Swiss Round Table on Antibiotics

The Round Table on Antibiotics is a non-profit association of personalities from science, industry, politics and administration who, in view of the increasing antibiotic resistance, cannot rest from contributing to the solution of the problem of the lack of new antibiotics and persistent shortages.

With a focus on financial incentive schemes to develop new antibiotics and secure supply, we are taking a complementary approach to existing important stewardship and monitoring activities. Antibiotics with new mechanisms of action and access to effective antibiotics will remain a cornerstone in the fight against AMR, even with optimal implementation of other measures.

While there are activities at the international level that are slowly gaining momentum, Switzerland is not prepared for implementation of such measures. For implementation in Switzerland, experts are needed who can develop a specific concept that meets the needs of the Swiss society while being embedded internationally. The Round Table on Antibiotics sees its mission in the development of a Swiss-specific concept in cooperation with the most important national and international stakeholders.

The Round Table on Antibiotics is not a lobbying organization of the pharmaceutical industry, nor is it a communications agency or consultancy that performs such activities.

We are a non-profit association of members who are interested in ensuring that new antibiotics are developed again and that effective antibiotics are available to the public at any time. We are convinced that we can only achieve these goals by cooperation and constructive dialogue between politics, science and industry. Therefore, representatives of all these organizations are part of the Round Table on Antibiotics.

The Round Table’s commitment to its independence is reflected  in article 4 of our bylaws:

Donations and income shall be structured in such a way that they do not affect the credibility, independence and reputation of the association.

The Round Table on Antibiotics is committed to all health technologies that have the potential to be effective in the fight against antimicrobial resistance. We are technology-neutral in this regard. In addition to antibiotics, we also have diagnostic technologies, phage therapies as well as vaccines on our radar.

Antibiotic resistance is a global phenomenon and does not stop at borders. It is dynamically driven by each use of antibiotics in humans, animals, and agriculture. It can never be fully eradicated both because bacteria continually adapt to antibiotics and will always spread due to global cross-border travel.

Stewardship refers to all measures that ensure that antibiotics are only used where clinically indicated. Stewardship is essential to slow down the development of resistance and to maintain the effectiveness of existing antibiotics as long as possible.

With the Antibiotic Resistance Strategy, the Federal Council has launched a program to reduce the use of antibiotics in human and animal medicine, in agriculture and in the environment as far as possible and to monitor their use. The program has shown effectiveness and the use of antibiotics is decreasing throughout Switzerland.

However, restricting antibiotics use alone is not enough, as the prevalence of resistant pathogens is steadily increasing. We therefore need new antibiotics to ensure effective treatments of infections are available where older antibiotics have lost their effectiveness.

Careful use of antibiotics in compliance with the prescribed treatment scheme reduces the possibility of bacteria to develop resistance against the antibiotic. This helps antibiotics maintain their effectiveness longer. You can contribute to this if you do not use antibiotics where they are not indicated, and if you use them as per your doctor's prescription. This will benefit you and all other patients who need an antibiotic treatment.

The reasons for this are manifold. One main reason, however, is the relatively low prices and profit margins for antibiotics in contrast to drugs used to treat other diseases.

The production of antibiotics (as well as other medicines) involves many steps that are carried out in different locations around the world. The journey from a raw material to the finished product in a European pharmacy is long. If just one link in the chain experiences difficulties the supply of the finished drug is at risk. In addition, there are often very few manufacturers for antibiotics. If one fails, there are hardly any alternative options. With low profit margins companies hesitate to invest in measures rendering supply chains more robust to minimise the risks of failure.

Information provided in a media report by the federal reporting office for essential medicines (Meldestelle für lebenswichtige Humanarzneimittel) dated 24 May 2023 on "Disruptions in the supply of medicines and compulsory stockpiling continue to increase": (abridged by RTA)

"Since the beginning of the reporting in 2016, the number of supply disruptions has increased every year with the exception of the two Covid 19 years in 2020 and 2021. Last year (2022), a 46% increase of cases was recorded compared to 2021, or 10% compared to 2019 (before the pandemic). Antibiotics (including tuberculostatics) topped the list with (37%) of all supply disruptions."

