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Viral Clearance in the Manufacture of Biologics

Bioprocessors have had a good handle on viral safety, but they need to keep their grip as they shift toward continuous processing and boost production of gene and cell therapies.
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In 1955, over 200,000 children in the United States received polio vaccine contaminated with live polio virus. Popularly known as the Cutter incident, this was a defining moment in biomanufacturing that led to the creation of regulatory systems in the development of biological products.

Any biotherapeutic needs to maintain a high standard of purity. Recombinant protein therapeutics, vaccines, plasma products, and cell- and gene-based therapeutic products that use cell culture to produce biologics are susceptible to contamination with viruses. Viral safety, then, is critical. It is often said to benefit from a three-pronged approach: 1) select virus-free or low-risk source materials; 2) test processes and products for viral contaminants at selected steps in the manufacturing pipeline; 3) perform downstream viral clearance tasks that encompass the removal or inactivation of potential viral contaminants.

Since viruses are the most abundant biological entities on the planet, is it feasible to expect complete removal of contaminating viral particles from biologics in bioprocesses? “But of course,” says Thomas R. Kreil, PhD, associate professor of virology at the Medical University of Vienna and vice president of global pathogen safety at Takeda. “Nobody would tolerate the presence of viruses in any medical intervention. The only exception would be where you are using the viral vector as part of the therapy, such as in gene therapy.”

Kreil co-authored a paper that was submitted to Nature Biotechnology by members of the Consortium on Adventitious Agent Contamination in Biomanufacturing (CAACB), a body organized by the Massachusetts Institute of Technology (MIT). The paper, which was published last April, summarized all contamination events known to have occurred in biomanufacturing. The information in this paper, Kreil maintains, may lead to “safety measures that will prevent a repeat of these mistakes with gene therapy vectors.”

Regulatory affairs

In 1995, the International Council for Harmonization of Technical Requirements for Pharmaceuticals for Human Use (ICH) first issued the Q5A Guidance on the Viral Safety of Biotechnology Products Derived from Cell Lines of Human or Animal Origin. The guidance, which was updated in 1999, has been the basis for the regulatory evaluation of a broad range of biologics. These include products derived from in vitro cell culture (for example, interferons, monoclonal antibodies, and recombinant proteins) as well as cell and gene therapy products.

A revision of the Q5A is currently underway, and it is expected to reflect biotechnological advances in manufacturing, emerging product types, analytical technologies, and viral clearance validation and risk mitigation strategies for advanced manufacturing, such as continuous processing. Demonstration of viral clearance is an integral part of all biomanufacturing developments and investigational new drug (IND) applications.

“Zero risk is impossible to achieve,” observes Kreil. “What manufactures need to demonstrate is adequate safety margins, and that is applicable for all biological medicinal products.”

Viral testing

Several methods are being used to test for harmful viruses in biologics. Detecting viral contamination in cultures is more complicated than detecting other contaminating microbes. Some viruses cause a visible morphological effect in cells they infect and can therefore be detected microscopically, but other viruses integrate into the infected cell’s genome as provirus, leaving no visible trace.

Traditional methods for detecting viruses and other microorganisms that may have been unintentionally introduced into a biomanufacturing process, such as cell culture density testing, require significant labor and yield limited data. The use of next-generation sequencing in detecting contaminating viruses at upstream steps in bioprocessing pipelines is on the rise in biomanufacturing facilities worldwide. This will speed up testing timelines and provide greater insights on adventitious virus detection. This image shows Cécile Rouillon performing an RNA extraction at PathoQuest’s P2 laboratory.

Traditionally, in vitro methods, such as cell density testing and polymerase chain reaction testing, and animal models have been used to test for the presence of contaminating viruses in the product stream. However, these methods for viral detection are labor and time intensive and yield limited data.

The advent of next-generation sequencing (NGS) holds great promise in the quick and accurate detection of known and unknown contaminating viruses. Performed upstream on ingredients used in production pipelines, NGS allows specific and sensitive testing of a wide range of viral contaminants, instead of the detection of only specific viruses allowed by current methods.

