Why does antimicrobial resistance matter to pharmaceutical companies?

Antimicrobial resistance threatens our entire healthcare ecosystem. Why is it a particularly pressing issue for pharmaceutical companies?
November 2020

Catherine McCabe

Analyst, Responsible Investment

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Let’s talk about risk

The value of investments and any income derived from them can go down as well as up and investors may not get back the original amount invested.

Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned.

The information, opinions, estimates or forecasts contained in this document were obtained from sources reasonably believed to be reliable and are subject to change at any time.

Modern medicine – and by extension the pharmaceutical sector – is heavily reliant on antibiotics. Alongside treating bacterial infections, antibiotics have a wide range of important uses, including in caesarean sections and chemotherapy.

Antimicrobial resistance (AMR) is a naturally occurring phenomenon that is being accelerated by poor stewardship of antibiotics in healthcare and farming. If antibiotics continue to lose their effectiveness, then commonplace medical interventions could become extremely high risk, undoing decades of progress in public health.

Moreover, antibiotic-resistant infections are difficult to treat or untreatable. They already account for c.700,000 deaths per year globally1, and they are increasing healthcare costs.2 AMR therefore threatens our entire healthcare ecosystem, including hospital operators and health insurers.

 

More research required

Since 1990, 78% of major pharmaceutical companies have scaled back or cut antibiotic research due to development challenges.3 Via our engagement and research, we have sought to understand pharmaceutical companies’ perspective on the steep decline in antibiotic research. The fundamental challenges are:

 

  1. Scientific: It is extremely difficult to find substances which kill bacteria or prevent them from spreading and are non-toxic to humans. Fewer than 1 in 70 antibiotics reach patients.4
  2. Economic: Antibiotic R&D is expensive and (for various reasons) antibiotics do not command high prices. To compound matters, stewardship measures limit their use in order to preserve their efficacy.

 

In order to fix the broken market and rescue the antibiotic pipeline, more incentives are needed, such as market entry rewards and changing how pharmaceutical companies are paid for access to antibiotics.

 

Responsible manufacturing & stewardship

Responsible manufacturing and product stewardship are also key to addressing AMR. In our engagement, we used the relevant metrics in the Access to Medicine Foundation’s Antimicrobial Resistance Benchmark to ask targeted questions.

Shionogi and GlaxoSmithKline, two major pharmaceutical companies we’ve engaged, are taking positive steps towards good antibiotic stewardship. Progress is accelerating, but we need all companies for which AMR is a material business risk to work towards implementing best practices.

Moreover, pharmaceutical companies’ efforts to meaningfully contribute to the war against AMR must go hand-in-hand with solutions to reduce the need for antibiotics in the first place. Each year, there are 47 million unnecessary antibiotic prescriptions written in US doctors’ offices and emergency departments.5

Let’s talk about risk

The value of investments and any income derived from them can go down as well as up and investors may not get back the original amount invested.

Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned.

The information, opinions, estimates or forecasts contained in this document were obtained from sources reasonably believed to be reliable and are subject to change at any time.

Watch our video on antimicrobial resistance and the importance of corporate engagement

Antimicrobial resistance - The importance of corporate engagement

Our engagement on AMR

Since we began engaging on AMR in 2019, there have been a number of developments which should help to reinvigorate antibiotic R&D. We will monitor the impact of proposed incentives, and keep encouraging the major pharmaceutical companies still involved in antibiotic R&D to continue to invest in this area, and to be transparent on collaboration to overcome the barriers to progress.

If governments, companies, investors and civil society succeed in continuing to make incremental progress, we can keep antibiotics working, saving countless human and animal lives.

Use our handy terms to look up any technical terms you are unfamiliar with.

Click the link below to discover more about why AMR matters for both pharmaceutical and food companies, as well as details of our engagement.

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