Widespread microbial resistance – where antibiotics are no longer able to kill bacteria – is increasingly seen as an apocalyptic threat. Routine surgical procedures could become perilous and minor problems like urinary tract infections could kill.

Research warns such a situation could potentially cast us back to a Victorian-style era of medicine in which tens of millions of people die annually and the global economy loses US$100 trillion (£63 trillion) in output.

A huge problem like this should have drug companies racing to be first to market with new types of antibiotic. Yet the prospect of creating new drugs is “low due to the poor return on investment they provide”, according to The Royal Pharmaceutical Society.

It’s been almost 30 years since a new class of antibiotics was last discovered. As the graph below shows, of the 41 antibiotics currently in the development pipeline only three of them are “breakthrough” drugs that will tackle the most resistant bacteria treated by doctors today.

Last year, the UK government established the Review on Antimicrobial Resistance(AMR), led by former Goldman Sachs chief economist Jim O’Neill, to investigate the economic issues that are holding back antibiotic drug development. In a new report, the AMR recommends two alternative mechanisms for creating incentives for antibiotic research.

On average, a new drug takes ten-to-15 years to come to market and can cost up to $1.8 billion (£1.1 billion) to research and develop. It can take another eight-to-ten years to begin making a profit. The high R&D costs reflect the failure of many drugs during development. Historically, just 1.5%-3.5% of antibiotics in development have made it to market.

Governments have traditionally created incentives for innovation using patents: short-term monopolies that provide an opportunity for exclusive sales at inflated prices. However the patent system is failing to drive innovation in breakthrough antibiotic drugs. There are two major reasons for this.

First, there is huge uncertainty around the profitability of breakthrough antibiotics because the sales volume is unpredictable. Most existing effective antibiotics are generic, cheap versions of a drug out of patent. This means that new, patented drugs will not be cost-effective to prescribe until those current antibiotics become redundant due to antimicrobial resistance. Novel antibiotics must also be used judiciously in order to delay the inevitable day when they also become obsolete.

This is compounded by an opportunity cost problem. There are other drug discoveries that would provide an even higher profit – and diverting research investment towards antibiotics may prevent a company from investing in these more profitable drugs. The obvious examples are chronic conditions such as diabetes, where patients may require the treatment for the rest of their lives. In comparison, antibiotics can cure infections in weeks, so the volume of sales of drugs is low.

New solutions?

The new review’s recommendations focus on two main strands. The first is to establish a five-year $2 billion (£1.3 billion) AMR Innovation Fund to support research and development. Pharmaceutical companies would provide the money – equivalent to less than 0.6% of the top 10 companies’ current R&D expenditure – and universities and small bio-tech companies would receive funding to kick-start early-stage research. The scale and private-sector source of this money represent a change from the traditional public funding of these research groups.

The second recommendation is to create one global purchaser funded by governments and healthcare providers. This would reward drug companies for valuable new antibiotics – not through sales volume, but based on their social value.

How this value would be determined is not yet clear; the AMR suggests a figure of up to US$1.3 billion (£0.8 billion) would be needed to cover the failed developments along the way. Whether or not this level of reward is enough remains to be seen. In contrast, the company Eli Lilly generated US$2 billion (£1.3 billion) in sales of just one of its diabetic therapies (Humalog) last year alone.

Eyes on the prize

Another approach that hasn’t been considered is the use of innovation prizes. Instead of a fund buying out multiple patents, it could offer one enormous prize on a “winner-takes-all” basis. The new Longitude prize, launched last year, is already offering £10m to tackle another aspect of the resistance problem: the creation of a device to quickly tell medical staff whether a patient needs antibiotics.

Similarly, the Ansari X Prize has already had success using a $10m (£6.3m) fund to inspire the first non-government organisation to launch a reusable manned spacecraft into space twice in two weeks. More than 10 times the prize value was invested in research and development in pursuit of the prize.

Creating the right incentives to drive new antibiotic discoveries is only one piece of the puzzle. Eventually any new discovery will become useless as bacteria once again become resistant. So creating incentives to protect this precious resource from overuse is also critical. Past experience demonstrates that clinical prescribing behaviour and regulation are not adequate solutions.

The AMR’s recommendation to establish a global purchaser to reward valuable antibiotic discoveries irrespective of the sales volume is innovative and exciting. Whether international co-operation can realise this ambition, and whether the rewards are great enough to spur investment in new antibiotics remains to be seen. However, a problem as globally critical as this demands such bold solutions.

This article was originally published on The Conversation. 

About the author: Graham Cookson is a Professor of Economic & Public Policy at University of Surrey.