Detection of newly synthesized RNAs, a sign of the transcriptionally active virus, may be used to differentiate between inert and active viral contaminants, which allows for greater accuracy in risk assessments. Aligned to GLP (Good Laboratory Practices) and GMP (Good Manufacturing Practices) requirements for biomanufacturing, NGS is applicable to cell banks, cell therapy drug products, vaccines, raw materials, viral inactivation testing, and testing for the lack of replication-competent viruses.

“The pricing of NGS is not high compared to in vivo testing,” emphasizes Marc Eloit, PhD, professor of virology at the Veterinary School of Maisons-Alfort, head of the Pathogen Discovery Laboratory at the Institut Pasteur Paris, and a funder of and scientific adviser to PathoQuest. “You need a few days to carry out an NGS test, but for in vivo testing, you may need months. Operationally, it is very cost effective. Vaccine companies such as Sanofi and GlaxoSmithKline are pushing to replace in vivo testing with NGS because of its efficacy and price.”

“If you look back at stories of previous viral contaminations of biological products, you will see that if NGS had been in place, it would have easily detected the contaminating virus,” notes Eloit. “If you have a good bioprocess and NGS testing, the risk for viral contamination is very, very remote.”

“NGS won’t replace viral clearance,” clarifies Sean O’Donnell, PhD, research advisor in the purification development and virology group at Eli Lilly & Company. “What it will do is tell us whether there is any contaminating virus in unprocessed bulk harvest or cell banks that you’re starting with, that you cannot detect using cell-based or PCR assays. NGS may become a very useful tool in the future and replace in vitro viral testing where we use indicator cell lines, as well as in vivo animal testing.”

“Examples of low-hanging fruit for NGS in bioprocesses are in cell line characterization and in investigational tools,” adds Paul Barone, PhD, co-director of biomanufacturing at the MIT Center for Biomedical Innovation and the director of the CAACB. “Adoption of NGS will likely not impact viral clearance studies. The assays for viral clearance validation using model viruses and traditional assays are well established. They work. NGS would be overkill.”

Viral clearance

Traditionally, biomanufacturing accomplishes viral clearance through heat, chromatographic separations (for example, through protein A/ion exchange columns), low-pH treatments, solvent/detergent (S/D) viral inactivation, and nanofiltration. A 2010 meta-analytical study on regulatory submissions showed that nearly half of all viral clearance claims were based on chromatography techniques. In addition, it showed that nearly a third were based on filtration techniques.

Viral contamination, while rare, does occur in cell culture-based bioprocesses adhering to GMP standards, curbing the supply of life-saving drugs and imposing substantial financial losses. One approach adopted in the biotech industry is to implement preventative measures such as virus-retentive filtration (an upstream viral barrier).

Viral clearance becomes tricky when the product itself is a viral vector. But even in such cases, strategic process design can achieve adequate viral clearance. “For example,” says Kreil, “when you produce adeno-associated virus (AAV), the workhorse vector of gene therapy, you can still include an S/D step that effectively inactivates lipid-enveloped viruses. AAV does not carry a lipid envelop, and so, its potency is fully preserved in the treatment. The same is true for nanofilters of larger pore size. You can choose the filter such that the very small AAV passes through, but larger contaminating viruses are retained.”

Redundancy

Despite the judicious use of cell lines that are not susceptible to viral infection, and despite advances in viral testing, multiple orthologous steps in viral clearance methods are not going to be eliminated from bioproduction pipelines.

“[With] the implementation of redundant measures … you can depend on multiple mechanisms [to reduce] the likelihood that mistakes [will] happen,” maintains Kreil. “We do that in all aspects of life. Think about cars—antilock braking systems, safety belts, air bags. You don’t want to take a risk. It’s the same idea in bioprocesses.”

