The Legal Ecology of Resistance: the Role of Antibiotic Resistance in Pharmaceutical Innovation

Antibiotic effectiveness is a common pool resource that can be prematurely depleted through resistance. Some experts warn that we may face a global ecological collapse in antibiotic effectiveness. Conventional wisdom argues for more intellectual property rights to speed the creation of new antibiotics. Recent theoretical literature suggests that conservation-based approaches may yield superior results. This Article describes a novel typology for organizing these emerging theories and provides an early empirical test of these models using proprietary data on the sales of vancomycin, an important hospital antibiotic for the last three decades. The results challenge the assumptions in several models and will force a re-evaluation of the role of intellectual property rights in antibiotic resistance and conservation. In particular, insurance reimbursement may be a more effective policy lever than patent law to preserve antibiotic effectiveness. I. THE TRAGEDY OF THE ANTIBIOTIC COMMONS Antibiotics may be the greatest single medical success of the twentieth century. But this achievement rests on an insecure foundation. As antibiotics are used, they create evolutionary pressure that threatens their undoing through resistance.1 In a post-antibiotic * Associate Professor of Law, Boston University School of Law. My thanks to Dr. Marc Lipsitch of the Harvard School of Public Health for his assistance in the biology of resistance, and Aaron Kesselheim, M.D., at the Harvard Medical School, for our joint work relating to innovative coordination mechanisms for antimicrobial conservation. Other reviewers include Michael Meurer, Ursula Theuretzbacher, Gary Lawson and Wendy Gordon. This Article was presented at the Healthcare Fragmentation Conference at Harvard Law School in June 2008; the Boston University Law School faculty workshop in OUTTERSON.31-3 3/10/2010 10:16:09 AM 614 CARDOZO LAW REVIEW [Vol. 31:3 world,2 some of the advances in health over the previous seventy-five years would be threatened.3 The edifice of modern medicine assumes the efficacy of antibiotic therapies as a foundational tool. Antibiotic effectiveness is correctly viewed as a valuable common pool resource4 akin to verdant forests, productive fisheries, and a stable Greenland Ice Sheet. Common pools are prone to depletion and collapse through uncoordinated withdrawals. In the case of antibiotics, withdrawals occur as antibiotic resistance grows through use and misuse. We face a tragedy of the antibiotic commons as uncoordinated use and misuse of precious antibiotics may prematurely destroy these important drugs.5 September 2008; the Drug Policy Research Group at Harvard Medical School in October 2008; and at several meetings of the Drug Resistance Working Group at the Center for Global Development. This work is supported by research grants from The Robert Wood Johnson Foundation, Resources for the Future; the Boston University School of Law; the Ewing Marion Kauffman Foundation; and an in-kind grant from IMS Health. 1 The relationships between use and resistance are not linear and are occasionally negatively correlated. Marc Lipsitch, The Rise and Fall of Antimicrobial Resistance, 9 TRENDS IN MICROBIOLOGY 438, 441-42 (2001). 2 Per Nordberg, Dominique L. Monnet & Otto Cars, Antibacterial Drug Resistance, in WORLD HEALTH ORGANIZATION, PRIORITY MEDICINES FOR EUROPE AND THE WORLD: PUBLIC HEALTH APPROACHES TO INNOVATION ch. 6.1 (2004), available at http://archives.who.int/ prioritymeds/report/index.htm; Richard P. Wenzel, The Antibiotic Pipeline—Challenges, Costs, and Values, 351 NEW ENG. J. MED. 523 (2004) (“Currently, the antibiotic era is threatened . . . .”). 