QIDP: An Insufficient Policy?

The last decade has seen a rapid rise in resistant microbes along with a corresponding increase in public concern about antibiotic resistance. It is clear there is cause for concern: according to a 2013 CDC report, there are more than 2 million antibiotic resistant infections each year resulting in the deaths of over 23,000 patients. To combat this, the Generating Antibiotic Incentives Now (GAIN) Act was signed into law by President Obama in mid-2012. The GAIN Act creates a process for the Qualified Infectious Disease Product (QIDP) designation. QIDP designation provides a range of incentives for developing antimicrobial therapies for combating resistant organisms, including extension of the exclusivity period and priority review for newly developed antibiotics and antifungals.

While the program has been successful in driving innovation with nine products approved and dozens of products in development with QIDP designation since its implementation, commercial viability remains a question. For example, of all the products developed and marketed under this program we have not identified a product generating more than $60 million in annual revenue. This is likely a disappointing result for the pharma companies that developed these assets and a poor return on their investment. The resurgence of antimicrobial development may be short-lived if such products do not find commercial success. Before outlining certain policy changes for consideration which may better align commercial incentives with the public health urgency of antimicrobial resistance, we would first like to discuss the unique commercial challenges which may limit products in this space.

While it is not uncommon for healthcare companies to face challenges integrating their assets into existing treatment algorithms, this dynamic is exacerbated in the antimicrobial space in three key ways:

  1. Antimicrobial stewardship limits prescribing volume: Antimicrobial stewardship practices emphasize the restriction of clinical use of antibiotics to curb the development of resistance and safeguard the efficacy of new antibiotics. Furthermore, current stewardship practice suggests reserving the most specific and novel agents for patients where sensitivity tests confirm the agents are necessary. However, due to the extended turnaround of these tests (generally 24 to 72 hours), patients are typically treated with an array of existing antibiotics empirically before transitioning to a novel and specific antibiotic.

     

    Although they may be appropriate from a health policy perspective, these antimicrobial stewardship practices restrict commercial opportunities by limiting product prescribing to only the most severe, confirmed cases for each pathogen. These cases add up to a relatively small number per year, even in major hospitals located in areas with high incidence of resistance. The added 24 to 72 hour window to confirm antimicrobial susceptibility increases the possibility that a patient’s condition deteriorates further. At this point in disease progression, the likelihood that any product would be able to sufficiently clear the pathogen burden to allow recuperation is reduced. Therefore, providers need to balance utilization with antimicrobial stewardship policies on a case-by-case basis and this results in low sales volume.
     

  2. Prospective payment systems limit pricing: Conventional wisdom would suggest that the high clinical burden and unmet need that these products address would correlate to a high willingness-to-pay. However, this correlation may only be true once cases are very urgent or there is confirmed sensitivity to the antibiotic. These patients are likely already utilizing considerable institutional/ICU resources and may be experiencing multi-organ failure due to the severity of their infection. The cost of a patient with a severe infection experiencing combinations of respiratory arrest, kidney failure, etc. can be staggering and especially burdensome to an already-stretched hospital system.

     

    Given that hospitals are often reimbursed via a fixed rate per patient (depending on the patient’s insurance) regardless of the cost of treatment, there comes a point where the cost of care may far exceed the reimbursement. The economic concerns that need to be overcome for antibiotics priced at a premium could relegate such therapies to later in the treatment algorithm and to a specific subgroup of patients (for example, patients who have confirmed resistance or last-resort cases). Hospital economics can thus further curtail the use of high-priced antibiotics, in addition to the restrictions due to antimicrobial stewardship.
     

