Medicare payment rules hinder the fight against superbugs

Late last year, a retirement community in Vermont was quarantined after an outbreak of antibiotic resistant bacteria swept through the facility, sickening 70 seniors. In pediatric oncology wards, children beating cancer are increasingly felled by drug-resistant bacteria and fungal infections. Every week, we hear more stories of infections that have become untreatable due to resistance.

Such alarms, once rare, are becoming more commonplace. Bacteria, fungi, and other microbes that have become resistant to antimicrobial drugs — often dubbed superbugs — thrive in communities with high antibiotic use like nursing homes, hospitals, and preschools. In one recent study, drug-resistant bacteria were detected in 1 in 4 nursing home residents. The Centers for Disease Control and Prevention have reported that health departments found more than 220 instances of “unusual” antibiotic resistance in 2017 spread across more than half of states in the U.S. According to the CDC, these bacteria “can spread like wildfire” and some of the infections were resistant to every antibiotic available.

Today, the U.S. faces two major crises from superbugs: death and sickness from drug-resistant microbes, and a lack of new products to treat them.

The U.S. and other governments have passed measures to slow the emergence of drug-resistant bacteria by reducing overprescription and overuse of antibiotics. But not enough has been done to support the pipeline for new antibiotic drugs, which a senior FDA official has characterized as “fragile and weak,” an assessment shared by every expert body that has looked at the problem, including the CDC and the World Health Organization.

The U.S. risks losing its scientific capacity to develop new antibiotics because antibacterial research is often not commercially viable. Public companies such as Melinta and Achaogen with approved new antibiotic drugs have had to restructure to avoid running out of money; Achaogen filed for Chapter 11 bankruptcy on April 15. Even large companies like Novartis have turned their backs on antibiotic research.

Why are these companies in trouble and why are we firing researchers when superbugs may be killing 150,000 Americans each year?

One core problem stems from the way Medicare pays hospitals for using antibiotics. Even though it takes years and hundreds of millions of dollars to develop innovative antibiotics, Medicare insists on paying for them like Band-Aids and bedpans as part of the “bundled payment” for hospitals in Medicare.

Bundled payments — also known as Diagnostic Related Groups or DRGs — were a bipartisan solution to the problem of hospital cost inflation. But this fix has led to the unintended consequence of hindering the fight against superbugs. Here’s why: Hospitals get a fixed fee for each Medicare patient they treat, but those payments assume the use of older generic antibiotics. If a physician chooses to use a newer, more effective antibiotic, the hospital loses money on the patient. It’s no wonder that thousands of Americans each month are treated with colistin, an old antibiotic from the 1950s with terrible side effects and doubtful effectiveness when other antibiotics fail to quell an infection, instead of new ones that are proven to be better.

In too many of these cases, the best virtue of colistin is its price. But even a free drug is a bad bargain if the patient dies from an infection that could have been treated with a newer, better drug or suffers severe drug-related side effects like organ failure.

Antibiotics are unique among medicines because the most innovative products generally aren’t used to treat many patients, but instead are held in reserve so microbes don’t become resistant to them. This practice, which is part of antibiotic stewardship programs, is an excellent public health measure, but it keeps the sales volume low. Developing innovative antibiotics is actually punished by both low volumes (from stewardship) and low prices (from the DRG).

No wonder the larger companies have fled for more lucrative areas of drug research.

Most innovative drugs, such as those for cancer or HIV/AIDS, are reimbursed through a different part of Medicare that is outside of the DRG bundle because they are generally administered in an outpatient setting. New antibiotics take the hit when they are used in hospitals to treat the most acutely ill patients. If Medicare changed its rules to allow hospital antibiotics to be reimbursed as if they were outpatient drugs, doctors would then be able to choose the antibiotics that are best for their patients, not just the least-expensive ones.

We would never stand by and watch the last American manufacturers of automobiles or aircraft go bankrupt because of government reimbursement rules. Antibiotics are an essential part of health care infrastructure and we must ensure that we are supporting and contributing to driving innovation in this sphere, not undermining it as Medicare’s payment policy currently does.

The solution is to recognize the unique value of antibiotics to society by removing hospital antibiotics from the DRG bundle in Medicare. Paying for these drugs on the same basis as outpatient drugs is an immediate action we can take while long-term solutions such as market entry rewards or other large pull incentives are worked out.

Failing to support our antibiotic research infrastructure will leave us defenseless when superbug infections strike. The time to fix this problem is now, before it is too late.

Kevin Outterson, J.D., is a professor of law at Boston University and executive director of CARB-X, a nonprofit public-private partnership dedicated to developing products to tackle the global rising threat of drug-resistant bacteria. Helen W. Boucher, M.D., is an infectious disease physician at Tufts Medical Center, the director of the Tufts Center for Integrated Management of Antimicrobial Resistance, a professor of medicine at Tufts University School of Medicine, and treasurer of the Infectious Diseases Society of America. The views expressed here are their own, and don’t necessarily reflect the views of their organizations or the funders of their organizations.