Regulatory guidelines require biomanufacturers to incorporate separate individual mechanisms of viral clearance rather than repeat the same mechanism to achieve greater removal of virus. “A combination of low-pH treatment and S/D treatment, followed by column chromatography, such as that involving protein A or ion exchange, and viral filtration ensures viral safety,” says O’Donnell.

Detergent doppelgängers

A nearly universal method adopted to inactivate lipid-coated viruses in biotherapeutics has been to use detergents such as Triton X-100. However, this popular detergent degrades into hormone-like compounds with estrogen-mimetic activity that may negatively affect wildlife. These environmental concerns have caused the European Union to prohibit the use of Triton X-100.

Triton X-100, a detergent widely used for viral inactivation in bioprocesses, will be banned by the European Union by January 4, 2021. This image shows Jamie Fink, an associate consultant biologist who is part of the virology and purification team headed by Sean O’Donnell, PhD, at Eli Lilly & Company. Here she is working on identifying effective and environmentally benign replacements of Triton X-100.

Environmentally friendly alternatives to Triton X-100 include Nereid, a proprietary new compound synthesized by Takeda’s R&D group, and reduced Triton X-100. “At Takeda, we have developed a new detergent that we believe is going to be a fully competent replacement of Triton X-100,” reports Kreil. “It has identical viral inactivation potency as Triton X-100 and is expected to avoid harming the environment.

“Although this new molecule is structurally almost identical to Triton X-100, it is not expected to metabolize into a hormone-like compound. We are doing the final testing of the molecule and looking at scaling up production. If successful, we want the community to have access to this innovation ASAP.”

“Polysorbate 80 (PS80) was one of the first Triton X-100 replacements that we looked at for viral inactivation,” recalls O’Donnell. “Only at low concentrations of PS80 in the presence of bioreactor harvest material did we see effective viral inactivation, but not in phosphate-buffered saline. We boiled that down to the need for CHO cellular enzymes to hydrolyze PS80, specifically phospholipase A2. When we used phospholipase A2 with PS80, we saw viral inactivation in matrices that did not contain CHO cells.”

PS80 is known to be hydrolyzed to produce fatty acids (oleic and lauric acids) by enzymes from production cells. It was found that oleic acid alone was capable of viral inactivation. “This makes it tricky for biomanufacturers to use PS80,” says O’Donnell. “It adds a level of complexity since you now have to demonstrate that you have a certain level of PS80 hydrolysis into x amount of oleic acid to demonstrate viral inactivation. That is how we came to investigate Simulsol SL 11W, which is made by a company called Seppic.”

Although purified oleic acid causes viral inactivation, it cannot be directly used for viral inactivation because when added directly to the bioreactor, it is insoluble in aqueous solution. This fouls filters, sticks to stainless steel, and becomes prohibitive for the manufacturing process. “Oleic acid works great for viral inactivation,” O’Donnell remarks, “but it’s just not feasible from a manufacturing standpoint.”

Simulsol SL 11W works optimally with different starting matrices and has fast kinetics very similar to Triton X-100. It works over a large temperature range, from 4 to 30°C, and it doesn’t foul any filters going onto the protein A column where it is removed from the product stream. The efficient removal of Simulsol SL 11W, confirmed by mass spectrometry, makes it very “palatable for manufacturing processes,” suggests O’Donnell. “We’re still investigating Simulsol SL 11W. We have not implemented it yet in our manufacturing processes, but we are very close.”

Viral filtration

Viral filtration, a highly effective size-based removal of viral particles from the product stream, has its own set of challenges. Parvovirus filters have a pore size of around 20 nm. This is smaller than most common contaminating viruses. “When we test these filters, we use parvoviruses—either MMV (mouse minute virus) or PPV (porcine parvovirus)—that are 18 to 20 nm in size,” details O’Donnell.

Fouling of filters is the irreversible decline of flow through the filter that occurs when particles cake the membrane surface. Therefore, filters need periodical replacement or cleaning.

