1. The legal ecology of resistance: why normal IP rules should be adjusted for antibiotics Kevin Outterson mko@bu.edu Oxford 25 April 2014

2. Funding & Disclaimer RWJF Public Health Law Grant, The Legal Ecology of Resistance (2009-2011) DHHS/FDA Incentives for the Development of New Drugs, Vaccines, and Rapid Diagnostics for Bacterial Diseases, SP 11- 003 (2011-present) Member, CDC Antimicrobial Resistance Working Group (2011-present) Visiting Fellow, Royal Institute of International Affairs (Chatham House) Antimicrobial Resistance Working Group (2013-present) Kaufman Family Foundation, Innovation & Antimicrobial Resistance (2012 – present) EU/IMI/DRIVE-AB (consultant, 2014 – present) But these comments today are my own, and do not necessarily reflect the views of any funder or agency

3. Legal ecology of AMR TYPECONSERVATIONPRODUCTION PropertyIntellectual property (IP) used as conservation tools to privately constrain demand Intellectual property (IP) used as incentives to bring new antibiotics to market RegulationPublic health infection control and antibiotic stewardship programs regulate demand for antibiotics FDA regulations relaxed to speed approval of new antibiotics. Tax subsidies support R&D ContractPrizes, grants, and value-based reimbursement support antibiotic conservation. Prizes, grants, and value-based reimbursement support new antibiotic production. TortPatients sue for hospital-associated infections, increasing institutional incentives to promote safety through antibiotic conservation Federal law designed to preempt state tort law, waiving drug company tort liability for antibiotics Source: Kesselheim and Outterson, 2010 Note: IP collectively refers to Patents, Data Exclusivity (DE), Marketing Exclusivity (ME), Patent Term Adjustments (PTAs), Patent Term Extensions (PTEs), and Supplementary Protection Certificates (SPCs). Even though these are treated in a similar fashion in the model, they vary in terms of purview, structure, and expected impacts.

4. Outterson, Legal Ecology of Resistance, Cardozo L Rev 2010; Outterson, Vanishing Public Domain, U Pitt L Rev 2005.

5. ABX exceptionalism

6. Rivalry Innovation Valuation Boundaries Generics Competition Outterson et al., New Business Models for Antibiotics, Chatham House 2014; Outterson et al., Approvals and Withdrawals of Antibiotics, J Law Med & Ethics 2013; Kesselheim & Outterson, Improving Antibiotic Markets for Long Term Sustainability, Yale J Health Policy, Law & Ethics 2011; Kesselheim & Outterson, Health Affairs 2010; Outterson, Legal Ecology of Resistance, Cardozo L Rev 2010; Outterson et al., Will Longer Antimicrobial Patents Improve Global Public Health, Lancet ID 2007; Outterson, Vanishing Public Domain, U Pitt L Rev 2005.

7. 1. Rivalry

8. Rivalry

11. 2. Innovation

12. Spellberg/IDSA. House Energy & Commerce Comm., June 9, 2010

13. Outterson, Powers, Seoane-Vazquez, Rodriguez-Monguio, Kesselheim JLME 2013

15. Systemic Antibacterials Approved by the FDA (1980-2009). Marketed Drugs, Linear Trend Bayh-Dole Act CAFC ODA CUSFTATRIPS OB Ped Excl. Bioshield TRIPS India + AUSFTA Sec.505

16. Outterson, Powers, Seoane-Vazquez, Rodriguez-Monguio, Kesselheim JLME 2013

17. New cardiovascular system drugs approved by the FDA (1980-2009), marketed drugs & linear trend

18. New antineoplastic & immunomodulating NME agents approved by the FDA (1980-2009), marketed drugs & linear trend Short course of treatment is NOT the problem Outterson, Powers, Seoane-Vazquez, Rodriguez-Monguio, Kesselheim. Approvals and withdrawals of new antibiotics and other antiinfectives in the Unites States, 1980-2009. Journal of Law, Medicine & Ethics 2013. Conventional wisdom: Short course of treatment is why companies cant make money on antibiotics

19. Legal ecology of AMR TYPECONSERVATIONPRODUCTION PropertyIntellectual property (IP) used as conservation tools to privately constrain demand Intellectual property (IP) used as incentives to bring new antibiotics to market RegulationPublic health infection control and antibiotic stewardship programs regulate demand for antibiotics FDA regulations relaxed to speed approval of new antibiotics. Tax subsidies support R&D ContractPrizes, grants, and value-based reimbursement support antibiotic conservation. Prizes, grants, and value-based reimbursement support new antibiotic production. TortPatients sue for hospital-associated infections, increasing institutional incentives to promote safety through antibiotic conservation Federal law designed to preempt state tort law, waiving drug company tort liability for antibiotics Source: Kesselheim and Outterson, 2010 Note: IP collectively refers to Patents, Data Exclusivity (DE), Marketing Exclusivity (ME), Patent Term Adjustments (PTAs), Patent Term Extensions (PTEs), and Supplementary Protection Certificates (SPCs). Even though these are treated in a similar fashion in the model, they vary in terms of purview, structure, and expected impacts.

