Why the Drugs We Need Most Are Too Unprofitable to Make

In 2018, the San Francisco-based biotech firm Achaogen secured Food and Drug Administration (FDA) approval for a new antibiotic targeting some of the most resistant “superbugs.” Despite this scientific milestone, the company filed for bankruptcy only one year later.

Achaogen’s collapse illustrates a fundamental misalignment in antimicrobial economics: a highly effective drug can be a financial liability. Because clinicians prioritize “stewardship”—reserving the most potent new medicines for the most critical cases to prevent bacteria from developing further resistance—these drugs remain stored in hospital pharmacies with minimal sales volume.

As of late 2024, the result of this misalignment is a market failure. While drug-resistant infections are projected to claim 39 million lives by mid-century, the companies capable of addressing the threat are withdrawing from the field. The incentive to innovate has been decoupled from the commercial survival of the innovator.

The Antimicrobial Paradox

The pharmaceutical market for antibiotics is governed by a unique biological constraint. Unlike treatments for chronic conditions like hypertension or cancer, which patients may take for years, an antibiotic course typically lasts only seven to ten days.

Furthermore, antibiotics are a rare class of medicine that loses utility through use. Evolution is a constant pressure. According to Kevin Outterson, Professor of Law at Boston University and Executive Director of CARB-X, antibiotics require a renewable strategy because they begin to lose effectiveness the moment they are deployed in clinical settings.

In this environment, public health success—using a drug sparingly—becomes a commercial failure. For most pharmaceutical products, revenue is tied to volume. For an antibiotic, high volume accelerates the drug’s obsolescence.

Source: AMR Solutions / PMC, 2026

The financial requirements for drug development do not align with current private investment returns. Data from AMR Solutions indicates that the median cost to bring a new antibiotic to market is approximately $1.3 billion. When including the $400 million necessary for post-approval supply chains and global surveillance, the break-even point reaches $1.7 billion.

Average annual sales for newly approved antibiotics often remain below $50 million. At this rate, a company would require 34 years to recover its initial investment—far exceeding the lifespan of its patents and likely the window of the drug’s biological effectiveness.

The Second Valley of Death

The exodus of major pharmaceutical players has left the antibiotic pipeline increasingly fragile. Between 2014 and 2024, Novartis, Sanofi, and AstraZeneca significantly reduced or eliminated their antibacterial research divisions. This departure of well-capitalized giants has left the field to small startups that often lack the resources to survive the “Second Valley of Death”: the period after FDA approval but before a drug achieves profitability.

Small firms like Melinta, Tetraphase, and Nabriva followed Achaogen into bankruptcy or fire-sale acquisitions shortly after bringing innovative products to market. They were unable to sustain manufacturing and distribution costs on limited sales revenue. As of 2024, only a few top-20 firms, including GSK and Roche, maintain active late-stage programs for new antibacterials.

“Regulatory approval alone does not guarantee commercial success,” said Henry Skinner, PhD, CEO of the AMR Action Fund. “Without sustainable revenue, companies struggle to launch new products, fulfill post-approval requirements, or continue investing in innovation.”

The Clinical Cost of Resistance

The financial decline of the pipeline coincides with a rising biological threat. According to the 2024 Global Research on Antimicrobial Resistance (GRAM) study published in The Lancet, antimicrobial resistance (AMR) was the direct cause of 1.27 million deaths globally and was associated with nearly 5 million deaths in 2019.

This threat compromises the foundational safety of modern medicine. In clinical practice, the risk of untreatable infection now looms over routine procedures. A surgeon performing a standard hip replacement or a physician administering chemotherapy must account for the fact that common bacterial strains are increasingly resistant to first- and second-line treatments. According to the CDC, hospital-onset infections for six major bacterial strains increased by 20% by 2024 compared to pre-pandemic baselines. If effective antibiotics are unavailable, the mortality rate for elective surgeries and routine care will rise as the medical safety net thins.

The Global Leaders Group on AMR estimated in 2024 that drug-resistant pathogens could reduce global life expectancy by an average of 1.8 years by 2050. In the United States, multidrug-resistant infections currently cost the healthcare system between $4.6 billion and $5.7 billion annually in direct hospital expenses.

The Global Policy Laboratory

To address the market failure, several governments are testing “pull incentives” that pay for the availability of an antibiotic rather than the volume of pills sold.

The United Kingdom transitioned the National Health Service (NHS) to a permanent subscription-style payment model in late 2024. Under this framework, the NHS pays a fixed annual fee of up to £10 million per drug. This provides manufacturers with predictable revenue while allowing clinicians to reserve the drugs for necessary cases without financial pressure to increase sales.

Japan expanded its antimicrobial procurement pilot in 2024, providing a revenue floor for drugs targeting critical pathogens like carbapenem-resistant Enterobacterales. Similarly, Sweden has implemented a strategy to guarantee annual payments for specific products to ensure their availability in a smaller market.

In the United States, the focus remains on the PASTEUR Act. Reintroduced with bipartisan support in 2023 and debated through 2024, the act proposes a subscription model worth up to $6 billion over 10 years. The legislation seeks to treat antibiotics as a public utility—similar to a fire department—where the value lies in the drug’s availability for a crisis rather than its daily consumption.

Shifting Innovation

The nature of the antibiotic pipeline is changing as traditional chemical research retreats. As of late 2024, the global clinical pipeline includes 90 agents, but only 15 are considered “innovative” by World Health Organization (WHO) standards.

Non-traditional therapies are increasingly filling the gap. WHO data shows that bacteriophages (viruses that target bacteria) and microbiome-modulating agents now represent approximately 45% of the antibacterial products in development.

While these technologies show promise, they face the same commercial hurdles as traditional antibiotics. Kevin Outterson has noted that the current business model for developing and distributing antibiotics is insufficient, warning that the pipeline remains at risk of collapse if makers cannot find a path to financial stability.

Geopolitical Tensions and Access

Even with new payment models, significant disparities in access persist. The burden of resistance is disproportionately high in lower-income regions. OECD projections show that resistance rates in Southeastern European countries, such as Romania and Greece, exceed 50%, while rates in Northwestern Europe remain below 12%.

International organizations, including Doctors Without Borders (MSF), have raised concerns that U.S. and European policies do not include sufficient requirements for global access and affordability. This risks a scenario where new treatments remain unavailable in the regions with the highest clinical need.

Additionally, the European Union is debating the “Transferable Exclusivity Voucher” (TEV) model. This would allow a company that develops a new antibiotic to extend the patent life of another high-profit drug in its portfolio by one year. While intended to attract investment, some economists argue this model is an inefficient use of health budgets, as it delays the entry of lower-cost generics for unrelated conditions.

A Critical Infrastructure Decision

As the U.S. Congress considers the PASTEUR Act and other incentives, the core debate centers on whether antibiotics should be classified as consumer products or critical infrastructure.

This is not a theoretical discussion regarding pharmaceutical margins; it is a question of whether routine medical care will remain viable in the coming decade. The current system has historically penalized the development of the very drugs required for public safety.

The science of drug discovery is difficult, but the underlying economics have proven more challenging. Until the market is restructured to value the existence of a cure over its consumption, the pharmaceutical industry may continue to struggle to produce the world’s most essential medicines.

As Sir Jeremy Farrar, Chief Scientist at the WHO, has stated: “We are failing to contain the rise of resistance, and failing to develop new drugs to replace those that no longer work.” The decision for 2024 and 2025 is whether society is willing to pay the cost of maintaining the antibiotic safety net before it fails.