3 Many commentators focus on the devastating return of infectious diseases in a postantibiotic era. See, e.g., RAMANAN LAXMINARAYAN ET AL., EXTENDING THE CURE: POLICY RESPONSES TO THE GROWING THREAT OF ANTIBIOTIC RESISTANCE 1-28, and sources cited therein (2007); William M. Sage & David A. Hyman, Combating Antimicrobial Resistance: Regulatory Strategies and Institutional Capacity, 84 TULANE L. REV. (forthcoming 2010), available at www.ssrn.com/abstract=1436154, at 3-4. But the majority of the decline in 20thcentury infectious disease mortality in the United States occurred before the introduction of antibiotics. Gregory L. Armstrong, Laura A. Conn & Robert W. Pinner, Trends in Infectious Disease Mortality in the United States During the 20th Century, 281 J. AM. MED. ASS’N 61, 63 fig.1 (1999) (showing a decline in infectious disease mortality rates in the United States from about 800 per 100,000 persons in 1900 to less than 400 per 100,000 persons prior to 1935). Nevertheless, much of the current practice of medicine in U.S. hospitals and ambulatory surgical centers depends upon effective antibiotics and would undergo radical changes in a post-antibiotic era. 4 Several authors have written of antimicrobial effectiveness as a common pool resource. See LAXMINARAYAN ET AL., supra note 3; Eric Kades, Preserving a Precious Resource: Rationalizing the Use of Antibiotics, 99 NW. U. L. REV. 611 (2005); Kevin Outterson, Julie Balch Samora & Karen Keller-Cuda, Will Longer Antimicrobial Patents Improve Global Public Health?, 7 LANCET INFECTIOUS DISEASES 559 (2007) [hereinafter Outterson et al., Antimicrobial Patents]; Kevin Outterson, The Vanishing Public Domain: Antibiotic Resistance, Pharmaceutical Innovation and Intellectual Property Law, 67 U. PITT. L. REV. 67, 78-80 (2004) [hereinafter Outterson, Vanishing Public Domain]. Some consider antimicrobial effectiveness a public good. See, e.g., RACHEL NUGENT ET AL., CENTER FOR GLOBAL DEVELOPMENT, PROTECTING DRUG EFFICACY AS A GLOBAL HEALTH GOOD: DRAFT REPORT OF THE DRUG RESISTANCE WORKING GROUP (Dec. 5, 2008) (on file with author); Sage & Hyman, supra note 3, at 8. But antibiotics themselves are not public goods: Consumption is rivalrous through resistance, and exclusion is possible through global intellectual property law. 5 For a general introduction to the tragedy of the commons, see Randall R. Dipert, OUTTERSON.31-3 3/10/2010 10:16:09 AM 2010] LEGAL ECOLOGY OF RESISTANCE 615 This Article focuses on three important policy questions concerning resistance. The first is the tension between production of new antibiotics and conservation of existing drugs. At first blush, both seem to be laudable goals, but in many ways conservation and production work at cross purposes, and difficult choices must be made between them. For example, antibiotic conservation suppresses demand for antibiotics by controlling infectious diseases and curbing inappropriate use. Viewed from the perspective of new drugs, these programs undercut market incentives by dampening future demand. This is known as the “conservation dampens production” hypothesis, as discussed at length below.6 But from the perspective of public health, infection control is an unqualified success when infections are prevented. Another important hypothesis, “patent holder conservation,”7 posits that patent holders will be careful stewards of antibiotics, promoting conservation through patent law. This Article explores these concepts and suggests that greater emphasis should be placed on conservation, but not necessarily through patent law. The second question is the relationship between resistance and innovation. The conventional wisdom assumes that resistance is a problem in antibiotic innovation, but this Article argues that resistance may actually stimulate innovation rather than retard it.8 Resistance makes highly effective antibiotics obsolete over time, which clears the competitive field before a new drug enters the market. This process of creative destruction may favor innovation. The final question evaluates the policy levers employed in the battle against antibiotic resistance. This Article questions the current reliance on patent law to solve antibiotic resistance problems. For example, the Infectious Diseases Society of America (IDSA) correctly identifies the need for effective antibiotic therapies, but has mistakenly called for significant changes in patent law to remedy the problem, including patent extensions and wildcard patent extensions9 for Sidestepping the Tragedy of the Commons, in THE COMMONS: ITS TRAGEDIES AND OTHER FOLLIES 27 (Tibor R. Machan ed., 2001); Garrett Hardin, The Tragedy of the Commons, 162 SCIENCE 1243 (1968). 