American Journal of Law & Medicine

Exploring the Obstacles to Implementing Economic Mechanisms to Stimulate Antibiotic Research and Development: A Multi-Actor and System-Level Analysis

This Article examines the potential stakeholder-related obstacles hindering the implementation of mechanisms to re-ignite the development of novel antibiotics. Proposed economic models and incentives to drive such development include: Public Funding of Research and Development ("R&D"), Tax Incentives, Milestone Prizes, End Payments, Intellectual Property ("IP") and Exclusivity Extensions, Pricing and Reimbursement Incentives, Product Development Partnerships ("PDPs "), and the Options Market for Antibiotics model. Drawing on personal experience and understanding of the antibiotic field, as well as stakeholder consultation and numerous expert meetings within the DRIVE-AB project and Uppsala Health Summit 2015, the Authors identify obstacles attributable to the following actors: Universities and Research Institutes, Small and Medium-sized Enterprises ("SMEs "), Large Pharmaceutical Companies, Marketing Approval Regulators, Payors, Healthcare Providers, National Healthcare Authorities, Patients, and Supranational Institutions.

The analysis also proposes a characterization and ranking of the difficulty associated with implementing the reviewed mechanisms. Public Funding of R&D, Pricing and Reimbursement Incentives, and PDPs are mechanisms expected to meet highly systemic barriers (i.e., obstacles across the entire antibiotic value chain), imposing greater implementation challenges in that they require convincing and involving several motivationally diverse actors in order to have much effect.



"The time may come when penicillin can be bought by anyone in the shops. Then there is the danger that the ignorant man may easily underdose himself and by exposing his microbes to non-lethal quantities of the drug make them resistant."

Alexander Fleming, Nobel Lecture, December 11, 1945 (1)

Alexander Fleming had already identified the risks of "ignorant use" seventy years ago, and a general awareness of the threat of antibiotic resistance has been gradually increasing over the last decade, culminating in the World Health Organization's action plan for 2015. (2) Researchers, think tanks, and ad hoc review bodies (3) have proposed several mechanisms in an attempt to address the lack of new product development and the desperate need to improve the use of existing antibiotics. (4) Numerous new policies, financial incentives, (5) and broader business and economic models (6) have been, and still are being, considered. These considerations include: innovation prizes, faster drug approval regimens, (7) patent buyouts and prolonged patent life, and advanced market commitments, among others.

While evaluations of the general advantages and disadvantages of these incentives and interventions exist, (8) less is known about how the particular stakeholders in the antibiotic field would react to the solutions proposed. We argue that the feasibility of the proposed solutions can be assessed by means of a stakeholder analysis, (9) whereby each mechanism is examined from the perspective of the various actors it can directly or indirectly impact. These actors include private, public, national, and supra-national organizations (e.g., universities, pharmaceutical firms, healthcare providers, payors, and non-governmental organizations) operating at various levels in the antibiotic value chain, stretching from basic research to patients and other end-users.

Against this background, the purpose of this Article is to identify and examine the actor-specific concerns hindering acceptance of the mechanisms proposed to incentivize the development of new antibiotics. We offer a fine-grained analysis of each mechanism, searching for the potential obstacles that can be expected from the standpoint of the type of actor involved. In developing our viewpoint, we focus on as many potential obstacles as possible, rather than empirically assessing the strength of the identified obstacles. We purposefully chose not to highlight the merits of the analyzed mechanisms themselves.

By the term "obstacle" we mean an actor-specific feature, such as its behavior, goals or organization, which makes the actor oppose, avoid, not react to or not comply with a specific incentive or model, thereby reducing the efficacy or even causing the failure of that mechanism. Obstacles can emerge because a mechanism runs counter to the interests and goals of an actor. (10) Another source of barriers might exist when a mechanism requires changes in the behavior, routines or structure that an actor would not undertake freely, (11) including the fact that implementing or being exposed to a mechanism may cause economic losses to the actor. (12) Further, obstacles against a mechanism can appear if an actor lacks the capacity, ability or resources to react positively to its implementation, including specific actors' conservative attitudes towards change or problems in understanding the nature of the mechanism and appreciating its importance or usefulness in other respects. (13)

