News and Opinions  –  2023

5 reasons why the European Transferable Exclusivity Voucher proposal should go in the bin

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2023-09-28

Earlier this year the European Commission released their proposal for revised rules on pharmaceuticals in the EU. Now they are being amended and negotiated both by the European Member States in the Council and in the European Parliament. One controversial provision that has been proposed to address the deep crisis in antibiotic research and development is the so-called “Transferable Exclusivity Voucher”. Here we argue why this proposal is the wrong way to go and will risk detracting time, resources and political interest from far more transformational alternatives on the table elsewhere.

A red coupon with the words cash back on.
Photo: Shutterstock.

That the European Commission’s proposal to create a maximum of ten Transferable Exclusivity Vouchers (TEV) over a 15-year period is controversial, is not new. Even before the proposal was published in April, the concept had been criticized for being an overly expensive and inefficient way of incentivizing the development of new antibiotics.

Earlier this year, before the Commission proposal was published, ReAct together with a number Europe’s foremost experts in antibiotic research and development (including economist Jim O’Neil, the author of the UK AMR Review from 2015), co-wrote this Lancet commentary outlining a number of  shortcomings of the Transferable Exclusivity Voucher-concept, and calling on the European Commission to refrain from including it in their revised legislation proposal. As such it was very disappointing to see that those arguments had been ignored by the European Commission, when the Transferable Exclusivity Voucher proposal in the end was included in revised pharma-legislation package which was published.

False narrative that no alternatives exist

Now the European Parliament and the EU Member States in the Council are embarking on their part of the legislative process to amend the proposal as they see fit. In coming months suggestions for amendments will be put on the table in both institutions. While the Member States in the Council have seemed reluctant to the European Transferable Exclusivity Voucher concept from the beginning, the Parliament is divided. The notion that “the TEV is better than nothing” and that “there are no other alternatives”, is echoed many places.

However, European policy makers should reject this false narrative. There are plenty of alternatives –  many are well studied and some even tested.

DG HERA have in fact assessed a number of these alternatives in depth in the report “Study on bringing AMR medical countermeasures to the market”. The pull incentives assessed there may not necessarily fit into the revised pharma legislation, but that should be less of a concern for European policy makers. Showing ambition and putting in place a comprehensive set of incentives that will actually solve the various challenges, that have halted progress in antibiotic development for decades, should be the main priority.

Broader systems transformation essential

When setting out to address the crisis in antibiotic research and development, it is of course useful to look the numerous policy reports that have been published over the last 10 years which have all called for new incentives to be put in place that address innovation, access and stewardship of new antibiotics – from the UK’s AMR review in 2015, the WHO’s Development and Stewardship Framework, the Boston Consulting Groups reports, to the EU project “DriveAB” ect. ReAct also published a report in 2021 with a number of suggestions on transformational incentives and other types of interventions – see link below.

While the reports vary in ambition level about how to reform the system, they all recognize that transformational change is needed to revive the antibiotic pipeline. Even governments took a collective position in favor of transformation, when adopting the 2016 UN Political Declaration on AMR in which the concept of “delinkage” – i.e. the separation of research and development costs from sales volumes and price – is highlighted as particularly appropriate concept for development of new antibiotics.

Read ReAct Report: Ensuring sustainable access to effective antibiotics for everyone, everywhere – How to address the global crisis in antibiotic Research & Development 

Against this background the following are ReAct’s recommendations to MEPs and Member States on the European Commission’s Transferable Exclusivity Voucher proposal.

ReAct’s recommendations on the European Commission’s TEV proposal

1. The way the voucher scheme is designed means that its first and foremost purpose is to bring back big multinational companies into the antibiotic research and development field – not to transform the antibiotic research and development system.

As such the voucher builds on the general misconception that the re-engagement of multinational pharmaceutical companies will solve the antibiotic innovation crisis. However, the multinational’s exodus from the antibiotic field over the last decades has meant that their expertise in developing and managing responsible distribution and supply of antibiotics globally has largely disappeared. This expertise and knowledge now sit elsewhere – including with academics, non-for-profit research organizations, small and medium-sized enterprises and global institutions and organizations.

