This is a presentation to the Australian Society for Antimicrobials (ASA) meeting in Melbourne, 27th February 2020. The presentation draws on research by OHE, funded by the Wellcome Trust, on innovative HTA methods and contracting for antibiotics. It proposes a subscription model delinking the use of new antibiotics from payments to developers for making the products available. It provides an update on UK (NICE and NHSE) plans to introduce a subscription model and suggests that Australia could also pilot such an approach.

1. ohe.org
How do we get and pay for new
antibiotics? Proposed new models for
value assessment and contracting for
payment
“ANTIMICROBIALS 2020”
27 FEBRUARY 2020, MELBOURNE
Adrian Towse
Emeritus Director & Senior Research Fellow, OHE
Visiting Professor, London School of Economics

2. Agenda
1. Acknowledgements
2. The role of HTA and contracting
3. HTA and contracting for antibiotics
4. What constitutes value for antibiotics?
5. Measuring and modelling antibiotic value
6. Innovative payment models
● UK proposals by NICE and NHS England
7. Conclusions and recommendations
● Options for Australia
8. References
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3. 1. Acknowledgements
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Research funded by the
Wellcome Trust
Research with the
Academy of Infection
Management, funded by
GSK, MSD, and Roche
Research undertaken with AZ
and funded by AZ
The Office of Health Economics
is a not-for-profit (charity). It is
owned by the ABPI but operates
independently.
This trip is funded by MSD.

4. 2. The role HTA and contracting
● The antibiotics available today are becoming obsolete at a fast pace, and industry development pipelines
of antibiotics are weak
● The development of antibiotics faces a threefold challenge:
● Scientific - due to the low success rates in R&D stages
● Regulatory and Clinical - due to the challenges of generating evidence of clinical superiority in
randomised controlled trial (RCT)
● Economic - due to the low expected returns on investments (ROI) from antibiotic sales
● A number of interventions have been proposed to antibiotics R&D:
● Push incentives - providing financial and scientific support the development of new antibiotics
● Pull incentives – providing rewards to manufacturers for bringing to market new antibiotics (e.g. market
entry rewards, volume-delinked payment models)
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5. 2. The role of HTA and contracting
● Most national health systems undertake some form of value assessment of a new drug before providing
or reimbursing it for patients
● Value assessment of new drugs is typically based around evidence from randomised controlled trials
(RCTs)
● Given the value assessment, health systems decide if the price charged by manufacturers is justified, or
what price they would be willing to pay, for all or some of the label indications of the new drug
● Manufacturers are generally then paid an agreed price per pill
● Deals may be struck on the ‘list’ price, taking account of expectations or limits on prescribing, of
volume and sometimes of outcomes
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6. 3. HTA and contracting for antibiotics
● Value assessment of new drugs is typically based around RCTs to show clinical superiority against a
comparator treatment. This is a problem for new antibiotics because:
● Estimates of effectiveness in patients to be treated are typically based on non-superiority trials
● Non-clinical data (such as PK/PD and in-vitro microbiological data) are typically not accepted by HTA
agencies
● A considerable part of antibiotic value arises from externalities (benefits and costs to the non-treated
individuals) which are not measured in RCTs
● The treatment strategies which will maximise value to patients and the wider public are not considered
in RCTs
● Most pricing & reimbursement arrangements agree a price per pill. This is a problem for new antibiotics
because:
● Stewardship arrangements limit use of the drug during the period of patent protection to optimise long
term social value
● Low volumes will not provide a return on investment for developers
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7. 4. What constitutes value for antibiotics?
● A considerable part of antibiotic value arises from ‘externalities (e.g. transmission of
infections, impact on rate of growth of AMR)
● Conventional HTA methods only include the effects associated with treating the immediate
patient
● Examples of consideration in deliberative decision making, but no formal for AMR-related
HTA assessment (e.g. France)
● Recent legislation in Germany has established that AMR can be considered as an additional
value element of antibiotics, but not clear how this will be applied in practice
● Previous work by OHE (Karlsberg Schaffer et al., 2017) made the case for going beyond the
benefits of antibiotics typically considered in HTA (i.e. health gains and cost offsets, and in
some systems also unmet need, and productivity benefits) and identified public health benefits
that are relevant to the health system and wider society but are not considered in traditional
assessments
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8. 8
RECOMMENDATIONS
● The typically ‘not included’
elements of antibiotics appear
to be much larger than the
immediate health gain to the
patient
● We need research to avoid
double counting and improve
value measurement
approaches
● Progress the inclusion of the
value elements, start from
value dimensions that have
the greatest impact on overall
value, and for which it is
possible to generate evidence
of value on
● Agreement on strategy for use
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Transmission value
Arises from preventing the spread of the
infection among the wider population by
treating individual patients
Enablement value
Arises, for example, from protecting the
safety of surgical procedures that rely on
prophylactic or post-operation antibiotics,
or of using drugs that suppress the
immune system risking infection
Diversity value
Arises from attenuating the ‘selection
pressure’ on existing antibiotics and
preserving the efficacy of these existing
treatments against resistant pathogens
Insurance value
Arises from having access to an effective
treatment available in case of a
catastrophic event, such as an outbreak
of multi-drug resistant pathogen
Novel action value
Arises from preventing cross-resistance
among classes of antibiotics, and
fostering R&D of ‘follow-on’ products with
the same mechanism of action
Spectrum value
Emerges from antibiotics that cover a
narrower spectrum of pathogens,
preventing the ‘collateral damage’ to the
microbiome and reducing the build-up of
AMR
Unmet need Productivity benefits
Health gains Cost offsets
TYPICALLY
INCLUDEDTYPICALLYNOTINCLUDED
4. What constitutes value for antibiotics?

