How To Address ESG Risks Arising From Antimicrobial Resistance

Note: This article originally ran in Life Science Leader

Antimicrobial resistance (AMR) is a growing global threat: the WHO recognises it as one of the top public health and development threats, and bacterial AMR was associated with almost 5 million global deaths in a single year in one landmark study.¹ AMR’s contributing factors include a lack of new antimicrobial products, limited access to antibiotics in low- and middle-income countries, and discharge of antimicrobial waste into the environment. Without a more ambitious and systemic approach to preventing AMR, the United Nations Environment Programme estimates that AMR could cause up to 10 million global deaths annually by 2050, which is on par with the rate of cancer deaths in 2020.

It will come as no surprise, therefore, that the life sciences sector—both public and private—recognizes AMR as a critical risk.² Pharmaceutical companies must focus on mitigating the growing legal and environmental, social, and governance (ESG) risks around AMR.

Policymakers Incentivize New Antimicrobial Development In Response To Market Failures

While subject matter experts and biotech companies have continued to identify new antimicrobials,³ market failures in recent decades have disincentivized development. Reimbursement barriers, a lack of economic viability,⁴ and a challenging regulatory environment have deterred many major players in the pharmaceutical industry from prioritizing in-house antimicrobial research and development programs.⁵ The few products that have been approved have struggled to survive in the marketplace.⁶ As a result, no new class of antibiotic has been successfully launched in decades.⁷ Additional incentives, such as subscription-based models, are generally recognized as necessary to help correct these market failures and to promote the discovery and development of new antimicrobials. Global policy and lawmakers have begun to recognise this and to take important steps in the right direction.

In the public sector, novel legal mechanisms are being leveraged to promote antimicrobial innovation. In the U.K., the National Health Service (NHS) in England implemented a pilot scheme in 2019 under which companies were paid a fixed annual fee for antimicrobials, determined by reference to the value of the drug to the NHS rather than the volume of drugs administered, and the U.K. government recently consulted on the expansion of the scheme.⁸ The U.K.’s Association of British Pharmaceutical Industry has been vocal in its support of a subscription-based model. The U.S. also introduced legislation in 2023, which, if passed, would among other things: (i) establish a subscription model, reimbursing drug developers based on patient access to drugs rather than sales volume, (ii) require better reporting on antibiotic use and resistance data, and (iii) fund smaller antimicrobial drug developers.⁹ The European Commission has proposed an alternative approach with transferable exclusivity vouchers granting an additional year of regulatory protection to developers, which they can deploy for other (more profitable) products in their portfolio.¹⁰

In the private sector, global pharmaceutical companies have formed the AMR Action Fund, with backing from public and private stakeholders. The fund aims to invest in small and midsize companies to facilitate the placing of two to four new antimicrobials on the market by 2030.

International And Investor Pressure To Promote Global Access To Antimicrobials

Access to antimicrobials in low- and middle-income countries (“LMICs”) has been identified as a contributing factor to global AMR. The deployment of effective antimicrobials—in sufficient volumes—in LMICs would help to limit the transmission of drug-resistant pathogens.¹¹ There has been a promising recent upward trend in private sector awareness and voluntary action to address AMR caused by lack of medicine access in LMICs. Some players have already adopted specific medicine access strategies, including focused voluntary licensing agreements,¹² through which licensees are granted non-exclusive rights to manufacture generic versions of on-patent products for use in LMICs.¹³

However, investors are also now exerting pressure on the pharmaceutical sector to enhance access to antimicrobials in LMICs. The Investor Action on Antimicrobial Resistance Coalition has encouraged companies to develop antimicrobial access strategies, including at the R&D phase, and they encourage consideration of, for example, tiered pricing, voluntary licensing agreements, technology transfers and public-private partnerships. The Coalition also highlights investor activity in this space, including raising awareness of AMR, and encouraging ESG data providers and investment networks to develop AMR KPIs. If investors vote with their wallets, investment flows to the industry may be impacted, but the industry should also be aware of potential shareholder agitation around, for example, any public statements or corporate reporting on AMR.

The WHO is also expected to issue its final proposal for an Accord on Pandemic, Prevention, Preparedness and Response in May 2024. Although the WHO has scaled back the provisions on equitable access in the latest draft, wording remains on the need for equitable access to pandemic-related products (including antimicrobials). International negotiations over the WHO proposal began nearly two years ago, with the pandemic as a catalyst, and there has been a heavy negotiating focus, internationally, on two particular aspects of the proposal: the “pathogen benefit sharing” scheme and the heavily debated role of intellectual property waivers. There is potential for private sector obligations to flow down from this instrument in the medium to long term.

