Humans are pretty darn lucky. We're surrounded on a daily basis by a number of things that could potentially kill us, including bacteria and viruses, yet our immune system has evolved over time into a pretty impressive defense system that's capable of repelling or killing many of the bacteria and viruses we encounter.
Unfortunately, our immune system isn't the only thing that's evolving. Viruses and other infectious diseases are evolving right alongside us, with some becoming resistant to drugs that have been traditionally used to treat those diseases. The sad result is that more people are dying from these so-called drug-resistant superbugs than ever before, and this may be just the beginning.
The rise of the superbug
According to a recently released study that was commissioned by the British government, drug-resistant superbugs are on pace to kill an extra 10 million people per year worldwide and cost up to $100 trillion by 2050 if global governments and pharmaceutical drug developers don't focus on battling these evolving diseases.
The study, which is still ongoing and isn't expected to yield its full plate of results until 2016, examined the antimicrobial resistance of three common infectious diseases along with malaria, HIV, and tuberculosis.
What's truly scary is the $100 trillion figure offered up by the study may be a conservative estimate. The reasoning, as the review notes, is it could make even the simplest surgical procedures dangerous. A report from the Centers for Disease Control and Prevention noted in 2011 that roughly one-in-25 patients acquired an infection while in the hospital. If this figure falls further the costs to treat infections post-surgery could balloon higher.
Drug developers keep their distance
So why isn't anyone doing anything about this? The reason is that it's not always profitable for drug developers to tackle infectious diseases. There are costs to research and develop drug candidates and put them through clinical trials, file a new drug application with the Food and Drug Administration, and stockpile the drug in advance of a potential approval and launch.
All the while, three hurdles stand in the way of drug developers. First, there aren't any guarantees that additional competition won't enter the field. Look at Ebola, with close to one dozen companies trying to develop a cure. Chances are that there may only be room for a small handful of drug developers to succeed, yet we have more than a dozen trying to beat each other to the punch. The point is that there will be many losers and that discourages biopharmaceutical companies from taking the initiative to research and develop new antibiotic and antiviral medications.
Secondly, the effective shelf life of a developed medicine may be called into question. Because of the mutating capacity of viruses a developed therapy could last a long, long time, or it may only survive a few years. Without this certainty in place a number of drug developers simply stay on the sidelines.
Finally, drug developers have to feel confident that the U.S. government and other nations around the world will be committed to purchasing their antibiotic or antiviral product. Using the seasonality witnessed in influenza vaccine sales as an example I suspect that no drug developer feels wholly confident in this happening.
The end result is far too few new medicines being focused on infectious diseases.
Baby steps being taken
But this doesn't mean we haven't seen a complete lack of advancements.
This year has been particularly positive for the development of drugs designed to treat skin and skin structure infections caused by drug-resistant bacteria, including MRSA. In total, we've witnessed three FDA approvals -- and not surprisingly two of the companies making these drugs were acquired shortly thereafter. This includes Actavis' (NYSE:AGN) purchase of Durata Therapeutics and its skin infection drug Dalvance, and Merck's (NYSE:MRK) announced acquisition of Cubist Pharmaceuticals (UNKNOWN:CBST.DL) with skin infection drug Sivextro.
Perhaps the most exciting approval of all came in August from The Medicines Co. (NASDAQ:MDCO) for acute bacterial skin and skin structure infection (ABSSSI) drug Orbactiv. Unlike the prior standard of care, vancomycin, which required seven to 10 days of treatment, Orbactiv is given as a single injection and was shown in clinical trials to be just as effective as vancomycin. It could represent a big improvement in patient quality of care, and may even remove the need for treating these patients in the hospital setting (i.e., it could be administered in an outpatient clinic), removing the possibility of further disease transmission.
More incentives may be needed
Despite what you might think, the U.S. government isn't sitting on its hands while drug-resistant superbugs grow stronger.
In 2012 President Obama signed the Generating Antibiotic Incentives Now, or GAIN Act, into law as a means of spurring the research and development of medicines designed to treat potentially deadly infectious diseases.
The GAIN Act offers a number of key benefits. First, it grants an additional five years of exclusivity to eligible antibiotics which are designated as "qualified infectious disease products." This extra five years is tacked onto the typical exclusivity period which ranges from as little as six months for pediatric exclusivity, to as much as seven years for orphan drugs. Better protection from generics should generate bigger profits and incentivize drug developers to tackle more infectious disease indications.
Also, the GAIN Act speeds up the review process of qualified infectious disease products and requires the FDA to lay out clear guidance on what is needed in clinical trials in order to get a therapy approved. Prior to the GAIN Act there was no clear guidance in place from the FDA.
Lastly, the GAIN Act mandates the FDA maintain a list of "qualifying pathogens" that represent the most serious threats to public health. In essence, it's a hit list on the diseases that could use the most immediate attention, and therefore a bullseye for pharmaceutical companies to focus on.
Yet the truth is more may still be needed.
One idea being thrown around by the President's Council of Advisors on Science and Technology that just might work is that of tradable vouchers. A tradable voucher would reward an innovator company with a short extension of its patent exclusivity period that it could potentially "trade" to another company. This voucher could be particularly attractive to large pharmaceutical companies who might be looking to supplement their income in the wake of patent expirations. This certainly isn't the first time we've heard the idea of a tradable voucher presented, but the time may be coming where it makes sense to consider it as a viable option to spur new drug development.
What I can say with some degree of certainty is that superbugs aren't going away any time soon, which means we need solutions sooner rather than later. I, for one, hope for significant progress in the coming years, but fully understand as both a consumer and investor that change, no matter what form it eventually takes, isn't likely to happen overnight.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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