9. 5. Measuring and modelling antibiotic value
● Proposals to model the value of the public health benefits of antibiotics in HTA using
QALYs and estimates of cost-effectiveness in:
● Morton et al. (forthcoming) - recommendations to modify incremental cost-
effectiveness ratios (ICERs) in order to capture the public health effects of antibiotics
● Rothery et al. (2018) - approach for a comprehensive assessment, including
consideration of relevant strategies for antibiotic use and estimation of population
benefits using dynamic models to simulate the dynamics of resistance transmission
and development
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10. 5. Measuring and modelling antibiotic value
REACTIONS & RECOMMENDATIONS
● Proposals rely on complex modelling exercises that require advanced expert capabilities for their
implementation
● Adequate expert capacity may be available in some countries (e.g., UK and Australia), but progress is
needed to build it up in other countries
● Scarcity of data on AMR transmission and development
● Potential role of clinicians, epidemiologists and other expert judgement where data are missing or to
simplify the estimation of resistance trends and other key parameters
● Importance of using a perspective of analysis that captures appropriately the public health benefits of
antibiotics
● Standard HTA methods rely on evidence from RCTs. These typically do not demonstrate clinical
superiority of new antibiotics, and are site based rather than pathogen based
● Appropriate antibiotic value should be modelled according to the clinically relevant strategies of use
(typically pathogen based) and to estimate of clinical value based on PK/PD data and expert opinion
● Some elements of antibiotic value (e.g. transmission value) are already applied to vaccines assessment
● The modelling expertise of certain member state agencies in charge of assessing vaccines (e.g. France,
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11. 6. Innovative payment models
● The contracting of antibiotics is usually regulated through tariff-based payments (DRGs), which
disincentivises the optimal use of new antibiotics if their value is reflected in a high price
● US CMS NTAP process now reimburses 75% of price of a novel antibiotic outside of DRG, but this
does not address low volumes and need for stewardship
● Proposals from Duke-Margolis for antibiotic contracting in terms of models that delink payments from
volume sold, in order
to provide appropriate R&D reward while promoting stewardship:
● Daniel et al. (2017) propose a Priority Antimicrobial Value Entry (PAVE) award, consisting of a pre-
set
market entry reward available upon launch, and a progressive shift towards value-based contracts
● Schneider et al. (2020) propose a subscription model for the public sector (Medicare) patients
● Little discussion to date in Europe on novel contracting for antibiotics, it is unclear whether delinked
payment models will be considered because they represent a major departure from existing
contracting approaches. Some progress in:
● the UK - NICE and NHS England have recently announced a pilot programme of a delinked payment-
based system
● Sweden - pilot of lump sum payment model, but this initiative seems to address the availability of
antibiotics in the Swedish market rather than providing appropriate R&D incentives
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12. 6. Innovative payment models – UK proposals by NICE and NHS
England
● Overall objective is to put in place a subscription model for purchasing antibiotics and ensure
that learnings are shared with the international community.
● Three elements
1. Selection of candidate drugs: Pilot of 2 drugs, one new and one existing, will be separate
procurement lots, use of procurement through “competitive dialogue”
2. Valuation: Use of modified NICE HTA processes with expert opinion to estimate range of ££ value;
add to health gain, cost savings, AMR specific elements of diversity; transmission; enablement;
spectrum benefits; and insurance benefits. Use of pre-clinical data (e.g. PK/PD data) to estimate
health gain of the new drug.
3. Contracting: Expected to be fully delinked subscription model, with pre-agreed payments but
linked to delivery of data and of product when needed. Period not yet specified, but could be 5
years, renewable with new data.
● Timing: AMR 5 year vision launched January 2019, Pilot launched July 2019; Stakeholder update
Nov 2019; draft documents expected March 2020; selection by end 2020; valuations by end 2021;
contracts negotiated in parallel, expected end Q1 2022.
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13. Governments should promote change in antibiotics assessment and contracting with
internationally coordinated initiatives. EUnetHTA for example, or successor bodies, could
be tasked with a role in developing a joint assessment of a new antibiotic, thus hopefully
stimulating independent action.
Countries gaining experience with innovative HTA and contracting
for antibiotics should share the learnings with other countries to
contribute to the common understanding of the most effective policy
interventions
7. Conclusions and recommendations
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Governments and funding institutions should continue to
advocate change to HTA and contracting for antibiotics
around the world.

