How not to solve a crisis: The European Commission’s Plan for Transferable Data Exclusivity Vouchers

Drug-resistant infections, sometimes called “superbugs,” killed an estimated 1.27 million people in 2019, a number set to rise to 50 million by 2050. It is a global health crisis that has been quietly in the works for years. And despite the hefty death toll, it is a crisis that is not receiving enough attention. 

Antimicrobial-resistant infections result from overuse and inappropriate use of antibiotics in medicine, for example, treating a viral infection with an antibiotic and from overuse in agriculture, where antibiotics are often used as growth stimulants in animals. AMR risks eroding the important progress made in medicine since the first synthetic antibiotic was used in 1910. As part of a comprehensive package of measures to combat antimicrobial resistance, it is paramount that new classes of effective antibiotics are developed. The last new class of antibiotics that made it to the market was discovered in 1984 and development pipelines for truly new classes of antibiotics are all but empty.

Antibiotics are a special class of pharmaceuticals that do not fit the industry’s standard business model. This pharma business model is based on selling as much as possible for as long as possible and at the highest price the market will bear. New antibiotics, however, need to be reserved and used cautiously while assuring their availability for patients who need them. In other words, the pharma industry would have to be persuaded to leave the new antibiotic drugs mostly on the shelf to be used sparingly. 

The industry will not invest in developing health products they cannot sell, and therefore large pharmaceutical companies have abandoned the search for new antibiotics. Smaller companies have entered the field but struggle with raising the cash because the mega-profit prospect isn’t there. 

The lack of incentives for new antibiotic drug development has been recognised for years and has been the subject of numerous reports and proposals, including a U.K. government-commissioned report by the economist Jim O’Neill published in 2016. Central to his proposal to encourage the development of new antibiotics are so-called market-entry rewards. O’Neill recommended an award of around US$1 billion each to the developers of successful new drugs, subject to certain conditions to ensure that the new antibiotic drugs are not “overmarketed” and yet are available to patients who need them wherever they live. That was the carrot. He also proposed a stick in the form of a “play or pay” funding scheme in which companies must pay a modest levy on the sale of their existing medicines into an international or regional fund unless they can demonstrate they are investing an equivalent amount in antibiotic R&D. 

The O’Neill recommendations for R&D have been largely ignored. The European Commission is now pursuing an entirely different route, and it is one O’Neill did not favour. In the recently leaked draft of the revision of the EU’s pharmaceutical legislation (Articles 40-42), the Commission proposes so-called transferable data exclusivity vouchers to incentivize antibiotic drug development. A company that applies for marketing authorization with the European Medicines Agency for a “priority antimicrobial” can obtain a transferable data-exclusivity voucher. Such a voucher provides an extra year of data exclusivity, which amounts to one year of extra market monopoly either for the antibiotic registered or another product authorized for use in the EU. The company applying for the voucher needs to demonstrate its ability to supply the EU market in sufficient quantities and provide information on all funding received related to the development of the antimicrobial. The voucher can be transferred (sold) to another company and be transferred an unlimited number of times. The EU voucher scheme would be in force for 15 years, during which period a maximum of 10 vouchers may be granted (subject to extension upon proposal by the Commission). 

So far, this is only a proposal (that the Commission has not made public yet), and many do not like it.

The European pharmaceutical industry, however, is lobbying hard for the voucher scheme. Not because they are keen to get back into the antibiotic research field but because they hope to extend the monopolies on some of their blockbuster drugs by buying vouchers. The vouchers, after all, are tradable. In practice, this would mean that generic competition for the product to which the voucher is applied will be delayed for the duration of the extended exclusivity period of one year. Needless to say, the generic industry is not keen on the proposal. They point out that it will dramatically increase the cost to health care systems. For example, extending the exclusivity period for adalimumab (Abbvie’s Humira), a product used to treat arthritis, would have meant an additional cost of US$1.1 billion for the EU’s healthcare systems. It would also introduce uncertainty for the generic industry as to when they can enter the market with generic or biogeneric versions of a product when such a product may be subject to an extended period of market monopoly. 