Root cause research shows that supply disruptions often stem from events that affect supply globally: An explosion at a plant in China in 2016 led to serious supply shortages of piperacillin, and the Fukushima disaster led to global shortages of fosfomycin. A non-compliance issue at a manufacturing plant led to a recall and supply shortages of the vaccine Infanrix Hexa.

In Switzerland, the pharmaceutical industry is one of the most important sectors and also worldwide Switzerland is known for its innovative medicines. Nevertheless, Switzerland has not been able to ignore the trend of outsourcing production abroad. Especially for complex manufacturing processes, production is dependent on many suppliers located all over the world.

It would be unrealistic to believe that we could bring production back to Switzerland. Instead, we should create economic framework conditions that promote investments in resilient supply chains for antibiotics (and other drugs). This may involve repatriation of production steps to Europe and, in some cases, even to Switzerland.

Antibiotic markets are characterized by

1. declining therapeutic and monetary value of the drugs, with emerging antibiotic resistance,
2. stewardship requirements, i.e., the request for responsible use of antibiotics that reduces the net present value due to lower product volume sold,
3. high opportunity costs, and low net present value of antibiotic development projects, 
4. small, low profit margin markets combined with high price pressure.

The combination of these factors can be overcome by regulatory changes, i.e., by changing the rules of the game, as in the market of orphan drugs for the treatment of rare diseases. Most promising is the introduction of so-called pull incentives and other models that de-link revenues from product volume sold and guarantee an adequate profitability. Several models are currently discussed in research, industry, and politics that have the potential to overcome the challenge of the "broken antibiotic market".

Since the 1990-ies only a small number of novel antibiotics have been developed and brought to the market, despite the urgent global need for novel antibiotics. There are multiple reasons for this, including WHO’s request for novel antibiotics to be used only as last resort, when treatment with traditional antibiotics was not effective (a stewardship measure).

This implies very low product quantities sold. Furthermore, current drug reimbursement systems do not appropriately consider the full value of antibiotics for the health care systems. Despite the urgent societal need of new antibiotics, there are more promising investment opportunities in the pharmaceutical market that are preferred by researchers, professional investors, and the pharmaceutical industry.

The traditional mechanism of generating revenue by multiplying the unit price by the product volume, has detrimental effects for antibiotics: With prices for antibiotics tending to be low, and product volumes to be reduced to clinically justified levels to slow resistance building, achievable revenues cannot compete with those achievable in other pharmaceutical markets.  

Innovative financial models are therefore required that ensure a reasonable revenue for manufacturers, independent of the product volume sold. Such models are called “Pull” incentives because they act as signals from the market to manufacturers and their investors to bring new antibiotics to the market.

Although the WHO considers the clinical pipeline and recently approved antibiotics insufficient to tackle the challenge of increasing emergence and spread of antimicrobial resistance, large international pharmaceutical companies are shutting down their antibiotic research programs, e.g., AstraZeneca in 2016, Sanofi and Novartis in 2018. The reason why big pharma is losing interest in the antibiotics market is due to much better revenue perspectives in other drug markets.

In the meantime the majority of antibiotic development activities are performed by innovative start-ups and small and medium size enterprises (SMEs). However, these companies find it very difficult to get the necessary funding, for the very same reason that makes many big pharma companies withdraw from the antibiotic markets: The lack of competitive business cases for antibiotics.   

In 2019, Achaogen and Melinta Therapeutics, two of the leading antibiotic developers, filed for bankruptcy despite their recent launch of new antibiotics. These examples illustrate the gap between societal need for new antibiotics and reluctance to meet the demand, which is sometimes referred to as the "broken market of antibiotics".

Pull incentives encompass measures that reward research & development (R&D) by increasing future revenue expectations; their primary aim is to make antibiotic R&D projects financially attractive, such that a sustainable flow of new antimicrobials can make it to the market and be maintainted there. Pull incentives'- apply to successful products only which have attained a marketing authorization. The risk of failure is on the (private) developer and its investors.