Goal conflicts, costly-to-break routines and other economic losses, lack of ability, and conservatism are all typical barriers to organizational change, as well as to the implementation of innovation discussed in the literature on organizational behavior. (14) More precisely, the theoretical inspiration of this Article is a process-oriented perspective on innovation. (15) This perspective views innovation processes as context-dependent and influenced by the social and material investments previously made, (16) which embed innovations in developing, producing and using settings. (17) Therefore, attempts to create change are assumed to be affected by interdependencies that stretch over time (18) and space. (19)


Reflecting the aforementioned theoretical stance, the methods applied in this Article are aimed at identifying how specific stakeholders relate with the proposed mechanisms, considering if and how these models/mechanisms impact the stakeholders' social and material investments in place. Mapping focused on obstacles and relied on three major steps and streams of data collection, which together built the authors' understanding of the antibiotic field and of the actors that operate within it. (20) Firstly, a broad literature review identified proposed mechanisms designed to address the lack of R&D and insufficient antibiotic pipeline, as well as the relevant stakeholders in the antibiotic field. (21) Understanding the business models and organizational logics of these stakeholders is pivotal in order to appreciate their role in the current, indeed disappointing, (22) innovation pattern for antibiotics; particularly for understanding their reaction to, and potential impact on, the proposed incentives and mechanisms for improving this pattern. This understanding was built via the second and third streams of data collection. (23)

Secondly, the authors have actively participated in over twenty meetings arranged by the Driving Re-investment in R&D and Responsible Antibiotic Use project (the "DRIVE-AB project"), gathering on occasions over seventy individual participants representing sixteen public and seven private organizations from twelve countries. (24) This project, financed by the Innovative Medicines Initiative ("IMI"), aims to identify and formulate alternative models and mechanisms for the research and development of novel antibiotics and for responsible antibiotic use. (25) The DRIVE-AB project specifically enabled understanding of the business models and organizational logic of such stakeholders as universities, SMEs, large pharmaceutical firms, and payors. (26)

Thirdly, the opinions and attitudes of selected stakeholders towards certain incentives and reward mechanisms were probed through "group interviews" during the Uppsala Health Summit, an international symposium held in June of 2015. (27) At this event, three of the authors of this paper organized a workshop on "New Economic Models Addressing Antibiotic Resistance," which gathered about seventy participants, representing four main categories of stakeholders: academic researchers, policymakers, pharmaceutical companies, and healthcare professionals actively working with antibiotics issues. (28) Divided into six groups led by experienced researchers on industrial/organizational change, participants discussed the structural changes and new economic models they viewed as necessary to (1) stimulate the development of new antibiotics despite the need to use them restrictively; and (2) simultaneously reduce over use of antibiotics in high and mid-income countries while guaranteeing access in low-income countries. (29) The discussions at the Uppsala Health Summit also covered the opportunities and hindrances that the new models and structural changes could entail due to the interdependencies connecting the development, production and use (30) of antibiotics on national as well as global levels. (31)

Even if the second and third streams of data collection did not explicitly cover each actor's obstacles in relation to each mechanism, they nonetheless provided enough detail about each actor's business models and organizational logic to allow the authors to deduce each actor's likely reaction (or lack thereof) to the various mechanisms selected for analysis. The authors identified the obstacles presented in Part IV by taking the perspective of the specific actor and subsequently deducing all possible organizational, behavioural, economic, legal, and motivational obstacles that an actor could oppose to a given mechanism. (32) This is an exploratory study whose results rely on the authors' understandings and interpretations of the empirical actors. Therefore, the identified obstacles constitute hypotheses that need future validation via empirical studies. (33) These possible obstacles, however, also have an empirical foundation since at least some actors belonging to the various stakeholder categories mentioned most of these obstacles explicitly during the two streams of data collection. (34)