O’Neill addressed these problems in his 2016 report: “[Vouchers] push the cost of antibiotic development onto an arbitrary set of payers and patients (those who use the medicines on which the voucher is applied). Secondly, to deliver a similar incentive for new drugs, compared to market entry rewards, these vouchers would cost the healthcare system more in the long-term as they have to reward the innovative drug developer and provide an additional profit margin to the company selling the drug on which the voucher is applied.”

A recent Lancet commentary shared similar concerns, pointing out a 1-year voucher could cost the European healthcare systems up to $3.2 billion and would decrease access to medicines due to delayed market entry of generic medicines. The authors point out that studies have shown that similar incentive mechanisms may have accelerated market entry of products that are already in late-stage development but have done little to enhance R&D in the neglected areas. Vouchers also do not ensure access to new antibiotics because companies may choose not to supply certain markets or seize activity. The draft legislation permits the Commission to revoke the voucher when supply, procurement, or purchase criteria have not been fulfilled, but only before its transfer. The voucher scheme also has no link between the clinical value of the new antibiotic and the reward given, since that is determined by the value of the product to which the voucher is applied. Instead of implementing a voucher scheme, the commentary’s authors propose subscription-style payments at EU level that guarantee income to those who develop antibiotics delinked from the amount of product sold.

Civil society organizations have voiced similar concerns over access to medicines and the financial consequences for European healthcare systems. They have also pointed out that the flexibility that patent law provides to remedy undesirable consequences of a patent monopoly does not exist for data exclusivity. The European Consumer Organization BEUC calls the proposal “bad for consumers.

In November, 14 EU member states issued a nonpaper objecting to the voucher plan, saying: “Transferable vouchers do not directly incentivise the development of novel antimicrobials, nor do they ensure that products are accessible and available throughout the EU for an agreed upon time period…the costs for national health systems will be high.” The member states instead prefer direct financial incentives such as market entry awards, a subscription payment scheme that guarantees an income regardless of volumes, and R&D incentives such as milestone prices. They see a central role for the recently established European Health Emergency Preparedness Response Authority.

The TDEV scheme will likely not directly benefit the companies and entities that are actually engaged in new antibiotic drug development, including not-for-profit organizations such as the Global Antibiotic Research and Development Partnership. 

Antibiotic drug development lends itself for a delinkage model whereby incentives for innovation are disconnected from the ability to sell at high prices. Opponents of the TDEV plan seem to prefer such an approach as well. Delinkage could be implemented through direct financing and milestone prizes, possibly combined with purchase commitments to secure market prospects. The latter would have to be developed with global equitable access in mind. The new antibiotics need to be global public goods and not just available for the rich. The new health preparedness agency HERA should play a central role in implementing new R&D models, ensuring antibiotic drug development takes place and is appropriately financed. 

It might be worth dusting off O’Neill’s “play or pay” proposal to finance the new innovation models. After all, companies are making huge profits from infectious diseases. Pharma’s Covid-19 revenues amounted to close to US$100 billion in 2022. A new study, Pharma’s Pandemic Profits, published by SOMO on 27 February, describes how these gains are largely due to decades of research funded by public investment, billions in grants for development and production, and tens of billions in Advanced Purchase Agreements (APAs) with governments. It is not an unreasonable proposal to reallocate some of these resources, generated by public spending, to antibiotic drug development. Even a modest skimming would create a meaningful fund for antibiotic drug development.

An earlier version of this blog was published in Barron’s on 14 February 2023.

Ellen 't Hoen
Ellen 't Hoen
Ellen ‘t Hoen, LLM PhD, is a lawyer and public health advocate with over 30 years of experience working on pharmaceutical and intellectual property policies.


Never miss a post! Sign up for ML&P's newsletter.

Recent Articles

Related Articles