Priority Antimicrobial Value and Entry Award

To address the limitations of existing MER proposals, particularly in the US context, in August 2017, the Duke-Robert J. Margolis, MD Center for Health Policy proposed the Priority Antimicrobial Value and Entry (PAVE) Award, a publicly leveraged, value-based payment model.^{Reference Daniel, McClellan, Schneider, Qian, Lavezzari and de Graffenreid9} The PAVE Awardcombines a limited MER with a transition to value-based drug payments. The PAVE Award approach promotes innovative development through a reward designed to augment, not replace, private revenue sources for antimicrobials, while relying on antimicrobial payment reforms rather than a new government regulatory approach to promote sustainable use of the drug. The limited MER provides funds for the first five years on the market, with payments decreasing each year. However, unlike other proposals, market-based revenues beyond the MER would shift away from volume sales. In this model, MER payments would be increasingly contingent on manufacturers negotiating value-based contracts with payers that tie payments to value, not volume, in the covered population — that is, payment would be increasingly linked to population health measures such as reliable drug availability when needed, achievement of effective stewardship, and real-world data and evidence collection. These population-based payment models would not require public and private payers to pay more than they already do with FFS payments for high priority antimicrobials. Instead, the models would drive a restructuring of payments to better reflect the value these drugs provide, analogous to shifts toward value-based payment taking place in other areas of health care payment. This approach would encourage high-value, sustainable use and delink ROI from volume. The PAVE Award reflects the pluralistic structure and limited public financing and regulatory role in the US healthcare system, and builds upon approaches proposed by private foundations, other countries, and multinational organizations to support the development of priority antimicrobials (Figure 1).

Figure 1

Outline of Priority Antimicrobial Value and Entry (PAVE) Award

Adapted from G. W. Daniel et al., Value-Based Strategies for Encouraging New Development of Antimicrobial Drugs, Robert J. Margolis, M.D., Center for Health Policy at Duke University^{Reference Daniel10}

The PAVE Award would utilize a phased-in approach to allow antimicrobial developers to establish market access prior to negotiating value-based contracts with payers. Antimicrobials that would receive PAVE Award payments would target high-priority pathogens, using eligibility criteria set by an independent panel. Eligibility criteria could potentially be built off of the priority pathogens identified by the Centers for Disease Control and Prevention (CDC) and the World Health Organization.¹¹ Initially, benchmark payments would reward innovation in a tiered manner upon market entry.^{Reference Rex and Outterson12} Over subsequent years, each annual MER payment would be contingent upon the company demonstrating increased revenue from private and public payers in the form of payments tied to population value across the plan membership, through payments linked to measures of drug supply availability, appropriate stewardship, and collection of real-world data and evidence on drug utilization and effectiveness in the post-market setting. Establishment of value-based contracts between manufacturers and payers is an important component of this model because it shifts payment away from reimbursing for volume of use, and instead aligns payment with the ongoing public health value that antimicrobials provide. The Duke-Margolis PAVE Award can address some of the obstacles to action on MER legislation, by reducing the budgetary impact and need for a new government regulatory structure to assure that the manufacturer meets the intent of the delinkage features of other proposals.

Funding a Market Entry Reward in the US

As described above, in the US, setting aside a large amount of public funds is often not politically feasible, but there are several alternative options to consider for funding an MER. One possible approach would be to rely on transferable exclusivity vouchers (TEVs). TEVs would be valuable to manufacturers of drugs that generate high sales, since additional exclusivity would generate significant additional revenues. The government could make a TEV available to the MER recipient. Alternatively, the government could auction off a small number of TEVs per year, placing proceeds in an innovation fund used to reward successful development of high priority antimicrobial products.^{Reference Outterson and McDonnell18} The TEV conditions (duration, number, maximum value, etc.) could be altered to assure that the magnitude of the financial rewards was in line with congressional intent.¹⁹ While avoiding the need for government appropriations, this financing option would delay market entry of generic equivalents, delaying the reduction of drug prices from generic competition for the affected drugs.

Alternatively, public funds could be raised through taxes or fees on relevant stakeholders. For example, the AMR Review suggested a “pay or play” model, in which manufacturers that are not invested in antimicrobial development would be charged a fee.²⁰ The argument is that many therapeutic areas (including chemotherapy and surgery) are dependent on antimicrobials; since the industry as a whole depends on effective antimicrobials, drug manufacturers should contribute to antimicrobial development through investment in their own antimicrobial R&D or by paying a fee. Another possible method for generating funds is through a tax on all antibiotic prescriptions, as suggested in the PACCARB report and others.^{Reference Ferraro, Towse and Mestre-Ferrandiz21} The purpose of this tax would be to not only generate funds to reward antimicrobial development, but also to discourage inappropriate use of current antimicrobials by increasing the cost of use.