In order to conduct our analysis, the mechanisms incentivizing antibiotic R&D identified in the literature review and the other streams of data collection were grouped into eight typologies characterized by similar mode of actions. (35) The most relevant stakeholders for R&D and use of antibiotics were identified as belonging to nine groups of actors. (36) The deduction and specification of the obstacles was performed by two researchers for each stakeholder and then assessed by the rest of the research team. As a guideline for identifying and sorting these obstacles we initially applied a PEST approach distinguishing between political, economic, social, and technical obstacles for each group of actors. (37) This approach helped in identifying a great number of obstacles. Yet since many obstacles appeared to be a combination of, for instance, political, social, economic or technical aspects, we eventually decided to use this approach for the analysis but not for the categorization of the identified obstacles.

Finally, we looked through each of the various mechanisms in search of systemic obstacles, or obstacles emerging at the level of the entire antibiotic field rather than in a single actor. (38) Thus, our analysis extends from single stakeholders to the connections between the various stakeholders and the barriers deriving from these connections. The Article is organized as follows: after presenting the various stakeholders in the antibiotic field (Part II), we review the existing or proposed mechanisms addressing the lack of innovation (Part III). Next, we identify the obstacles attributable to each single stakeholder in relation to the various mechanisms (Part IV), and we conclude with a discussion also of the systemic-level barriers and of theoretical and practical implications of our results (Part V).


The antibiotic field is characterized by a complex structure including several types of highly specialized organizations and actors involved in drug R&D and use. Basic research (for example, in biology and epidemiology) is usually conducted in universities and other research institutes, while applied research and development of specific drugs are the domain of SMEs (39)) and larger pharmaceutical firms. (40) Trials conducted during the typical drug development phases are supervised by marketing approval regulators (e.g., the Food & Drug Administration ("FDA"), and the European Medicines Agency ("EMA")), but their approval does not mean that a new antibiotic is automatically purchased because it first must be accepted by public or private payors, who eventually compensate the healthcare providers, who buy (either directly or indirectly through payor agencies), prescribe, and use the product. (41) The use of antibiotics also directly involves patients and national health authorities, which develop guidelines on how products should be administered. Finally, supranational institutions, such as the World Health Organization ("WHO") and the European Union ("EU"), are also influential when it comes to both development and use of antibiotics. (42)

Although the antibiotic field includes other actors, we chose to focus on those mentioned below. We therefore excluded other actors from our analysis primarily because they are not directly involved or are insufficiently influential in determining the direction of drug R&D or the eventual use of the product. For instance, governments (43) can certainly be an important actor influencing the antibiotic field, but they are represented in our analysis by national health authorities. Venture capitalists ("VCs") are another important actor, but we chose to consider them in our analysis indirectly, via the influence and potential obstacles regarding SMEs, which they can finance and control. Finally, contract research organizations ("CROs"), although an actor involved in R&D, are excluded from our analysis because the selected mechanisms would only influence them indirectly, via SMEs and other drug developing companies. Next, we provide a brief description of each of the nine actors included in our analysis.

1. Universities and other research institutes deal with basic research and training of specialists in areas such as infectious diseases, epidemiology, chemistry, and biology. Their knowledge may constitute the basis for relevant discoveries, but in the last twenty years, most institutes have considerably downsized their activities focusing on antibiotics. (44)

2. SMEs (small and medium-sized enterprises) operating in the antibiotic field are often spin-offs from either universities or large pharmaceutical firms. Of the nearly 100 such specialized companies (45), roughly half operate in Europe. (46) SMEs focus on the early stages of antibiotic development, starting from lead identification and typically stretching to Phase II. Backed by VCs, seldom would SMEs have sufficient financing and internal experience in trials to bring a product to market launch on their own.

3. The number of large pharmaceutical companies with active antibiotic R&D programs declined from twenty-eight to four in 2009. (47) Despite a recent increase in this number, divestment or reduction of antibiotic teams means that most firms gradually abandoned basic R&D (48) and focus currently on later stages of development, possibly seeking to buy licenses from SMEs in phase II or III.