2. Secondly, it is a widespread misconception that the crisis in antibiotic research and development is due only to a failing economic model. The reality is much more complex. Antibiotic research and development is compounded by a number of significant scientific, structural and economic challenges that have been unresolved for decades.

Addressing these in a way that contributes to reducing antibiotic resistance by ensuring sustainable access and use of these drugs, requires far more ambition than establishing a Transferable Exclusivity Voucher. Several interventions across the full lifecycle of an antibiotic are needed, as was well described at the High-level meeting on AMR in Sweden during its Council Presidency earlier this year. While the TEV *may* increase the level of private capital going into the field, it will in fact do little to nothing to address the broader structural issues and scientific challenges, that caused most of the big companies to leave the field to begin with.

3. The TEV proposal does not remove the link between sales volumes and revenue stream which is essential to ensure stewardship and appropriate use of a new antibiotic, as well as affordable access.

In fact, the way the Transferable Exclusivity Voucher proposal is shaped allows for companies to “double dip” in that it requires the public to pay twice for innovation. First when companies receive the voucher (likely worth >1 billion Euro) and subsequently when they retain all sales revenues.

The misaligned incentive to sell as much as possible during the periods of patent protection and other types of market exclusivities will continue to exist under a TEV. This will be a negative and undermining force of important responsible use measures of new antibiotics. As such there is little systems transformation to achieve from this proposal.

4. The TEV proposal contradicts the overall intention of the revision of the pharmaceutical legislation which seeks to improve patient access to medicines including by addressing the widespread problem with extremely high prices on medicines.

By extending a company’s monopoly status on the market for a blockbuster drug with one extra year through the voucher, other patient groups and health systems will be affected, when that particular drug remains expensive for longer (given that generic competition will be blocked for an additional year).

5. Finally, crucial time will likely be lost in the long legislative process required to create a voucher scheme.

This delay of action seems unnecessary given that a set of other far more transformative and efficient pull incentives are proposed by DG HERA that do not require legal changes to be established.

What are the alternatives then?

The various policy options for pull incentives assessed in DG HERAs report (such as milestone rewards, subscription models, market entry rewards, and stewardship and access enabling IP management etc.) are based on far more evidence and economic modeling on their effectiveness, than the TEV has ever undergone.

Furthermore, these pull incentives can target particularly challenging funding phases for developers and crucially, can also foster transformational change of the wider antibiotic ecosystem through attaching requirements on increased transparency, data sharing, access and stewardship requirements, supply guarantees, price controls etc. Importantly – they can likely be implemented quicker than the TEV, subject to upfront funding being made available for their implementation by Member States and the Commission.

In short, it is ReAct’s reading that proceeding with the TEV will divert both money, political interest and time from implementing a set of more ambitious, comprehensive and effective incentives that have already been identified and thoroughly studied by the European Commission. After 35 years of near standstill in antibiotic development and rising resistance development to all our existing antibiotics, we cannot afford to waste more time.

More about the European Transferable Exclusivity Vouchers

  • The proposed Transferable Exclusivity voucher will provide one extra year of regulatory data protection that companies can use for a different blockbuster selling drug in a company’s portfolio. This means that generic competition, which is the most effective model for driving down the price of drugs, will be blocked for an additional year for the blockbuster drug.
  • The value of an “Transferable Exclusivity Voucher” is not fixed, but will depend on what an additional year of sales revenue for the other blockbuster selling drug amounts to.
  • The actual financing of this incentive will therefore come from EU Member States’ health budgets, when purchasing the drug benefiting from the voucher at a higher price for an additional year.
  • Multinational companies are usually those who have other blockbuster drugs in their portfolio for which to apply the voucher. The majority of companies involved in antibiotic research and development are small and medium sized enterprises with often limited or no experience in bringing a drug to market.

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