OHE long has been involved in analysing the nature of innovation and the effects of regulation. Two recent OHE presentations address the core issues.
OHE long has been involved in analysing the nature of innovation and the effects of regulation. Two recent OHE presentations address the core issues.
Incentives for innovation in antibiotics
The growing crisis of antibiotic resistance and the spread of ‘superbugs’ has spurred governments worldwide to seek approaches for encouraging innovation in antimicrobials. In his presentation at the 2014 One Bug, One Drug conference, OHE’s Jorge Mestre-Ferrandiz outlined the economic forces that influence whether innovation occurs and what it targets. He argued that specific measures, particularly public incentives, are important in encouraging the pharmaceutical industry to devote the extensive resources necessary to develop new treatments in some disease areas, such as orphan diseases, and some therapeutic areas, such as antibiotics. For orphan diseases and antibiotics in particular, one problem is low return on investment.
Incentives for innovation are either ‘push’ or ‘pull’ in nature. Push incentives include funding and other inducements for undertaking development; pull incentives provide assurance that a market will exist for the medicines produced. Orphan drug legislation in the US and the EU combine aspects of both push and pull and, despite imperfections, unquestionably have made a difference.
Antibiotics are less attractive targets for pharmaceutical companies than some other therapeutic categories because income from antibiotics usually is less. In a sense, then, antimicrobials is an ‘orphan’ therapeutic area. Recently, the US and EU each have introduced push incentives for antibiotic R&D, including funding and changes in regulatory requirements, but pull incentives are far fewer and have been limited primarily to market exclusivity, in the US. What is needed, the presentation concludes, is an ‘insurance-type’ model coupled with pricing that can reduce the barriers erected for both payer and innovator by uncertainty and risk.
For additional information, please contact Jorge Mestre-Ferrandiz.
Blog posts describing OHE research and analyses on innovation and antibiotics are available by clicking here.
Understanding the connection between regulation and innovation
The Regulatory Policy Institute, based in Oxford, holds an annual conference on competition and regulation. At this year’s conference, OHE’s Jon Sussex described how the prescription medicines market in England is regulated for innovation.
The regulatory problem for the pharmaceutical market is different from that for utilities markets, transport, financial services and indeed markets for all other types of goods and services. The source of the regulatory problem for prescription medicines in the NHS is that the consumer (patient) neither decides which medicine is prescribed nor is responsible for paying for it. For other goods and services, the consumer decides and pays, as well as consumes. In the pharmaceutical market under the NHS, it is the payer that effectively decides the value of an innovation, not the patient.
The cost and risk in drug development are high. To determine how best to target its R&D efforts, the pharmaceutical industry needs clear signals about what innovation the health care payer, the NHS, values. The recent history of such signalling has been dominated in England by the actions of the National Institute for Health and Care Excellence (NICE), whose assessments also have considerable influence internationally. Moreover, although England represents only 2% of the world pharmaceutical market, its prices are used as a reference for pricing in other markets.
How NICE expresses the value of medicines can be viewed as the NHS’s way of regulating innovation in prescription medicines. NICE bases its decisions about value on the incremental cost to the tax-funded health and social care services of the additional quality-adjusted life years (QALYs) a new medicine offers to patients. During the last year, NICE has been consulting on ways to broaden its assessment of value, particularly on whether to take account of the burden of disease and wider societal impacts beyond QALYs. But no decisions are close to being made and the signal to potential pharmaceutical innovators remains fuzzy.
For additional information, please contact Jon Sussex.
Blog posts about OHE research examining NICE’s decision making approach and its effects are available by clicking here