14. In the short-term, new antibiotics should be excluded from DRG-bundled payments to
disincentivise the use of cheaper drugs.
‘Volume-delinked’ payments represent a longer-term solution because these schemes
encourage better adherence to stewardship.
There is an overlap between the elements of value that are relevant for vaccines and
antibiotics.
The advanced vaccines modelling approaches could be transferred to antibiotics to
model the patterns of transmission and herd immunity
Antibiotic value should be determined on consideration of actual
strategies of usage, even if these differ markedly from those
tested in registration trials
The elements of value that are most relevant for particular
types of antibiotics and usage scenarios should be identified
and expert elicitation should be used to inform modelling
7. Conclusions and recommendations
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15. 7. Options for Australia
● Like UK, Australia has high quality HTA valuation expertise for new vaccines and for new drugs
● Experience of “Netflix” style subscription model for Hep.C DAA drugs indicated to rest of the world
Australia’s ability to undertake innovative contracting arrangements
● Opportunity to introduce a subscription model along the broad lines of the UK approach of three elements:
● Selection process for candidates (UK planning 2 products initially)
● Valuation process – recognition that expert opinion will inform conventional HTA approaches, need for
ad hoc approaches whilst more detailed approaches are developed
● Contracting – multi-year “delinked” contract with obligation to supply in line with clinical protocols that
enforce appropriate stewardship of existing and new antibiotics
● Challenge of Federal versus State funding for hospital drugs. Comparable in some ways to UK challenge of
decentralised hospital contracts and NHS finances with a national contract.
● The more experience the international community develops of contracting for new antibiotics, the sooner
we will learn how to get this right.
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16. 8. References
● Daniel et al. 2017. Value-based strategies for encouraging new development of antimicrobial drugs. Duke-
Margolis Center for Health Policy. Available at: https://healthpolicy.duke.edu/PAVE
● Dept of Health and Social Care. Jan 2019 Tackling antimicrobial resistance 2019 to 2024: the UK's 5-year
national action plan. Available at
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/78489
4/UK_AMR_5_year_national_action_plan.pdf
● Dept of Health and Social Care.. Development of new antibiotics encouraged with new pharmaceutical
payment system. News story. July 2019. Available at https://www.gov.uk/government/news/development-
of-new-antibiotics-encouraged-with-new-pharmaceutical-payment-system
● Karlsberg Schaffer, S., West, P., Towse A., Henshall C., Mestre-Ferrandiz J., Masterton R., and Fischer, A.
Assessing the Value of New Antibiotics: Additional Elements of Value for Health Technology Assessment
Decisions. Office of Health Economics Research Paper, May 2017Available at
https://www.ohe.org/system/files/private/publications/OHE%20AIM%20Assessing%20The%20Value%20o
f%20New%20Antibiotics%20May%202017.pdf
● Neri, M., Hampson, G., Henshall, C. and Towse, A., 2019. HTA and payment mechanisms for new drugs to
tackle AMR. Available at https://www.ohe.org/publications/hta-and-payment-mechanisms-new-drugs-
tackle-amr
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17. 8. References (cont.)
● NICE and NHS England. Nov. 2019 Slide Deck for Stakeholders. Developing and testing innovative models
for the evaluation and purchase of antimicrobials. Available at http://amr.solutions/wp-
content/uploads/99/2019-11-25_nhs-nice_webinar_slides_-_draft_for_release.pdf
● Rothery et al. (2018). FRAMEWORK FOR VALUE ASSESSMENT OF NEW ANTIMICROBIALS. Implications of
alternative funding arrangements for NICE Appraisal. NIHR Policy Research Unit in Economic Evaluation of
Health & Care Interventions (EEPRU). Available at http://www.eepru.org.uk/wp-
content/uploads/2017/11/eepru-report-amr-oct-2018-059.pdf
● Schneider M. et al. February 17, 2020. Delinking US Antibiotic Payments through a Subscription Model in
Medicare. Duke-Margolis Center for Health Policy. Health Affairs blog. Available at:
https://www.healthaffairs.org/do/10.1377/hblog20200211.544900/full/
● Towse, A., Hoyle, C., Goodall, J., Hirsch, M., Mestre-Ferrandiz, J., Rex J. 2017. Time for a Change in How
New Antibiotics are Reimbursed: Development of an Insurance Framework for Funding New Antibiotics
based on a Policy of Risk Mitigation. Health Policy http://dx.doi.org/10.1016/j.healthpol.2017.07.011
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To enquire about additional information and analyses,
please contact:
Adrian Towse Professor, MA, MSc, PhD
Director Emeritus and Senior Research Fellow
Visiting Professor London School of Economics
atowse@ohe.org