BACKGROUND

Overview
The CDC estimates that nosocomial infections, infections acquired from a healthcare organization, cost the U.S. healthcare system $5 billion per year. It is further estimated that $40 billion dollars is spent each year on the larger effects of anti-microbial resistance including the cost of different treatments after the initial treatment fails to work, extra hospital time required, additional medical attention required, and lost productivity for patients and healthcare workers. Due to the nature of the U.S. healthcare system, hospitals or their insurance carriers pay all costs associated with nosocomial infections.

In the US alone, approximately 2 million people a year acquire a nosocomial infection from a hospital and an additional 1.5 million people acquire a nosocomial infection from a long term care facility. Nosocomial infections cause approximately 100,000 deaths per year in the US alone.

Over the last fifty years, bacteria have become increasingly resistant to antibiotics at an alarming rate. In fact, certain bacteria have become so resistant to antibiotics that there remains no effective treatment. Pharmaceutical companies have effectively stopped developing new, less profitable antibiotics because of their short treatment cycles and their short effective lifetimes (before the bacteria become resistant).

HMO's
Currently, in the United States, most hospital visits are paid for by Health Maintenance Organizations ("HMO") that have established guidelines for each medical procedure including allowed length of stay and fixed diagnostic costs called "diagnostic related group" ("DRG") rates. Most HMO's offer bonus payments to hospitals if patients are successfully discharged earlier than the allowed stay.

Nosocomial infections inevitably extend a patient's hospital stay, often beyond the period covered by the HMO. Thus, hospitals, or their insurance carriers, pay all costs associated with these extended stays. The estimated $5 billion a year cost to treat nosocomial infections represents over $130 for every person admitted to hospital - whether or not they get an infection.

In addition to the direct costs, hospitals face other liabilities in the case of avoidable infections, especially if a hospital elects not to use a system that has been shown to control nosocomial infections. To reduce liability claims, insurance companies are likely to force hospitals to use a system such as eGenomics' or face restrictions on coverage.

New Antibiotics?
Contrary to common wisdom, as antibiotic resistance has increased, pharmaceutical companies have actually stopped developing new anti-infective medicines. In general:

• Bacteria have become amazingly adept at developing resistance to new antibiotics thereby shortening the effective lifespan of any newly developed drug
• Antibiotics have short treatment cycles
• Research & Development costs have sky-rocketed and the time to market for a new drug is often ten or more years

Due to these factors, pharmaceutical companies have refocused their research budgets away from the expensive development of new-generation antibiotics. Instead, pharmaceutical companies have focused their research efforts on the development of more profitable medicines such as those that treat chronic conditions such as high blood pressure. Such medicines are taken every day for the lifespan of a person and are significantly more profitable to sell than antibiotics which are taken for weeks. New-generation antibiotics, often prematurely termed "super-drugs", must be prescribed in limited quantities so as to not accelerate the time it takes for the bacteria to develop resistance to these new drugs.