“We have seen that operating conditions can affect virus removal by these filters,” says O’Donnell. Some filters are sensitive to the start and stop of flow. “If you have a feed stream coming into the filter, stop the flow for whatever reason, and then repressurize the filter, you can see force breakthroughs of virus particles,” he continues. “You really have to understand the operating parameters of your viral filter and your feed streams.”

Viral clearance in batch versus continuous operations

Large-scale biomanufacturing is currently evolving from batch mode processing (BP) to continuous processing (CP). In contrast to modular BP unit operations separated by holding periods, CP accomplishes the entire pipeline in a seamlessly integrated manner and has several advantages, such as product stability, efficient use of resources, and reduction in operation size, thereby reducing the manufacturing footprint and rendering the process more cost effective and the medical product more affordable. The evolution of BP to CP is a welcome upgrade in productivity so long as there is sufficient and strong scientific evidence to assure viral clearance and safety.

“We’ve recently published two papers to show how S/D and low-pH treatment can be applied in CP,” Kreil mentions. “It is technically a bit more demanding, and the validation of the viral inactivation process is more complex. But it can be done. We have also shown that continuous nanofiltration can be run for weeks and that it is completely compatible with CP.” You could take two or more viral clearance methods and implement them redundantly in CP for enhanced safety.

Filtration-based viral removal methods are easily adaptable to continuous processing. “No matter whether it is a batch mode or a continuous single-unit operation, if you are operating within the manufacturing specifications of the viral filters, they are just as effective,” maintains O’Donnell. “As you increase volumetric throughput across the filters, you see virus breakthroughs when you get to critical thresholds. So, appropriate sizing and scaling is important in CP. Changing filters and increasing the surface area of the filters to accommodate the increased load is going to be part of it.”

When choosing viral clearance strategies to analyze products of CP pipelines, the design and qualification of scale-down models and integration of linked unit operations will need modification in viral clearance validation.

Key issues in the transition from BP to CP include determining how widely used viral clearance operations can be incorporated into CP pipelines in accordance with the Q5A guidelines, and how a representative scale model can be designed and implemented for viral clearance studies given the increased productivity and product load in CP.

Validation

After viral clearance, regulatory authorities require a demonstration of how much virus has been removed. At the beginning of the process, right after harvesting cells from the bioreactor, many manufacturers test for MMV since it is a common contaminant of CHO cells. After downstream viral removal and inactivation steps, biomanufacturers must demonstrate a reduction in viral load from the initial harvest step.

This is done through calculating the “retrovirus safety margin” in the case of CHO cells. This calculation considers bioreactor titers, purification yields, and PCR or transmission electron microscopy test results.

“Typically, for something that will go commercial, you want to show that you have six logs of retroviral safety margin after the downstream viral clearance steps are totaled,” states O’Donnell. “The more robust viral clearance steps accomplish greater than four logs of viral inactivation or removal, and you want multiple steps of viral removal in the process.”

Challenges

“There is ample data from recombinant protein products to show that the current methods used in viral clearance work, even in removing viruses that you don’t know are there,” says Barone. The current viral clearance challenge, he continues, “is in emerging products such as viral vaccines, viral vectors, and especially cell therapies.”

Understanding the viral clearance parameters with the new CP pipelines is going to be challenging for biomanufacturers, particularly at the outset. “But many manufacturers are already beginning to understand how the operating conditions around CP parameters will work,” says O’Donnell.

The other big challenge is coming up with an alternative to Triton X-100, which has been prohibited by the European Union. “We’re one of many manufacturers that has come up with alternatives such as adding passive anion exchange columns to remove viruses, but these are costly and time consuming, O’Donnell complains. “Using something like Simulsol, which you can drop into any manufacturing process, is an attractive option.”

Viral safety a pandemic context

The potential impact of SARS-CoV-2 on biomanufacturing operations has raised several questions. “We have seen an increasing interest and an acceleration of the discussion on NGS,” says Eloit. “It provides COVID-19 vaccine developers the capacity to be faster in this race against time. Viral safety timelines are reduced four- to fivefold with the NGS approach compared to animal testing.”