6 See infra Part II.C. 7 See id. 8 This is the “resistance stimulates innovation” hypothesis, discussed infra Parts II.C and III.C. 9 A wildcard patent extension grants additional years of patent life on any drug of a company’s choice if the company achieves some socially desirable goalin this case, development of a novel antibiotic. Wildcard patent extensions have generated sharp academic exchanges in recent years. See Jorn Sonderholm, Wild-Card Patent Extensions as a Means to Incentivize Research and Development of Antibiotics, 37 J.L. MED. & ETHICS 240 (2009) (supporting wildcard patent extensions); Amy Kapczynski, Commentary: Innovation Policy for a New Era, 37 J.L. MED. & ETHICS 264 (2009) (critiquing Sonderholm); Outterson et al., Antimicrobial Patents, supra note 4, at 561-62 (finding wildcard patent extensions to be inefficient, unfair, and possibly unconstitutional); Brad Spellberg, Antibiotic Resistance and OUTTERSON.31-3 3/10/2010 10:16:09 AM 616 CARDOZO LAW REVIEW [Vol. 31:3 antibiotics.10 Patent law mechanisms are ill-suited to address this problem, in part because pharmaceutical prices in the United States are not really set by the market.11 To the extent that market-based pricing is an important element of the patent system,12 its absence in pharmaceuticals is quite troubling. If the primary market signals are muddled or broken, additional patent-based programs should not be rolled out before the reimbursement system is fixed.13 Insurance reimbursement is a powerful tool that is not well deployed to promote continued antibiotic effectiveness. As discussed infra Part III.C, reimbursement has created both helpful and perverse financial incentives. The former improves access to drugs through third party reimbursement; the latter hinders conservation and allows hospitals and physicians to receive additional payments for out-ofcontrol infections and unnecessary prescriptions. Private incentives and social goals are seriously mismatched. But perhaps it is easier to fix the reimbursement system than to implement effective patent-based solutions. If so, our policy focus should be on reimbursement rather than patents. This Article proceeds as follows. Part II maps the theoretical terrain surrounding the tragedy of the antibiotic commons, with an emphasis on organizing existing approaches into a new typology, found in Table 1.14 The goal of this exercise is to place existing work into six theoretical categories and to identify missing elements in the current literature. Seven key hypotheses from the most relevant theories are then collected and summarized in Table 2.15 For example, one hypothesis is called “patent holder waste” because it posits that an antibiotic patent holder, facing imminent expiration of its patent, may be inclined to waste the asset (from society’s viewpoint) through overzealous marketing before the patent enters the public domain. The patent holder waste hypothesis, if proven, offers patent law as a possible antibiotic conservation tool: With a longer patent, the drug company Antibiotic Development, 8 LANCET INFECTIOUS DISEASES 211-12 (2008) [hereinafter Spellberg, Antibiotic Resistance] (critiquing Outterson et al.); Kevin Outterson, Antibiotic Resistance and Antibiotic Development—Author’s Reply, 8 LANCET INFECTIOUS DISEASES 212-14 (2008) [hereinafter Outterson, Antibiotic Resistance] (responding to Spellberg’s critique); B. Spellberg et al., Societal Costs Versus Savings from Wild-Card Patent Extension Legislation to Spur Critically Needed Antibiotic Development, 35 INFECTION 167 (2007) [hereinafter Spellberg et al., Societal Costs Versus Savings] (supporting wildcard patent extensions for antibiotics). 10 INFECTIOUS DISEASES SOC’Y OF AM., BAD BUGS, NO DRUGS: AS ANTIBIOTIC DISCOVERY STAGNATES . . . A PUBLIC HEALTH CRISIS BREWS 22-26 (2004) [hereinafter BAD BUGS]. This report was a call to action from the leading infectious diseases society in the United States. 11 See infra Part III.C. 12 See infra Part III.C. 13 Arti K. Rai, Building a Better Innovation System: Combining Facially Neutral Patent Standards with Therapeutics Regulation, 45 HOUS. L. REV. 1037, 1056-57 (2008). 