SEIZE THE $50 BILLION SITE-OF-CARE SHIFT OPPORTUNITY
Get the tools, data, and insights to drive growth.
Learn more

 We are pausing publication of The Daily Briefing out of respect for the tragic passing of Brian Thompson. We will resume publication of this daily newsletter in the coming days.

Library

| Daily Briefing

'A crisis': Why do antibiotics companies keep going 'belly up'?


Despite the imperative to develop new antibiotic treatments, the companies seeking to make them are struggling to stay afloat amid poor returns.

Where to start with antibiotic stewardship

Drug startups are shutting down in waves

In December 2019, Melinta Therapeutics, one of the biggest antibiotics specialists in the United States, filed for bankruptcy, citing slow sales and high costs. Months earlier, antibiotic developer startup Achaogen collapsed after selling Zemdri, a new antibiotic for drug-resistant urinary-tract infections. Zemdri cost $300 million to develop but was sold for a fraction of the cost at $16 million.

Ryan Cirz, a lead researcher at Achaogen, said, "We got everything right, and it still didn't work."

Why drugmakers aren't making money off new antibiotics

In recent years, investors have provided more than $1 billion to antibiotics companies to support drug development, partly due to the government's efforts to revive the research area. The government since 2010 has awarded over $1 billion to support drug development, and a 2012 law made it easier to win regulatory approval for the drugs, the Journal reports.

But that hasn't been enough to revive the business.

While large companies have bought a few smaller drug makers, many small companies—which are responsible for 90% of antibiotics under development—are still on their own, the Journal reports. When those smaller companies put their drugs on the market, they're fully responsible for the additional sales and marketing costs, according to the Journal.

That means these companies have to make a lot of money to recoup development costs. According to Patrick Heron, general partner at Frazier Healthcare Partners, commercially successful antibiotics have to make at least $300 million per year—but that is way more than what most new antibiotics are making these days, the Journal reports.

According to the Journal, there are a few reasons new antibiotics struggle to hit commercial success.

One factor that investors and drugmakers didn't predict is "how little new antibiotics, once they reached the market, would be used, and how much hospitals and providers would stick to the existing generic products," Heron said. The new drugs are competing against older, less expensive antibiotics that cost about a few dollars per dose. And since insurers pay hospitals a fixed amount of money for antibiotic treatment, hospitals are likely to choose the cheapest treatment, the Journal reports. 

In addition, patients who are prescribed antibiotics usually only need to take them for a couple of weeks at a time, meaning the drug companies are not getting money out of long-term use of the treatments, according to the Journal.

The problem with the poor sales

The poor returns are driving away investors, forcing drugmakers to cut their research and drug development programs, the New York Times reports. There were 18 major pharmaceutical companies developing new antibiotics in the 1980s, and now, that number is down to three, according to the Times.

Lawmakers are taking steps to address the issue, the Journal reports. The Disarm Act, introduced in Congress in 2019, would make Medicare pay for antibiotics in full. According to Ted Schroeder, chief executive of Nabriva Therapeutics, a change in the way drugmakers are paid could have an "immediate positive impact." He added that if no changes are made by 2020, drugmakers are looking at a "pretty bleak future."

Helen Boucher, an infectious disease specialist at Tufts Medical Center described the situation as "a crisis that should alarm everyone" (Roland, Wall Street Journal, 1/5; Jacobs, New York Times, 12/25/19).

[an error occurred while processing this directive]

SPONSORED BY

INTENDED AUDIENCE

AFTER YOU READ THIS

AUTHORS

TOPICS

INDUSTRY SECTORS

MORE FROM TODAY'S DAILY BRIEFING

Don't miss out on the latest Advisory Board insights

Create your free account to access 1 resource, including the latest research and webinars.

Want access without creating an account?

   

You have 1 free members-only resource remaining this month.

1 free members-only resources remaining

1 free members-only resources remaining

You've reached your limit of free insights

Become a member to access all of Advisory Board's resources, events, and experts

Never miss out on the latest innovative health care content tailored to you.

Benefits include:

Unlimited access to research and resources
Member-only access to events and trainings
Expert-led consultation and facilitation
The latest content delivered to your inbox

You've reached your limit of free insights

Become a member to access all of Advisory Board's resources, events, and experts

Never miss out on the latest innovative health care content tailored to you.

Benefits include:

Unlimited access to research and resources
Member-only access to events and trainings
Expert-led consultation and facilitation
The latest content delivered to your inbox
AB
Thank you! Your updates have been made successfully.
Oh no! There was a problem with your request.
Error in form submission. Please try again.