“With any pandemic,” adds Barone, “a biotech company has to assess the risk to the process and the product that the emerging virus poses, as well as the risk to business continuity independent of whether the novel virus can be a product contaminant.”

The key questions regarding a newly emerging, pandemic-causing virus are: Is it a product contaminant? What are its sources? Is it airborne? Could it get into the raw materials and replicate in host cell lines? Would you detect the novel virus using existing assays? Will downstream viral clearance eliminate this novel virus?

Questions such as these were included in a recent survey of CAACB members. The survey’s results, which appeared in April 2020, suggest how manufacturers may respond to the COVID-19 pandemic.

A key lesson from the survey, says Barone, is as follows: “If you are using a production cell line that does not replicate the virus, and if you have robust downstream viral clearance, and if you are using a test that detects SARS-CoV-2, then there is very little risk to the process or the product. But with biotech products where these conditions do not hold—for example, a product of a cell line that can replicate SARS-CoV-2, where there is no downstream viral clearance, and where there is no time for in vitro viral testing, such as in some cell therapy processes—the risk is much higher.”

“In June 2020,” Kreil observes, “the FDA asked for research into whether cell lines used in the production of biologics are infectable by SARS-CoV-2, and whether our viral testing parameters can detect and remove SARS-CoV-2. We had already tested our platform cell lines, and we had determined that they are not infectible. Our testing assays for adventitious viruses can very comfortably detect the coronavirus, and our viral clearance strategies are capable of effectively removing and inactivating SARS-CoV-2.”

Since SARS-CoV-2 is a relatively large lipid-coated virus, the virus can be effectively cleared by S/D treatment, low-pH incubation, caprylate treatment, pasteurization, and dry heat, as well as by nanofiltration and fractionation.

“In the case of cell therapies, there is no viral clearance,” says Barone. “Right now, I can’t even imagine a technology that can remove viral infected cells from noninfected cells. That entire prong of the safety tripod is gone for cell therapy products. Also, for autologous cell therapy, because of the time constraint, where the patient needs the therapy immediately, you don’t have time to wait for viral assays.”

Although viral clearance is undoubtedly effective and works very well in the production of recombinant proteins, it is not an option for cell therapy products. “For cell therapy products,” Barone continues, “you really need to depend on ways to avoid introducing the virus in the first place, such as rigorous process controls, aseptic processing, and closed systems. Ideally, even if a very good viral clearance strategy is available, you don’t want to need it.”

“I’ve been in this line of work for the past 20 years, and I’ve spent a lot of time thinking through contamination issues,” declares Kreil. “We have seen that things can go sour. Contaminations can occur. So why put the lives of the patients we serve at risk? If we forget what our job is—to keep our patients safe and see that they have a steady supply of their medicines—then we do not deserve to be in this industry. We have witnessed that virology is an issue in every bioprocess. We need an adequate level of virological expertise to understand these concerns, to investigate and implement remediations, and to validate the remedial measures. Then we have done our job.”

The post Viral Clearance in the Manufacture of Biologics appeared first on GEN - Genetic Engineering and Biotechnology News.

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Coronavirus dashboard for October 5: an autumn lull as COVID-19 evolves towards seasonal endemicity

  – by New Deal democratBack in August I highlighted some epidemiological work by Trevor Bedford about what endemic COVID is likely to look like, based…

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 - by New Deal democrat

Back in August I highlighted some epidemiological work by Trevor Bedford about what endemic COVID is likely to look like, based on the rate of mutations and the period of time that previous infection makes a recovered person resistant to re-infection. Here’s his graph:




He indicated that it “illustrate[s] a scenario where we end up in a regime of year-round variant-driven circulation with more circulation in the winter than summer, but not flu-like winter seasons and summer troughs.”

In other words, we could expect higher caseloads during regular seasonal waves, but unlike influenza, the virus would never entirely recede into the background during the “off” seasons.

That is what we are seeing so far this autumn.