Regulatory Changes On The Horizon To Improve Environmental Outcomes In Light Of Antimicrobial Waste Discharge

The discharge of antimicrobial waste into the environment through, among other things, the manufacturing process, patient use, agricultural use, and incorrect disposal is another significant driver of resistance. Many of these antimicrobials persist in the environment, and may eliminate surrounding microbes, with the exception only of antimicrobial resistant microbes.

The extent to which subsequent consumption of antimicrobial waste contributes to the proliferation of AMR is not yet well-understood. As a result, global policy and regulation around combating environmental AMR has been slow to develop. Generally, such strategies focus on reducing environmental pollution, including by regulating manufacturing and waste disposal practices and wastewater treatment with respect to antibiotics and resistant microbes.¹⁴ However, targeted strategies in the form of legislation and guidance are firmly on the horizon. For example, the European Commission’s proposal for reform of pharmaceutical legislation includes a requirement to consider AMR as part of the revamped Environmental Risk Assessment process, which requires an assessment of antimicrobial discharge across the entire supply chain. These proposals also will require enhanced packaging and labelling requirements regarding environmental impacts.

Companies operating in the EU should also be aware of the extended producer responsibility scheme under the proposed reform of the Urban Wastewater Directive which makes antibiotic producers financially responsible for the removal of antibiotics at treatment plants. In the agricultural sector, the U.S. Department of Agriculture is revising its guidelines for livestock producers seeking to market their products as “antibiotic-free,” specifically by requiring stronger documentation of antibiotic usage and potentially implementing a laboratory-testing verification regime. The EU has banned the use of antibiotics in growth promotion of livestock since 2006.

Softer law requirements are also gaining prominence. For instance, the UK’s National Health Service has implemented as one of its procurement criteria a requirement for pharmaceutical suppliers to be signatories of the AMR Industry Alliance Declaration, and to comply with the AMR Industry Alliance Antibiotic Manufacturing Standard.

What Should Pharma Companies Consider Now To Combat ESG-Related Risks From AMR

Pharmaceutical companies should consider a number of steps to mitigate ESG-related risks arising from AMR, including:

• Ensure that any public statements regarding antimicrobials are accurate, transparent, and backed by evidence, especially in corporate reporting.
• Consider risk management procedures and contractual protections within global supply chains. For example, the Pharmaceutical Supply Chain Initiative could be deployed to exert influence over suppliers, and to encourage more transparent and accurate reporting of antimicrobial concentrations in wastewater. The WHO also has issued recommendations targeted at manufacturing facilities, including setting water quality targets and enhanced risk management procedures, such as auditing.
• Consider AMR as part of environmental due diligence when investing in or acquiring new companies.
• Monitor and prepare for the reform of EU pharmaceutical legislation as it goes through the tripartite process.

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1. Global burden of bacterial antimicrobial resistance in 2019: a systematic analysis (The Lancet).
2. See, e.g, Call for urgency to deliver on global pledge for antibiotic incentives (ABPI) .
3. New Antibiotic Could Combat Multidrug-Resistant Superbugs; A new antibiotic, discovered with artificial intelligence, may defeat a dangerous superbug; Antibiotics in the clinical pipeline as of December 2022 - PMC (nih.gov).
4. Antimicrobials are among the least profitable classes of therapeutics, due to both low sales volumes—antibiotics are typically administered only for short periods (10-14 days)—and intense pricing pressure. In contrast, medicines approved in therapeutic areas such as cardiology, immunology, and oncology often have lengthy administration periods (months to years—and in some cases, a lifetime) and high per-unit prices during the period of protection by patents and regulatory exclusivities, making them a more attractive prospect for investment. 
5. See, e.g., The Antibiotic Resistance Crisis.
6. Antibiotic Development Needs Economic Incentives | The Pew Charitable Trusts (pewtrusts.org), describing the “Valley of Death” experienced by many antibiotics following FDA approval.
7. Researcher Explains Challenges in Finding Novel Antibiotics | The Pew Charitable Trusts (pewtrusts.org); Targeted Antibiotic Delivery: Selective Siderophore Conjugation with Daptomycin Confers Potent Activity against Multidrug Resistant Acinetobacter baumannii Both in Vitro and in Vivo | Journal of Medicinal Chemistry (acs.org).
8. The consultation closed in October 2023 and at time of publication the outcome was yet to be published. See The Antimicrobial Products Subscription Model: consultation on proposals - NHS England - Citizen Space
9. PASTEUR Act of 2023 Summary (senate.gov); PASTEUR Act of 2023 Text (senate.gov)
10. Proposal for a Regulation of the European Parliament and Council for the authorisation and supervision of medicinal products for human use and establishing rules governing the European Medicine Agency. 26 April 2023
11. OHT Report_10 Oct.cdr (onehealthtrust.org)
12. Big Pharma leading in access-to-medicine strategies, shows data (europeanpharmaceuticalreview.com)
13. Id.
14. Tackling antimicrobial resistance: Stopping pollution at source