Broken Market, Broken Pipeline: Why Antibiotic Innovation Needs Economic Rescue

Antimicrobial resistance

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Antimicrobial resistance (AMR) is escalating into a global health and economic crisis, threatening modern medicine’s foundations. In this exclusive interview, Henry Skinner, PhD, MBE, MJur, CEO of the AMR Action Fund, discusses the economic barriers to antibiotic innovation and outlines why traditional pharmaceutical models are failing. He highlights the urgent need for market incentives, the staggering global costs of AMR, and the critical role policymakers must play in preserving effective antibiotics for future generations.

AMR Action Fund is a mission-driven fund that finances the development of urgently needed antimicrobials.

ICT: The AMR Action Fund was launched to bridge the funding gap in late-stage antibiotic development. From your perspective, what are the primary economic barriers to bringing new antimicrobials to market?

Henry Skinner, PhD, MBE, MJur: The simple answer is financing. Antimicrobials are not big moneymakers and do not provide a return-on-investment for investors, so investors do not invest in new antimicrobials. In our current market, a drug’s value is primarily determined by its sales volume. That model works well in other therapeutic areas, particularly chronic diseases needing life-long therapy, but not antimicrobials.

Antimicrobials deliver enormous value to society—they cure infections quickly and enable a wide range of modern medical procedures, such as surgery, chemotherapy, and cesarean sections. But patients typically take them for only a few days, and doctors are trained to use new antibiotics sparingly to preserve their effectiveness. While that’s good for public health, it limits an antibiotic’s commercial potential, and investors put their money to work in areas with greater potential to generate financial returns.

ICT: Why do you think the traditional pharmaceutical business model fails regarding antibiotics, and how does AMR Action Fund attempt to counteract that failure?

HS: I’m reminded of something the author Erix Lax wrote in his terrific history of penicillin: “The key to science is ingenuity, but its engine is money.” For the past 40 or so years, venture capital has been the engine of biomedical innovation, investing many billions of dollars in small biotechs and yielding high-impact breakthroughs across therapeutic areas. Venture capital investors take on significant risks, and many of their investments fail. But when a company they invest in has strong, innovative science and develops a drug that is safe and benefits patients, the investor is rewarded with a financial return, which primarily happens through a bigger pharmaceutical company acquiring the smaller company or the smaller company going public through an IPO [initial public offering].

But due to the market challenges associated with antibiotics we just discussed, pharmaceutical companies aren’t chomping at the bit to acquire antimicrobial developers, and IPOs are exceedingly tough in this space. Without any viable pathways to exit, venture capitalists simply are not investing in antibiotics.

Consider that between 2011 and 2020, venture capital funding for US oncology companies totaled $26.5 billion. For antimicrobial developers during the same period, venture capital funding totaled only $1.6 billion and has since declined.

The AMR Action Fund was created to help bridge this gap by following a traditional VC model and investing approximately $1 billion into the most promising antimicrobial developers. But we alone cannot solve this crisis. To get the antibiotic pipeline back on track for the long term, we need policymakers to enact incentives that reward companies that successfully innovate urgently needed antibiotics.

Getting the right policies in place will send a strong signal to venture capital funds that antibiotics are worth the risk and incentivize them to invest in the field. In the absence of such policies, however, I worry that private investors will remain refractory to antibiotics and the engine of innovation will seize, while millions of patients die.

ICT: Could you break down the economic consequences of AMR globally? How does AMR threaten not just health care, but national and global economies?

HS: The economic consequences of AMR are staggering. The CDC estimates that treating just 6 different AMR pathogens in the US adds more than $4.6 billion in health care costs annually. Globally, estimates indicate that AMR adds $66 billion per year in health care spending, and that number could rise to $325 billion by 2050 under certain circumstances.

AMR can potentially harm the global workforce in multiple ways, leading to significant productivity losses. The OECD [Organisation for Economic Co-operation and Development], estimates that the negative impacts of AMR on workforce participation and productivity are equivalent to $36.9 billion in annual losses, with low- and middle-income countries shouldering most of the burden. AMR disproportionately affects women, who are often the primary caregivers in households and who make up nearly 70% of the frontline health care workforce globally.

When we are talking about a crisis that contributes to more than 4.5 million deaths each year, we must recognize that each one of these deaths has an enormous impact on families who must deal with the loss of their loved ones. If a household’s breadwinner falls ill with an intractable infection, the negative consequences could ripple through generations of that family.

ICT: How do market entry rewards, subscription models, and delinked payment strategies contribute to a sustainable antibiotic pipeline? Which of these mechanisms do you believe has the most promise?

HS: Investors right now do not want to touch antibiotics, not because of the scientific challenges of antimicrobial research and development, but because the market is so dysfunctional. In recent years, companies have succeeded in developing and obtaining approval of a new antibiotic only to go bankrupt soon after.

Market-based solutions that reward the successful development of new antibiotics are essential to rekindling investor interest, as they make the market significantly more predictable. That is important from an investor perspective, and it is key to creating a sustainable R&D [research and development] ecosystem in the long term, especially at the clinical stage, where costs and the risk of failure skyrocket.

I do not believe that there is a one-size-fits-all incentive model that will work for every country, region, or healthcare system. Different countries need to evaluate their needs and what works best for their health system in terms of how to structure these incentives.

I do believe, however, that incentives need to be sufficiently sized, and they need to prioritize investment in innovation that will benefit patients. High-income countries should not pursue schemes that seek to guarantee access to new drugs without supporting investment into R&D—it will result in a race to the bottom that ends antibiotic innovation. We urgently need policies that incent companies and investors to take the risks required to develop truly innovative antimicrobial therapies.

ICT: If nothing changes in the current financial model, what would be the long-term economic impact on hospitals and broader industries of a world without effective antibiotics?

HS: This is something that health economists are wrestling with, and it’s difficult to grasp because antibiotics underpin so much of modern medicine. A recent study in Cancer Medicine showed that hospitalized cancer patients are up to 2 times more likely to develop an AMR infection than hospitalized patients without cancer. So, what happens when a patient benefits from a breakthrough cancer treatment like CAR T-cell therapy, for example, but dies from an AMR infection? It’s not only tragic, but also costly.

This is the reality the world is facing, and it’s not relegated to cancer patients. We’re on the cusp of major advancements in organ xenotransplantation and gene therapies, but infections are a scourge to patients undergoing those procedures. If we do not have effective antibiotics, we will not be able to fully reap the benefits of these breakthroughs. The associated costs will harm the bottom line of hospitals and drug and medical device makers, but most importantly, the burden will be felt by patients and their families.

ICT: Looking ahead, what are the AMR Action Fund’s economic priorities in 2025 and beyond to ensure we don’t run out of effective antibiotics—and time?

HS: We need policymakers in high-income countries, particularly G7 countries, but also the G20, to act with urgency and enact incentives. The UK and Italy have taken steps in this direction, and a few additional countries are following suit, but that is not enough. Without action by the US, the EU, and all the G7 countries to bring the incentives to the necessary scale, the progress made thus far will be for naught.

I want to be clear: The AMR Action Fund is not a permanent solution. Like most venture capital funds, we will exist for 10 years, maybe a little longer. And we will likely stop investing in new companies well before that. The clock is ticking, and we are doing everything in our power to move the most promising antimicrobials through the clinic and to patients. Drug development is long, costly, and complex, though, and AMR is already contributing to more than 4.5 million deaths annually.

The current antibiotic pipeline is extremely fragile after decades of underinvestment. In the absence of timely market reforms, I am very concerned about what will happen when the AMR Action Fund no longer exists. Who will step up and finance clinical-stage R&D?