No Taxation Without Incentivisation! Say UK #Pharma Re: Anti-Infective Drug R&D | Pharmaguy's Insights Into Drug Industry News |

We desperately need new anti-infective drugs to avoid life threatening infections. Let’s make that happen by punishing companies who don’t invest in R&D for these specific drugs.


No, this is not a bad joke, but rather a slightly paraphrased recommendation of a UK government-commissioned Review of Antimicrobial Resistance (AMR).


I [Ed Schoonveld is Managing Principal at ZS Associates] certainly agree with the urgency in need for new drugs, but the report is suggesting levying a tax on drug companies that don’t engage in R&D efforts for anti-microbial drugs. It is referred to as “play or pay.” This proposed tax solution is horrifying for many reasons. It may very well cause significant harm rather than address the issue.


Some sort of market entry reward or a guaranteed stockpile order for these critical drugs would indeed create a natural incentive for the pharmaceutical industry to invest in these programs, which would otherwise yield little revenues. But let’s talk about funding because this is where the report is flawed.


It will take additional incentives to motivate a competitive industry to invest in risky discovery and development programs for anti-infective drugs that we hope will only be used sparingly.


Merck CEO Ken Frazier put it very nicely: The drug R&D business is not innovation (like a new iPhone version), it is invention, which is much more complex and uncertain.


This is where the report is horribly flawed. A tax to force invention? Forcing every pharmaceutical company to spend resources on anti-microbial drug development to avoid tax punishment is an equivalent of “the beatings will continue until morale improves!” All this will do is encourage all, rather than only the most talented in AMR, to spend money on anti-microbial research programs, preferably those that qualify for the tax exemption, but still give a relatively low-risk return on investment. It will drain intellectual resources from those companies that are better situated to truly invent new solutions in this space.


Stimulation leads to invention, never taxation.