Award Administration

Once funding is secured for the MER, an appropriate agency or organization would need to be responsible for administering the award, that is, evaluating whether potential recipients meet the criteria and for distributing funds over the period of the MER. Given its involvement in other initiatives related to antimicrobial development, the Biomedical Advanced Research and Development Authority (BARDA) would be a reasonable entity to take on this role. Because BARDA already facilitates public-private partnerships with antimicrobial companies during the clinical development phases, administering an MER may be a natural continuation of that program. BARDA is currently responsible for selecting projects and administering contracts with antimicrobial companies, so their expertise is well aligned for continued support of antimicrobial manufacturers. They also have long-term experience with public-private partnerships, which would be valuable for the implementation of an MER, particularly the PAVE Award. Further, the Pandemic and All-Hazards Preparedness Act (PAHPA) is up for re-authorization in 2018, creating an opportunity for incorporating an MER program.

Distributing Award Payments

Some MER proposals envision a one-time, lump sum award; in others, like the PAVE Award, the award would be distributed over a number of years. While a one-time payment may seem simplest to administer, such proposals usually envision a major role for the government in overseeing the continued reliable availability of the antimicrobial and its distribution. In contrast, a multiyear contract can help ensure that the manufacturer adheres to performance requirements that are expected for the MER to have is intended effects, such as drug availability, support for steward-ship, data collection and surveillance, etc.

In the congressional draft legislation, the award payment would be made in one upfront installment with the understanding that the government would “claw back” the money if conditions around drug pricing and access were not met. Both the IDSA Working Group proposal and the PAVE Award propose to distribute payments in installments over the course of five years. Under the PAVE Award, the total amount that should be paid out to the manufacturers over time remains to be determined, but the overall amount should be reflective of the value that the drug provides to public health. The PAVE Award suggests using the benchmarking method, which would provide manufacturers with a base amount, with potential add-ons for drugs that represent greater value.^{Reference Ferraro, Towse and Mestre-Ferrandiz21} For example, a drug that treats multi-drug infections through a novel mechanism of action would be prioritized over a drug that is a modification of an existing drug class. Scientific experts, clinicians, public health officials, and patients will need to weigh in on what characteristics should be prioritized for greater financial rewards.

The awards provided over time require mechanisms for determining whether the manufacturer continues to meet the award criteria. The PAVE award envisions the government verifying that the manufacturer has established value-based payment models with payers; such criteria are used now to adjust payments under Medicare's payment systems. The IDSA approach would require the government to set and monitor actual performance on criteria for access and steward-ship, with this monitoring occurring on top of volume-based payment mechanisms for the drug that are not aligned with the performance goals.

An early indication of MER success will be more than one manufacturer working on drugs that have similar targets, which raises the question of whether new drugs should receive the MER if they are second or third to enter the market, and if so, how much should they receive in relation to the first entrant. If only the first drug to market is rewarded, then the reward will be less predictable, and it will maintain a high level of risk for developers. However, administrators of the MER will also wish to avoid providing a large financial incentive to copycat drugs that bring little innovation to the space. Potential solutions, like early product registration or decreasing reward amount for subsequent products, may help balance these issues. Further work is needed to determine the most appropriate award limits as well as viable mechanisms that can be implemented to promote innovation.

Implementing the Payment Reform Component of PAVE

Unlike the other MER proposals, the PAVE Award includes significant incentives for the adoption of value-based payments in payer contracts for antimicrobials that shift incentives away from volume in a manner that matches the intent of stewardship programs for appropriate use. While payers would not be required to pay more than they do today under FFS, implementation of alternative payment models (APMs) would require new contracting models and performance measures to be worked out in collaboration with the payer community. For example, the payment reforms might include a per-member per-month or episode-based component of payment, supported by performance measures and real-world evidence.

Payers will need to see value in these contracts in order to agree to negotiate new payment models with antimicrobial manufacturers. Bundled and episode-based provider payments adjusted by performance measures are often used to support improving the quality of care provided to patients and to avoid overuse. Payers and drug manufacturers have also started to implement outcomes-based contracts, where rebates are provided to the payer if the drug does not meet predetermined outcomes. As a result of this shifting payment environment, payers and manufacturers are developing more experience and confidence with population-based payment contracts. However, many of these agreements involve high-priced drugs, where payers risk paying a lot for limited results. In the case of antibiotics, the magnitude of costs at stake for payers is lower. With smaller direct benefits for payers, they may need support in developing tools, templates, or models for such contracts.