Confirmed cases have continued to decline, presently just under 45,000/day, a little under 1/3rd of their recent summer peak in mid-June. Deaths have been hovering between 400 and 450/day, about in the middle of their 350-550 range since the beginning of this past spring:



The longer-term graph of each since the beginning of the pandemic shows that, at their present level cases are at their lowest point since summer 2020, with the exception of a brief period during September 2020, the May-July lull in 2021, and the springtime lull this year. Deaths since spring remain lower than at any point except the May-July lull of 2021:



Because so many cases are asymptomatic, or people confirm their cases via home testing but do not get confirmation by “official” tests, we know that the confirmed cases indicated above are lower than the “real” number. For that, here is the long-term look from Biobot, which measures COVID concentrations in wastewater:



The likelihood is that there are about 200,000 “actual” new cases each day at present. But even so, this level is below any time since Delta first hit in summer 2021, with the exception of last autumn and this spring’s lulls.

Hospitalizations show a similar pattern. They are currently down 50% since their summer peak, at about 25,000/day:



This is also below any point in the pandemic except for briefly during September 2020, the May-July 2021 low, and this past spring’s lull.

The CDC’s most recent update of variants shows that BA.5 is still dominant, causing about 81% of cases, while more recent offshoots of BA.2, BA.4, and BA.5 are causing the rest. BA’s share is down from 89% in late August:



But this does not mean that the other variants are surging, because cases have declined from roughly 90,000 to 45,000 during that time. Here’s how the math works out:

89% of 90k=80k (remaining variants cause 10k cases)
81% of 45k=36k (remaining variants cause 9k cases)

The batch of new variants have been dubbed the “Pentagon” by epidmiologist JP Weiland, and have caused a sharp increase in cases in several countries in Europe and elsewhere. Here’s what she thinks that means for the US:


But even she is not sure that any wave generated by the new variants will exceed summer’s BA.5 peak, let alone approach last winter’s horrible wave:



In summary, we have having an autumn lull as predicted by the seasonal model. There will probably be a winter wave, but the size of that wave is completely unknown, primarily due to the fact that probably 90%+ of the population has been vaccinated and/or previously infected, giving rise to at least some level of resistance - a disease on its way to seasonal endemicity.

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Gonorrhea became more drug resistant while attention was on COVID-19 – a molecular biologist explains the sexually transmitted superbug

The US currently has only one antibiotic available to treat gonorrhea – and it’s becoming less effective.

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The _Neisseria gonorrhoeae_ bacterium causes gonorrhea by infecting mucous membranes. Design Cells/iStock Getty Images Plus via Getty Images

COVID-19 has rightfully dominated infectious disease news since 2020. However, that doesn’t mean other infectious diseases took a break. In fact, U.S. rates of infection by gonorrhea have risen during the pandemic.

Unlike COVID-19, which is a new virus, gonorrhea is an ancient disease. The first known reports of gonorrhea date from China in 2600 BC, and the disease has plagued humans ever since. Gonorrhea has long been one of the most commonly reported bacterial infections in the U.S.. It is caused by the bacterium Neisseria gonorrhoeae, which can infect mucous membranes in the genitals, rectum, throat and eyes.

Gonorrhea is typically transmitted by sexual contact. It is sometimes referred to as “the clap.”

Prior to the pandemic, there were around 1.6 million new gonorrhea infections each year. Over 50% of those cases involved strains of gonorrhea that had become unresponsive to treatment with at least one antibiotic.

In 2020, gonorrhea infections initially went down 30%, most likely due to pandemic lockdowns and social distancing. However, by the end of 2020 – the last year for which data from the Centers for Disease Control and Prevention is available – reported infections were up 10% from 2019.

It is unclear why infections went up even though some social distancing measures were still in place. But the CDC notes that reduced access to health care may have led to longer infections and more opportunity to spread the disease, and sexual activity may have increased when initial shelter-in-place orders were lifted.

As a molecular biologist, I have been studying bacteria and working to develop new antibiotics to treat drug-resistant infections for 20 years. Over that time, I’ve seen the problem of antibiotic resistance take on new urgency.