  3. Distribution of patients limits effective stocking: The 2013 CDC report identified about 9,000 patients with a Carbapenem-Resistant Enterobacteriaceae (CRE) which is a family of bacteria that can cause particularly intractable infections. Assuming these patient cases were equally distributed across all hospitals, the average hospital would treat ~1-2 cases per year (although there are some high-volume centers which bear a greater share of resistant cases). CRE infections are further identified by site of infection, such as urinary tract infection, blood stream, intra-abdominal, etc. Since indications for new antibiotics are not only specific to bacterial species but also to site of infection, an even smaller proportion of patients would be eligible for a treatment according to its indication. Recalling that these new antibiotics are saved for use if other treatments have failed, there are few opportunities for each institution to build experience with a product and gain confidence to advocate for its use.

     

    Due to this limited patient population and lack of experience, most institutions may not stock the new antibiotic and may have a delay (albeit potentially only a few hours) as they acquire the drug from a distributor or “borrow” it from another local institution. This lack of stocking may be appropriate for hospital purchasing given the historically low incidence at an individual center but it can further limit the commercial opportunity.

As a result of these dynamics, a new antibiotic may be restricted to very few patients, may only be used in patients where the probability of success is limited, and may not be immediately available to the few patients who definitively need it.

Within this complex system, our team has identified several potential policy changes that may provide additional commercial incentives for new antibiotics, without compromising antimicrobial stewardship objectives.

  1. DRG carve out: Given antibiotic stewardship policies and the very low volume of patients who may be treated with a new antibiotic, the most appropriate way to obtain revenue targets may simply be via higher prices. However, as mentioned, this approach is especially challenging in prospective payment environments. A mechanism does exist for a temporary New Technology Add-on Payment (NTAP). However, after a 1-year NTAP period the DRG is expected to be recalculated to incorporate the technology based on the change in average cost per DRG-included case. This approach does not favor products that are rarely used since, nearly regardless of their price, the DRG case-rate is unlikely to be impacted. By paying separately for the antibiotic through a new “QIDP-antibiotic add-on,” the reimbursement policy could be aligned to support the appropriate limited use of these antibiotics, while providing the additional benefit of better tracking their use.
     
  2. Mandatory stockpiling: Newer antibiotics are not always immediately available in hospital stocks when they are need. By requiring institutional stockpiling, the antibiotic can be readily available as an option for the right patients. However, this policy could be unfavorable to institutions if they are required to purchase a therapy that is unlikely to be used—leading to returns, expired product, and general hospital pharmacy budget and stocking strains.
     
  3. Vouchers or innovation awards: Often, clinically effective products are prescribed and can generate revenue quickly which incentivizes and finances future development. However, the goal of the QIDP policy is to ensure there is a next line of antimicrobial agents available; meaning that while these products should not be used often today, they may be critical in the future. One way to address this disconnect would be via priority review vouchers similar to those granted to developers of drugs targeting tropical or rare pediatric diseases, which antibiotics developers can then transfer to other manufacturers for a payout. Alternatively an innovation award can offer a predetermined payout in year 2 or year 3 after launch. The payout could be capped in case the product achieves a specific revenue milestone (e.g. $250MM per year), but would create a floor for the return on investment in the QIDP space.

    Innovation awards have been a topic of discussion in the healthcare space for some time, but no awards have been implemented to date. A 2012 amendment to the Food and Drug Administration Safety and Innovation Act included a call for Health and Human Services and National Academies to conduct a study on the feasibility and possible consequences of innovation awards across a number of different product types, including antibiotics. Unfortunately, this section of the amendment was not passed by Congress.

The GAIN Act provided an array of benefits which have effectively spurred development, however it did not sufficiently address the commercial risks borne by manufacturers. The limited sales for the first QIDP-designated antibiotics suggest that regulatory and exclusivity advantages are not enough. Without further policies that reward innovators, there is a real risk that development programs for many promising assets are terminated due to lack of commercial viability.

Robert Dumitrescu is a Partner in Simon-Kucher & Partners’ Paris office. Mithila Rajagopal is a consultant in the Boston office. Eric Bachman and Sarah Scalia are former associates at Simon-Kucher & Partners.

 

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