There are several kinds of performance measures that might be considered when implementing value-based payment models for antimicrobials. First, measures could assess whether the antimicrobial is available to the covered population reliably when needed. This component should be relatively easy to measure through payer communications with their associated providers, as well as through FDA monitoring of drug shortage issues. Second, measures could assess adherence to appropriate use criteria. This component could build upon antimicrobial stewardship programs that are mandated in many hospitals and clinics, removing volume-based sales incentives for manufacturer representatives, and establishing criteria that specify the appropriate patient population for a given drug. In addition, the CDC's Antimicrobial Use Option of the National Healthcare Safety Network is available to hospitals to report antibiotic use data, which could help to track appropriate use. A final important type of measure for establishing value-based contracts is assessment of the continued effectiveness of the contracted antimicrobial. This component could be supported by a registry related to drug use and outcomes. Additionally, CDC surveillance of resistance could be utilized to assess whether the antimicrobial remains effective against certain targets.

These payment reforms and measures would strengthen the existing infrastructure that has been put in place for antimicrobial stewardship programs and appropriate use. Many of these programs require the development of pathways for use, requiring diagnostic confirmation of infection, and de-escalation of antimicrobial therapy if evidence of inappropriate use is found. Payers and providers can build upon these clinical pathways with guidance from the manufacturers about when use of their drug is most appropriate. Enhancing evidence-based clinical pathways for antimicrobial use, coupled with financial risk if they are not followed, could improve stewardship and appropriate use of high-priority antimicrobials.

Prior to or as part of legislation, a pilot program consistent with the PAVE Award could be implemented — e.g., a pilot payment reform for high-priority antimicrobials in Medicare. In addition to validating the guiding principles for the PAVE Award, pilot projects should aim to provide additional information about the outcome measures and datasets that will be needed to implement these agreements on a larger scale. Some of the issues that will need to be addressed in a pilot project are the following: (1) how an agreement might work for inpatient vs. outpatient drugs, (2) payment variability between private and public payers, and (3) strategies to integrate providers. There are several issues that could potentially be tested to address these categories. One is to create an add-on payment for infection-related DRGs, where execution of particular value measures (such as reporting use, using a diagnostic, or reporting effectiveness data) would be rewarded with additional payment. Another option would be for CMS to provide manufacturers an episode-based fee in exchange for access to the drug for patients in a given DRG, regardless of whether the drug is used.

Global Coordination on a Market Entry Reward

A growing number of international expert groups have identified MERs as the most viable “pull” option to address the growing unmet health need for antimicrobials for resistant organisms. However, the details of an optimal MER are likely to depend on the characteristics of a country's healthcare system and its financing. Additionally, due to governing and administration issues, it is unlikely that all countries would be willing to contribute funds to a single, common pool. While AMR impacts the entire world, and each country has different healthcare system and economic resources, complementary and reinforcing approaches are needed. While the US system is not well suited for providing substantial new resources for a government-procured and -managed antimicrobial, the PAVE Award proposal shows that a US approach that builds on private funding and a pluralistic health care system can complement more government-centered approaches in other countries. Finding solutions tailored to each participating nation can encourage multiple countries to take action together, and potentially address the issue of the “free-rider” problem, where some countries would receive access to the drug without committing funds or implementing steward-ship programs.

The PAVE Award moves toward a population and value-based approach and was designed with the US market in mind. However, value-based payment for healthcare products is not unique to the US, and this type of payment model can be applied within other countries. Many countries are developing or implementing value-based payment models, and many of the PAVE Award principles could be utilized within these settings. All countries do not need to adapt the PAVE Award in the same way for it to be successful. Instead, the PAVE Award provides points at which that coordination could occur. For example, the requirements that manufacturers will have to meet in order to qualify for the PAVE Award (specifically, maintaining availability of the drug, continued data collection, and sustainable use) could be broadly applied by other countries in their payment models. The requirement to maintain availability of the drug would improve access, while the requirements around data collection would allow both manufacturers and providers to better assess the patient population that is most appropriate for use of the particular drug. Further, coordinated surveillance of AMR, which might include shared data on infections and antimicrobial use, can also help to address issues of stewardship and access. As more health care systems develop capacities to promote appropriate use with aligned health care payments, the more coordinated surveillance and evidence development will be feasible, enabling more progress toward an effective global response to antimicrobial resistance.