There are a shrinking number of antibiotic drug makers and investors, who see little payoff in a market that reimburses new drugs on volume, rather than their benefits to public health, according to a new report from a trade group known as the Biotechnology Innovation Organization.

About 80% of new antibiotics that are being developed in clinical trials come from small, emerging biotechnology companies, as larger manufacturers have exited the market. And, over the past decade, venture capital funding for US antibiotic development was 17 times less than for oncology drugs.

“The #1 issue is the market solution, so even though there’s important stewardship that goes on, the thing that has to happen first is to incentivize those drugs to be made, designed and to be put through 10 years of clinical trials, which isn’t ‘t happening right now,” said David Thomas, vice president of industry research at BIO.

BIO and antibiotic experts point to a few factors that are leading to this decline. While Congress has created fast-track lanes for new antibiotic drugs, payment is still a big problem since most health systems—where the bulk of antibiotic-resistant bacteria has originated—pay for drugs based on how much they buy.

“Hospitals are trying to use the new ones as a last resort so that resistance doesn’t develop right out of the gate,” said David Hyun, who leads the Pew Charitable Trusts antibiotic resistance project, and was not involved in the study. He added that they also don’t purchase a lot, especially as compared to drugs for chronic conditions. “The overarching challenge is how do we delink—specific for antibiotics—the value of these lifesaving drugs from the volume of sold, and, rather, try to put a value of public health value to it.”

Drug companies like Achaogen and Melinta Therapeutics declared bankruptcy shortly after obtaining FDA approval for their respective antibiotics. Less than half of the 12 antibiotic companies that went public over the past decade are still operating, according to the report.

In addition, more than 82% of all antibiotic FDA approvals occurred before 2000, and the FDA has only approved one new drug that targets bacteria differently on a molecular level in the past 35 years. Yet, these drug makers tend to have more success than other classes of drugs. Between 2011 and 2020, 16.3% of antibiotics in early-stage clinical trials went on to secure FDA approval, compared to 5% of cancer drugs.

The BIO report also says that Medicare payment bundles discourage the use of newer antibiotics because they generally cost more than older versions. The group suggests Medicare pay hospitals a separate amount for these drugs, when accompanied with a bundle, and that CMS could do this through rulemaking.

Several pieces of legislation have been floated by Congress to solve various aspects of the pipeline problem. For instance, the Pioneering Antimicrobial Subscriptions To End Up Surging Resistance Act of 2021 has bipartisan support and is currently part of Cures 2.0a healthcare modernization and reform bill.

Beyond these large reforms, there’s potential for health systems to help identify and develop novel antibiotics candidates, especially among academic hospitals that have staff working in both clinical practice and research. And hospital clinicians can also add a trusted message in messaging to policymakers.

“Clinicians, especially infectious disease doctors, provide the best voices and examples to policymakers of the real world impact at a very individual level,” Hyun said.