Sizing A Market Entry Reward for the Development of New Antibiotics

Abstract

Antimicrobial resistance (AMR) is a growing threat to global health and wealth. Although new antibiotics are needed to address AMR, industry investment in new antibiotics is limited, due to the expected low economic returns on these projects. The UK implemented a 13M dollar pull incentive in 2022, to provide additional funds to motivate private sector actors to invest in new antibiotics and stakeholders have suggested other OECD governments join these efforts. We examine how large an incentive for industry is needed to invest in new antibiotics to address AMR, using a model of economic return based on Internal Rate of Return (IRR) measures and incorporating the latest data on development phase progression and costs. To achieve a minimum IRR of 11%, our results suggest a government funded market entry reward on the order of 2.6 billion dollars, paid over ten years, would be required to incentivize the development of one new antimicrobial agent. If six new antibiotics were required over a period of ten years, the total indicated fund would be 15.6 billion dollars. Compared to the direct and indirect costs of doing nothing, our estimated cost of a pull incentive seems manageable, and is consistent with estimates of an AMR pull incentive recently proposed in the US Pasteur Act (up to 3 billion dollars). Our estimates provide a foundation for governments and potentially other stakeholders to pursue the development of new antibiotics to avoid or mitigate the AMR crisis.