20. 3. Valuation

21. Quandaries Best clinical practices undercut the market for new molecules

22. Date of download: 2/25/2014 Copyright © 2014 American Medical Association. All rights reserved. From: National Burden of Invasive Methicillin-Resistant Staphylococcus aureus Infections, United States, 2011 JAMA Intern Med. 2013;173(21):1970-1978. doi:10.1001/jamainternmed.2013.10423 National Estimated Incidence Rates of Invasive MRSA Infections, Stratified by Epidemiologic Category a Data are given for methicillin-resistant Staphylococcus aureus (MRSA) infections reported to the Emerging Infections Program–Active Bacterial Core surveillance (United States, 2005-2011). a Defined as MSRA isolated from a normally sterile source. Figure Legend :

23. Quandaries Best clinical practices undercut the market for new molecules Financial incentives across the supply chain often are at odds with best clinical practices Companies have a lower eNPV for abx, generally underinvest in sector – New abx chase larger markets (UTIs, otitis media, cSSSIs, now MRSA, broader spectrum), neglecting highest risks (GN) and dx

24. Private eNPV by Indication Private eNPV variable across indications CUTI has the highest private eNPV & HABP the lowest Large variation in private eNPV for all indications Lower bound private eNPV < $0 for all except ABSSSI & CUTI Note: Error bars represent 90% confidence bounds around the mean value Source: Preliminary data from ERG analysis for HHS (pending, 2014)

25. Further quandaries Companies cant raise prices

26. Social v. private value

27. Further quandaries Companies cant raise prices Companies cant ethically boost volumes Powerful new antibiotics face tightly regulated utilization (much slower adoption, appropriately) NI trials and narrow definition of inventive step allow market entry of numerous abx with limited marginal utility and modest safety data

28. Withdrawn NME antibiotics 1980-2009 26 out of 61 NMEs withdrawn (more than triple the rate of all other NMEs) Few had priority review status (n=2) Few were ever commercially successful (n=3) Many were follow on cephalosporins (n=10) and fluoroquinolones (n=9) Six had safety-related withdrawals Outterson, Powers, Seoane-Vazquez, Rodriguez-Monguio, Kesselheim. Approvals and withdrawals of new antibiotics and other antiinfectives in the Unites States, 1980-2009. Journal of Law, Medicine & Ethics 2013.

29. Further quandaries Companies cant raise prices Companies cant ethically boost volumes Powerful new antibiotics face tightly regulated utilization (much slower adoption, appropriately) NI trials and narrow definition of inventive step allow market entry of numerous abx with limited marginal utility and modest safety data Resistance is too slow Everyone is underinvesting in the sector, including NIH

30. US NIH Research Spending on Antimicrobial Resistance Research (FY 2010 – 2015, adjusted annually for US CPI, FY2010 base) Source: NIH Research Portfolio Online Reporting Tool, Estimates of Funding for Various Research, Condition, and Disease Categories (RCDC) (March 7, 2014) http://report.nih.gov/categorical_spending.aspx. From Outterson et al, Chatham House (pending 2014) http://report.nih.gov/categorical_spending.aspx

31. 4. Boundaries

32. Boundary issues Resistance spreads within and across drug classes in many pathogens Makes coordination by molecule more difficult (overlapping property rights) Property rights become indistinct; science may or may not improve the clarity (cf. Bessen & Meurer) Makes voluntary models more difficult (free riders, inability to fully exclude)

33. Ecological models Rare in patent law, but growing prominence in abx theory with complex, overlapping relationships Examples: – Pollution – Common pools – Microbiome

34. Pollution via transfers – Increases costs to competitors – Germ sheds – Legal tools: regulation; liability rules; contract; tradeable permits Eco 1: pollution

36. Pollution via transfers – Increases costs to competitors – Germ sheds – Legal tools: regulation; liability rules; contract; tradeable permits Follow-on molecules Pigovian taxes on agricultural use (Hollis, NEJM 2014) Eco 1: pollution

37. Valuable, exhaustible resources Uncoordinated withdrawals Huge potential gains from cooperation Example: fisheries, buffalo Eco 2: common pools

38. Spellberg/IDSA. House Energy & Commerce Comm., June 9, 2010

40. Cod aquaculture 1950-2007

41. Spellberg/IDSA. House Energy & Commerce Comm., June 9, 2010

42. Buffalo hunting Based on data kindly provided by M.S. Taylor

43. The pre-1870 business model

44. After 1870

45. Hides

46. Skulls

47. The 20 th Century Model

49. Eco 3: microbiome

52. 5. Generics

54. H1. Patent holder waste Time-limited property rights (patents) may be particularly inappropriate (tort of waste) – Over marketing – Sub-therapeutic animal uses – Label extensions to CAP/cSSSI/AOM – Narrow v. broad spectrum – Dx + Rx Outterson K, et al., LID 2007; 7:559-566; Outterson K, Cardozo L Rev 2010; 31: ; Kesselheim AS, Outterson K, Health Affairs 2010; 29(9):1689-96.

