning to this incentive mechanism. We also widely varied assumptions in our model to test the sensitivity of our findings.

Additionally, we do not account for the societal value and cost savings that might be generated by the introduction of novel antibiotics as a result of REVAMP, which could potentially offset some of the proposal’s cost. However, the number of patients with serious multidrug-resistant infections is small, so the cost savings are unlikely to match the billions of dollars in excess drug spending caused by extended market exclusivity for blockbuster drugs.

We found that using transferrable market exclusivity vouchers to promote antibiotic drug development may lead to billions of dollars in additional societal spending on prescription drugs. As focus continues to grow on ways to encourage generation of new antibiotics as a complement to other strategies to reduce antimicrobial resistance—such as improved antibiotic stewardship and other infection-control measures—our results raise important concerns about the overall cost of transferrable exclusivity vouchers.

Notes

Disclaimer. The funders had no role in the conception, design, or analysis of this research.

Financial support. This work was supported by the Collaborative Research Program for Biomedical Innovation Law, which is a scientifically independent collaborative research program supported by Novo Nordisk Foundation (grant number NNF17SA0027784). A. S. K.’s work is supported by Arnold Ventures, as well as the Harvard-MIT Center for Regulatory Science and the Engelberg Foundation.

Potential conflicts of interest. The authors: No reported conflicts of interest. Both authors have submitted the ICMJE Form for Disclosure of Potential Conflicts of Interest.