14 See infra Part II.B tbl.1. 15 See infra Part II.C tbl.2. OUTTERSON.31-3 3/10/2010 10:16:09 AM 2010] LEGAL ECOLOGY OF RESISTANCE 617 could manage the antibiotic more in keeping with society’s long-term interests. This Article casts some doubt on the validity of the patent holder waste hypothesis, as well as several other proffered hypotheses. Since context matters, Part III is more practical in orientation, exploring the institutional and legal structures in the U.S. market that directly affect continued antibiotic effectiveness, including the central role of reimbursement (in Part III.C). This Part also draws heavily upon the biomedical evidence on resistance, since resistance involves biologically complex systems with many heterogeneous elements. To adequately understand and model resistance, understanding both the biological and legal ecology is vital. Part IV is the case study on vancomycin, using proprietary sales and volume data for this important antibiotic over the past few decades. Vancomycin sales and patent data are evaluated with respect to two of the most important conditions related to antibiotic resistance: Clostridium difficile-associated disease (CDAD) and methicillinresistant Staphylococcus aureus (MRSA). The data are placed in the context of U.S. markets for antibiotics, including the relevant patents and insurance reimbursement systems. The case study challenges several key hypotheses from Table 2.16 For example, the “resistance stimulates innovation” hypothesis is found to be supported, upending conventional wisdom. Resistance appears to have an overall positive effect on antibiotic production, at least from the public health perspective. On the other hand, the vancomycin case study does not support the “patent holder waste” hypothesis, since limited patent terms do not appear to have encouraged vancomycin waste. The evaluation of the seven hypotheses in light of the case study is found in Table 3.17 This Article also challenges the assumption that intellectual property law is the key policy lever for antibiotic markets. The language of intellectual property has been an important framing tool,18 but other market structures are equally or more important for antibiotics, especially insurance reimbursement. If we repair the broken reimbursement system for antibiotics, patent changes may not be necessary at all. The stakes are huge for getting these policies right; the Infectious Diseases Society of America warns that the alternative may be a global ecological collapse in antibiotic effectiveness.19 16 Id. 17 See infra Part IV.C tbl.3. 18 Amy Kapczynski, The Access to Knowledge Mobilization and the New Politics of Intellectual Property, 117 YALE L.J. 804 (2008). 19 See BAD BUGS, supra note 10. OUTTERSON.31-3 3/10/2010 10:16:09 AM 618 CARDOZO LAW REVIEW [Vol. 31:3 II. LEGAL RESPONSES TO COMMON POOL DEPLETION PROBLEMS Tragedies of the commons can be addressed through law. Three legal mechanisms have been used in other contexts: private coordination through property law, public coordination through regulation, and private coordination through contract. A. Property, Regulation, and Contract The first mechanism is privatization—enclosure of the commons— through property rights.20 The archetype is the overgrazed common pasture facing ecological collapse. The common pasture first becomes private property, and then the new owner manages the resource with property law. The consolidated owner or firm, it is hoped, manages the property for long-term sustainability. The “patent holder conservation” hypothesis is an application of this narrative, substituting public domain antibiotics for common pastureland.21 We will call this approach “property.” The second legal mechanism is public coordination through regulation. The federal and state regulation of air pollution is a prime example. The atmosphere itself is not easily privatized, and the number of polluters is too large for private coordination, so regulation is a likely tool.22 We will call this approach “regulation.” The final legal mechanism is private coordination through contract. When transaction costs are low enough, contract can be used for private coordination, often in conjunction with property law.23 In addition, groups can sometimes manage common resources through informal mechanisms to prevent uncoordinated use and withdrawals.24 With due regard for the potential for informal coordination, we will nevertheless call this approach “contract.” When property, regulation, and contract tools are all plausible options, the ideal policy surely depends on the context. For some 20 For a critical view, see James Boyle, The Second Enclosure Movement and the Construction of the Public Domain, 66 LAW & CONTEMP. PROBS. 