Pull incentives…

• apply to successful products only which have attained a marketing authorization. The risk of failure is on the (private) developer and its investors.
• ensure a level of certainty on the return on investment (ROI) for product developers.
• compensate profitability gaps for antibiotics in the current market environment which is characterized by relatively low volumes and prices for antibiotics.

> boost Small and Medium sized Enterprises’ (SME) financial attractiveness to the private sector.

Push incentives include all types of funding that support research and development (R&D) of new antibiotics. Hence they support activities prior to the market launch of products.

The fundings may be project-linked or project-independent grants or support for drug development through public-private partnerships (PPPs).

Typically, push incentives are comparatively modest amounts of money that can advance product candidates’ development into the early clinical phases. At this stage, venture capital firms or large pharmaceutical companies usually step in to further develop the product candidates up to their market launch. In the case of antibiotics, this mechanism fails because of the lack of attractive revenue perspectives.

Push and pull incentives are distinct regarding the time point at which they take effect. Push incentives support research and development (R&D) before market launch. Pull incentives exert their effect after a product has attained marketing authorization.

This has a decisive influence on the risk: Push incentives are more risky, because not every product candidate makes it to market. Pull incentives are paid for products that have attained marketing autorization.

Push and pull incentives are complementary: Attractive pull incentives (i.e. attractive market revenue) can motivate investors to fund R&D activities (i.e. to make push payments).

There are various designs of pull incentives. The following list includes the most prominently discussed designs.

Market Entry Rewards (MER): MERs consist of a one-off payment or a frontloaded series of financial payments to an antibiotic developer for successfully achieving regulatory approval for an antibiotic that meets pre-defined criteria.

Annual Revenue Guarantee: With this mechanism, public authorities “top up” revenue for manufacturers to reach a minimum or maximum guaranteed amount.

Subscription payments: Payments made by public authorities to ensure a guaranteed revenue.

Transferable Exclusivity Extension Voucher (TEEV): This pull incentive provides the manufacturer of a novel antimicrobial a voucher upon receiving regulatory approval. The recipient may use this voucher to extend the marketing exclusivity of one of its products or sell it to another company which may use it to extend the marketing exclusivity of one of its own products. The product finally benefiting from the exclusivity extension does not have to be an antimicrobial.

The current reimbursement system in the pharmaceutical market is based on the classical mechanism of price times volume. The higher the price and the higher the quantity sold, the more attractive the business and the more patients benefit from the new product.

In the antibiotics sector, however, this mechanism is counterproductive because it accelerates the development of antibiotic resistance. Moreover, this classic incentive mechanism counteracts stewardship efforts because it inherently incentivizes product use beyond clinically indicated levels.

Modern pull incentive systems therefore de-link or decouple revenue levels from the quantity sold. In de-linked pull models, the product quantity sold and the unit price should have no or only subsidiary impact on a company's earnings.

Antimicrobial resistance (AMR) hampers the effectiveness of antibiotics and thus threatens the effectiveness and safety of health care systems. Being the cornerstone of public health antibiotics’ remuneration size should duly reflect their value to society. Against this background the current low-price expectations for new antibiotics are no longer appropriate. On the other hand, neither political decision makers nor the general population are keen on paying higher prices for antibiotics. The search for sources of funding for pull incentives is challenging and is eventually decided by politics.

While there are several funding options, some of are pre-empted by the choice of the pull incentive:

> Market Entry Rewards or subscription fees may be financed through general taxes or health insurance premiums.

> In case of the Transferable Exclusivity Extensions Voucher model (TEEV) the sum paid by the purchaser of the voucher is financed through the revenue generated during the extended exclusivity period of the drug (not necessarily an antibiotic) to which the voucher is assigned. These revenues consist of reimbursements eventually paid by premium payers, tax payers or by patients’ out-of-pocket payments and will be higher due to the delayed availability of cheaper generics.

> The “pay or play” model foresees levies on pharmaceutical companies that are not active in the antibiotics sector.