4. Marketing Approval Regulators, especially FDA and the EMA, set the standards with which clinical trials on antibiotics need to comply for approval. (49) A recent trend is the simplification and speeding up of trial procedures specifically for antibiotics, including the acceptance of clinical trials with smaller patient numbers. (50)

5. Payors define price and reimbursement eligibility of an antibiotic (sometimes informed by health technology assessments) and are averse to paying high prices. (51) The application of diagnosis-related groups ("DRGs") to contain healthcare costs typically results in antibiotics being left only the residual part of the budget for a patient treatment program in hospital settings. (52) We focus here on public actors, financed via the national health budget, rather than private insurance schemes.

6. Healthcare providers (hospitals and community care) use and dispense antibiotics, acting as the first defender of responsible use. They can treat either based on diagnostic results or empirically, without really knowing the pathogen involved. Economic constraints apply not only to for-profit private providers, but to all actors: strong budget constraints make it hard to introduce innovative practices or to conduct research in the clinics.

7. Patients can exert pressure on doctors in outpatient settings to obtain antibiotics, thereby jeopardizing conservation. While also related to cultural traits, this pressure is stronger in countries with weaker healthcare systems. Since patients needing antibiotics cover a multitude of diseases, some of very short duration, they are less organized in patient groups than they are in patients who have chronic diseases (e.g., diabetes).

8. National Health Authorities ("NHAs") are actors ultimately responsible for the entire national healthcare budget and for regulations on the use and prescription of antibiotics. They can also initiate national campaigns on responsible use and influence the purchasing procedures of public hospitals and the list of medicines included in reimbursement schemes.

9. Supranational Institutions, such as the EU or the WHO, play an increasingly important role in initiating and driving international initiatives to align member states on common policies for antibiotic resistance, including joint funding and regulations. (53)


Existing proposals were categorized according to their high-level characteristics, ultimately providing eight broadly defined types of mechanisms. Each of these mechanisms could then fit into the familiar functional categories of "push," "pull," and "push-pull" mechanisms. (54) The list of proposals should not be assumed to be exhaustive, especially given that this area is currently attracting much attention and sparking new ideas for how to reignite antibiotic R&D. (55) Only mechanisms intended for novel drug development were considered (thus, those more pertinent for encouraging the re-marketing or re-formulation of older molecules were excluded). (56) The mechanisms included in this stakeholder analysis are as follows.


This category provides financial or other resources to support future R&D activities or to cover newly conducted ones, irrespective of the results of such activities.

1. Public funding of R&D. Subsidies can be offered for any stage of the R&D process. Traditionally they have been offered to early research efforts, but they are now receiving greater attention with regard to their potential to overcome any financial barrier, even the notoriously expensive and risky Phase 111 trials. Generally this category of mechanisms, which is currently in use, includes:

a) Public sector investment in basic research.

b) Development of human capital (e.g., training of basic researchers and other scientific personnel).

c) Partial to full funding of clinical trials, including Phase III. For the most part this is a push incentive but arguably could have a pull effect through the early stages given the immense financial and risk-imposing obstacle that Phase III normally represents. (57)

2. Tax incentives. These can apply to all phases. For antibiotic R&D, however, they should not be applied to marketing or sales activities because such incentives would work directly against conservation efforts. Since the design of tax incentives is dependent on the national tax framework, there is much variation in their application across countries. The forms currently applied are as follows:

a) Credits (most common): Credit subtracted directly from a company's liability rather than from taxable income. They reduce taxes unit for unit and thus have the same value for all. (58)

b) Allowances: Portion of income that is not taxed. (59)

c) Deferrals: The option to delay payment of tax on current earnings until the future. (60)


This category provides financial rewards depending on the results of R&D activities or achieved after market approval of a product.

1. Milestone Prizes. These mechanisms constitute monetary outlays offered after the achievement of clearly specified R&D goals, including addressing particular diseases. Such incentives can apply to any stage in the R&D process. If they are offered only post-market approval they are effectively "End Prizes" discussed below. These mechanisms currently exist, though not for antibiotics or diagnostics at this time. (61)

2. End Prizes (also known as "lump sum" payments). …

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