33 (2003). 21 See infra Part II.C. 22 If one focuses solely on downwind property owners, and their number is small, pollution externalities could be resolved in contract. See Ronald H. Coase, The Problem of Social Cost, 3 J.L. & ECON. 1 (1960). When the number of parties and transaction costs grow, contract evolves into either the firm or social contract (i.e., regulation). 23 Id. 24 See generally ROBERT C. ELLICKSON, ORDER WITHOUT LAW: HOW NEIGHBORS SETTLE DISPUTES (1994); ELINOR OSTROM, GOVERNING THE COMMONS: THE EVOLUTION OF INSTITUTIONS FOR COLLECTIVE ACTION (1990). OUTTERSON.31-3 3/10/2010 10:16:09 AM 2010] LEGAL ECOLOGY OF RESISTANCE 619 common pools such as pastureland, property rights may be an effective primary regime. For the Greenland Ice Sheet, direct property rights are an unlikely path to success. Even if we were willing and able to privatize the Greenland Ice Sheet, most of the damages and benefits would not easily be internalized to the owner. The owner would find it difficult to collect fees from the low-lying regions of the world threatened by a rise in sea levels and would find it equally difficult to influence the behaviors of billions of people partially responsible for climate change in order to protect the integrity of the common pool resource. This problem appears to be a candidate for global regulation. Nevertheless, property rights and contract may still play a prominent part. Property rights might slow global climate change through property-based contract schemes like carbon “cap and trade” programs.25 In some contexts, mixed approaches dominate. Many forests are a mix of public and private ownership, but even privately owned forests are sometimes regulated for various public benefits. Multiple companies may own and tap large pools of underground oil, but legal regulation can attempt to protect the joint oil pool when private contract falls short.26 Other examples could be offered, but in each one the ideal mix of property rights, regulation, and contract is likely to vary considerably according to the context. As Coase noted: [D]irect governmental regulation will not necessarily give better results than leaving the problem to be solved by the market or the firm. But equally there is no reason why, on occasion, such governmental administrative regulation should not lead to an improvement in economic efficiency. This would seem particularly likely when, as is normally the case with the smoke nuisance, a large number of people are involved and in which therefore the costs of handling the problem through the market or the firm may be high.27 We will return to context in Part III. B. A Legal Typology of Resistance Like the collapse of global fisheries,28 we may be experiencing an ecological crisis through biological resistance.29 Legal institutions must 25 U.S. State Governments Join International Carbon Action Partnership on Global Cap-andTrade Carbon Markets, 102 AM. J. INT’L L. 162 (John R. Crook ed., 2008) (describing the use of cap-and-trade carbon markets to reduce global carbon emissions). Bill Sage and David Hyman have discussed this concept for antibiotics as well. Sage & Hyman, supra note 3, at 16. 26 See, e.g., EUGENE KUNTZ ET AL., LAW OF OIL AND GAS (2009). 27 Coase, supra note 22, at 18. Coase also notes a third option: doing nothing at all when the costs of regulation exceed the costs of the underlying problem. 