55. Patent holder waste?

56. Volume effects of genericisation of several large antibiotics Source: GSK & OHE

57. Volume effects of genericisation of several large antibiotics Source: GSK & OHE

58. Volume effects of genericisation of several large antibiotics Source: GSK & OHE

59. Volume effects of genericisation of several large antibiotics Source: GSK & OHE

60. Volume effects of genericisation of several large antibiotics Source: GSK & OHE

61. Volume effects of genericisation of several large antibiotics Source: GSK & OHE

62. Volume effects of genericisation of several large antibiotics

63. Source: GSK & OHE Volume effects of genericisation of several large antibiotics

64. 6. Competition

65. Competition Competition may drive socially inappropriate resistance Appropriate conservation may require market coordination by companies across one more classes The unit of coordination may be all bacteria Viruses, fungi, molds & parasites may all be different, depending on the science

66. New Business Models

67. Process to date CH Roundtable October 2013 – Explored 9 models – Working Paper 1 published Jan. 2014, available on Chatham House website

68. Delinkage models Prize Fund aHIF SAR Global Licenses RADARS GSK LPAD Plus CMS P4P Capitation AQC PublicPrivate US Global Outterson et al. Chatham House WP 1 (Jan. 2014)

69. Process to date CH Roundtable October 2013 – Explored 9 models – Working Paper 1 published Jan. 2014, available on Chatham House website Expanded WG Summer 2014 – Moved to functional analysis – Report due October 2014 for IMI kickoff

70. Key delinkage elements Delink revenues from sales volume; Increase total incentives for antibiotics; Permit long-term coordination by stakeholders; and Preserve access without regard to ability to pay. Kesselheim AS Outterson K. Health Affairs 2010; Yale J. Health Policy, Law & Ethics 2011; Chatham House 10.2.13

71. Design parameters Simultaneously solve for both production and conservation Begin with inpatient & OPAT abx The ecology of resistance is a complex system – the solutions might also require complex, integrative designs Common pool resource coordination issues

72. Design questions 1 Who has the best information? Who is best positioned to change behavior? Who do we need to incentivize? What data do we want to collect? How do we measure success?

73. Design questions 2 Are returns to abx R&D declining? (if so, conservation is more valuable) Will cross-resistance undermine company-based conservation? (if so, less voluntary)

74. Design questions 3 Funding/OECD rbx Setting & measuring realistic global conservation targets – Industry capture – Info on health impact & efficacy

75. Design questions 4 Price/access for LMI patients IP ownership & coordination

76. Functional elements 1)Structuring the reward 2)Geographic scope 3)Product scope 4)Financing 5)IP ownership 6)Control over marketing & utilization Source: Chatham House Inception Report (pending, 2014)

77. Functional elements Some personal, tentative observations Source: Chatham House Inception Report (pending, 2014)

78. Functional elements 1)Structuring the reward 2)Geographic scope 3)Product scope 4)Financing 5)IP ownership 6)Control over marketing & utilization Source: Chatham House Inception Report (pending, 2014)

79. Reward Social value greatly exceeds private value 5% global boost = US$ 1.5b/year Paid over 10 years 5 high-quality molecules over a decade = US$300mm/molecule/year

80. Functional elements 1)Structuring the reward 2)Geographic scope 3)Product scope 4)Financing 5)IP ownership 6)Control over marketing & utilization Source: Chatham House Inception Report (pending, 2014)

81. Product scope All abx, or just higher quality abx? History of poor NME quality in abx Recent experience with GAIN Act Match the incentive to the problem

82. Functional elements 1)Structuring the reward 2)Geographic scope 3)Product scope 4)Financing 5)IP ownership 6)Control over marketing & utilization Source: Chatham House Inception Report (pending, 2014)

83. Financing Pre-clinical PPP model Clinical regulatory cost reduction & orphan drug model Post-authorization delinkage (rbx system) Source: Chatham House Inception Report (pending, 2014)

84. The legal ecology of resistance: why normal IP rules should be adjusted for antibiotics Kevin Outterson mko@bu.edu Oxford 25 April 2014