How can the obviously unsustainable market for antibiotics become sustainable?

New economic models needed to address the challenge of antibiotic resistance. This was the subject discussed at a recent Misum seminar. A research group from Uppsala University presented the background and findings from an ongoing, large, international EU- sponsored project.

A few days later, Swedish radio reported from the World Economic Forum about an initiative presented in Davos, by some 80 pharma firms, addressing the same issue (listen here). In a Misum perspective we might of course ask: How can the obviously unsustainable market for antibiotics become sustainable?

Enrico Baraldi, Professor of Industrial Engineering and Management at Uppsala University and four members of his research team were invited to Misum to present DRIVE-AB, a project that is part of a EU sponsored research program.

Antimicrobial resistance is widespread and increasing at an alarming rate. The arsenal of antibiotics peaked in late 1990s. Since then most major companies in the pharmaceutical industry have left the efforts to find novel antibiotics. The present market practice, with revenues predominantly based on sales volumes, serves as a disincentive for development of new drugs. A major reason that use of new antibiotics needs to be restricted, otherwise bacteria will develop resistance.  Another important reason is that healthcare payers are not currently prepared to reimburse antibiotics at prices that would sufficiently motivate the cost of development.

As argued at the WEF, new economic models, be they called market models or business models, need to be developed. The DRIVE-AB project, with the Uppsala team in a leading role, search for models based on learning from how other industries and markets have solved similar problems. The ideas promoted by the industry at WEF referred to “value for society based pricing” and major public contribution to finance R &D. The DRIVE project found by analysis of outputs from hearings in a number of expert panels (I was invited to participate in one panel) no less than 26 different solutions, e.g. “service contracts”, performance-based selling”, “insurance model”, “value-chain separation “ , “ public or public-private investment fund”.  Some of these models will be selected for further analysis in a pharmaceutical context using e.g. simulation methods to analyze their consequences in practice. This would serve as as a base for further efforts, e.g. along lines suggested by the pharma industry in Davos.

We , at Misum, will not only follow the development with great interest but also benefit from the experiences for our own research efforts to promote sustainable market practices.

Written by: Lars-Gunnar Mattsson, professor emeritus, Stockholm School of Economics, and research manager at Misum