28 Plenty More Fish in the Sea?, ECONOMIST, Jan. 3, 2009, Special Report, at 10. OUTTERSON.31-3 3/10/2010 10:16:09 AM 620 CARDOZO LAW REVIEW [Vol. 31:3 evolve to confront this crisis, with the goal being continued antibiotic effectiveness. The conventional prescriptions in the policy literature are familiar: (1) public health regulation to dampen demand and conserve existing antibiotics (conservation or demand-side tools);30 and (2) incentives to create new antibiotics, typically through intellectual property rights and government grants (production or supply-side tools).31 Conservation/Production are a related dyad for antibiotic common pools, similar to the Property/Regulation/Contract coordination discussion immediately above. Mapping these elements onto a simple grid creates the following Table 1. This approach organizes existing tools into six sectors. Any particular sector should not be mistaken as the ultimate objective. The policy goal is not more drug patents (Sector 2), better conservation programs (Sector 3), or more efficient insurance reimbursement (Sector 5), but the continued availability of effective antibiotic treatments when needed. 29 See BAD BUGS, supra note 10. 30 For a classic book length introduction, see STUART B. LEVY, THE ANTIBIOTIC PARADOX: HOW THE MISUSE OF ANTIBIOTICS DESTROYS THEIR CURATIVE POWERS (2d ed. 2002); see also DEPT. OF COMMUNICABLE DISEASE SURVEILLANCE & RESPONSE, WORLD HEALTH ORGANIZATION, WHO GLOBAL STRATEGY FOR CONTAINMENT OF ANTIMICROBIAL RESISTANCE (2001). For a recent review, see Aaron S. Kesselheim & Kevin Outterson, Fighting Antibiotic Resistance—Innovative Strategies to Promote Continued Antibiotic Effectiveness, 29 HEALTH AFF. (forthcoming 2010). 31 See, e.g., F.M. Scherer, The Pharmaceutical Industry—Prices and Progress, 351 NEW ENG. J. MED. 927 (2004) (presenting an authoritative overview on the relationship between patented drug prices and R&D). Otto Cars and colleagues advocate both approaches in concert. Otto Cars et al., Meeting the Challenge of Antibiotic Resistance, 337 BRIT. MED. J. 726 (2008). OUTTERSON.31-3 3/10/2010 10:16:09 AM 2010] LEGAL ECOLOGY OF RESISTANCE 621 Table 1. Legal Approaches to Continued Antibiotic Effectiveness Conservation Production Property 1. Patents as conservation tools to privately constrain demand. 2. Patents as incentives to bring new antibiotics to market. Regulation 3. Public health infection control and regulatory antibiotic stewardship programs regulate demand for antibiotics. 4. FDA regulations could be relaxed to speed approval of new antibiotics. Tax subsidies support antibiotic research and development. Contract 5. Insurance reimbursement could be deployed as a conservation tool. 6. Prizes, grants, and generous reimbursement could support antibiotic research and development. This typology can help identify policy gaps among the six sectors. For example, it is often assumed that antibiotic production incentives are largely property-based, rooted in intellectual property law to foster the introduction of new antibiotics,32 but the production column of Table 1 identifies other options, including modifying U.S. Food and Drug Administration (FDA) regulations and creating prizes and grants for new antibiotics. Conversely, antibiotic conservation programs are generally described as regulatory approaches, without sufficient discussion of possible property-based and contract-based conservation tools.33 The conservation column of Table 1 identifies some alternative approaches, including insurance reimbursement as a contract-based tool. More fundamentally, it is important to view production and conservation as separate but interrelated realms and to focus appropriate attention on both. Our energy policy once suffered from a singular focus on production and neglected conservation. Today, a broader consensus supports government intervention in favor of both production and conservation.34 Politicians and economists debate their relative importance but generally support incentives for both as complimentary strategies. For antibiotic policy, a similar consensus has yet to translate into effective action. Sector 3 public health programs, such as hospital infection control and rational use of antibiotics, are commonly 32 See, e.g., BAD BUGS, supra note 10. 33 See, e.g., LEVY, supra note 30. 34 See, e.g., American Clean Energy and Security Act of 2009, H.R. 2454, 111th Cong.