Deadly, drug-resistant “superbugs” are a fixture in the headlines of late, along with cries from public-health experts that new antibiotics to treat them are desperately needed.

Yet in April, one of the few companies to get such a drug approved in recent years declared bankruptcy. In November, a second firm warned that it was likely to follow suit, and a few other developers of novel antibiotics are said to be in similar straits. The common denominator for all: lackluster sales, despite a new U.S. Centers for Disease Control and Prevention estimate that more than 2.8 million drug-resistant infections occur each year.

The reasons for this apparent paradox are complex, involving arcane rules for insurance reimbursements as well as the simple fact that antibiotics, by definition, are meant to be used sparingly and for short durations. The more we use them, the more chance that bacteria evolve chemical defenses that render the drugs useless.

At Venatorx Pharmaceuticals in Malvern, Christopher J. Burns thinks he can buck the trend — amid signs that policymakers are fundamentally rethinking how drugmakers get paid.

“There is no question that the sense of crisis is building,” said Burns, chief executive officer of Venatorx, which has several promising antimicrobial drugs in the works.

In June, Sens. Bob Casey (D., Pa.) and Johnny Isakson (R., Ga.) proposed overhauling Medicare reimbursement guidelines that, for now, give hospitals an incentive to use older, cheaper antibiotics rather than newer, pricier alternatives that may be more appropriate for a given infection.

And in October, Medicare increased payments to hospitals when they use certain novel antibiotics, also allowing them to seek additional payment for treating infections identified as drug-resistant.

Then there’s the unusual pilot program launched in July by the United Kingdom’s National Health Service, dubbed the “fire extinguisher” or “Netflix” model. For a select group of critical antibiotics, the government will no longer pay for each dose administered to patients. Instead, it will pay drugmakers a flat subscription fee, meaning the drugs would be available whether they were needed or not.

Brittany Miller works in the microbiology lab at Venatorx in Malvern, Pa. Tuesday, November 26, 2019.
JOSE F. MORENO / Staff Photographer
Brittany Miller works in the microbiology lab at Venatorx in Malvern, Pa. Tuesday, November 26, 2019.

Direct government payments to drugmakers might be a hard sell for U.S. politicians, but Burns and many policy experts say an alternative approach might be more palatable: allowing hospitals to pay for the access.

“Like an insurance policy,” he said.

A ‘grand slam’?

In the meantime, Burns, who cofounded Venatorx in 2010 with fellow Ph.D. scientists Daniel C. Pevear and Luigi Xerri, is not waiting around for policy fixes.

The privately held company has begun a phase-3 trial of its lead product, taniborbactam, in patients with complex urinary tract infections. Technically, it is not an antibiotic, but a companion drug administered with an older antibiotic to which certain bacteria have become resistant.

These bacteria have evolved the ability to make an enzyme that degrades the older antibiotic, a cousin of penicillin. But taniborbactam blocks the activity of that enzyme, allowing the antibiotic to regain its original punch.

“We’re rescuing it back to where it used to be before all the resistance,” Burns said.

The company also plans to test the drug combination against other infections, including certain kinds of hospital-acquired pneumonia, aided by up to $86.8 million from the Biomedical Advanced Research and Development Authority, an arm of the U.S. Department of Health and Human Services.

All told, the company is targeting at least three broad classes of drug-resistant bacteria with its various antibiotics in development. That strategy, as much as any policy change, may spell the difference between the Malvern firm and those whose finances have sputtered.

The company that filed for bankruptcy in April, California-based Achaogen, and the one that warned in November of a similar fate, Morristown, N.J.-based Melinta Therapeutics, both pinned their initial hopes on drugs for relatively unusual infections.

The type of deadly bacteria they targeted, called CRE, have been considered one of the world’s most urgent threats for more than a decade. They have evolved the ability to resist potent antibiotics called carbapenems, forcing hospitals to resort to older alternatives that are toxic to healthy human cells.

But the number of patients infected each year with these bacteria is relatively small for now, with U.S. estimates ranging from 13,100 to 49,000 cases.

And in a pair of studies this year, University of Pittsburgh researchers determined that the new drugs from Achaogen and Melinta, along with one other option, were not being used in most such cases — in part because of cost.

While a standard course of the new drugs costs less than $15,000 — a pittance compared with many treatments for cancer — hospitals cannot bill Medicare for that cost. Instead, they must cover it as part of the lump-sum “bundled” payment for a hospital stay, so many medical centers tend to use older, cheaper antibiotics as a first option.

“The value proposition is a little bit upside down,” said Ted Schroeder, chief executive officer of Nabriva Therapeutics, an antibiotics maker with U.S. offices in King of Prussia.

(The bill introduced by Sens. Casey and Isakson would address that issue, allowing hospitals to receive direct payments from Medicare for using certain antibiotics so long as they enroll in an antibiotic stewardship program.)

Still, even if hospitals used the new drugs to treat every CRE infection, total yearly sales would be less than $300 million, the Pittsburgh researchers calculated — not enough for more than one or two drug companies to survive.

If the market cannot support the very drugs that public health officials were crying for the loudest, that is a clear sign that the market is broken, said infectious-diseases specialist Cornelius J. Clancy, lead author of the Pittsburgh studies and an associate professor at Pitt’s medical school.

“This should have been the grand slam for antibiotic development,” he said.

Predicting the market

Some combination of new payment strategies, such as the subscription model, is needed to make up the difference, said Kevin Outterson, executive director of CARB-X, a Boston-based nonprofit that has helped fund some of the antibiotic development at Venatorx.

Antibiotics must be viewed as a societal resource that we hope to use as little as possible, hence the oft-used analogy to fire extinguishers or sprinkler systems, said Outterson, a law professor at Boston University.

“The people who install this equipment, they don’t have to wait till there’s a fire to get paid,” he said.

Yet another idea that policy experts have advocated for is to expand the Strategic National Stockpile: the cache of antibiotics, vaccines, and other medicines that the federal government maintains in the event of bioterror attacks or emergencies of similar scope.

Burns, the Venatorx CEO, said he would welcome that move. Anything to lessen the uncertainty that has driven several big pharmaceutical companies, such as Novartis, to leave the field entirely.

In addition to the uncertainty over payment, predicting the market size is a challenge.

The number of CRE cases remained stable for the last six years, the CDC says. But the annual number of drug-resistant gonorrhea infections has doubled during that time, to 550,000. Hygiene and judicious use of antibiotics can help prevent the spread of resistance, but bad luck is also a factor. If even a small number of bacteria evolve resistance to a certain drug, they can share the genetic recipe for that defense mechanism with billions of their peers in short order.

“It doesn’t necessarily tend to go linear,” Burns said. “It can percolate and percolate and then the roof blows off.”

When that happens, he said, Venatorx plans to be there, fire extinguisher in hand.