Gonorrhea, in particular, is a major public health concern, but there are concrete steps that people can take to prevent it from getting worse, and new antibiotics and vaccines may improve care in the future.

How to recognize gonorrhea

Around half of gonorrhea infections are asymptomatic and can only be detected through screening. Infected people without symptoms can unknowingly spread gonorrhea to others.

Typical early signs of symptomatic gonorrhea include a painful or burning sensation when peeing, vaginal or penal discharge, or anal itching, bleeding or discharge. Left untreated, gonorrhea can cause blindness and infertility. Antibiotic treatment can cure most cases of gonorrhea as long as the infection is susceptible to at least one antibiotic.

There is currently only one recommended treatment for gonorrhea in the U.S. – an antibiotic called ceftriaxone – because the bacteria have become resistant to other antibiotics that were formerly effective against it. Seven different families of antibiotics have been used to treat gonorrhea in the past, but many strains are now resistant to one or more of these drugs.

The CDC tracks the emergence and spread of drug-resistant gonorrhea strains.

Why gonorrhea is on the rise

A few factors have contributed to the increase in infections during the COVID-19 pandemic.

Early in the pandemic, most U.S. labs capable of testing for gonorrhea switched to testing for COVID-19. These labs have also been contending with the same shortages of staff and supplies that affect medical facilities across the country.

Many people have avoided clinics and hospitals during the pandemic, which has decreased opportunities to identify and treat gonorrhea infections before they spread. In fact, because of decreased screening over the past two and a half years, health care experts don’t know exactly how much antibiotic-resistant gonorrhea has spread.

Also, early in the pandemic, many doctors prescribed antibiotics to COVID-19 patients even though antibiotics do not work on viruses like SARS-CoV-2, the virus that causes COVID-19. Improper use of antibiotics can contribute to greater drug resistance, so it is reasonable to suspect that this has happened with gonorrhea.

Overuse of antibiotics

Even prior to the pandemic, resistance to antibiotic treatment for bacterial infections was a growing problem. In the U.S., antibiotic-resistant gonorrhea infections increased by over 70% from 2017-2019.

Neisseria gonorrhoeae is a specialist at picking up new genes from other pathogens and from “commensal,” or helpful, bacteria. These helpful bacteria can also become antibiotic-resistant, providing more opportunities for the gonorrhea bacterium to acquire resistant genes.

Strains resistant to ceftriaxone have been observed in other countries, including Japan, Thailand, Australia and the U.K., raising the possibility that some gonorrhea infections may soon be completely untreatable.

Steps toward prevention

Currently, changes in behavior are among the best ways to limit overall gonorrhea infections – particularly safer sexual behavior and condom use.

However, additional efforts are needed to delay or prevent an era of untreatable gonorrhea.

Scientists can create new antibiotics that are effective against resistant strains; however, decreased investment in this research and development over the past 30 years has slowed the introduction of new antibiotics to a trickle. No new drugs to treat gonorrhea have been introduced since 2019, although two are in the final stage of clinical trials.

Vaccination against gonorrhea isn’t possible presently, but it could be in the future. Vaccines effective against the meningitis bacterium, a close relative of gonorrhea, can sometimes also provide protection against gonorrhea. This suggests that a gonorrhea vaccine should be achievable.

The World Health Organization has begun an initiative to reduce gonorrhea worldwide by 90% before 2030. This initiative aims to promote safe sexual practices, increase access to high-quality health care for sexually transmitted diseases and expand testing so that asymptomatic infections can be treated before they spread. The initiative is also advocating for increased research into vaccines and new antibiotics to treat gonorrhea.

Setbacks in fighting drug-resistant gonorrhea during the COVID-19 pandemic make these actions even more urgent.

Kenneth Keiler receives funding from NIH.

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Measuring the Ampleness of Reserves

Over the past fifteen years, reserves in the banking system have grown from tens of billions of dollars to several trillion dollars. This extraordinary…

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Over the past fifteen years, reserves in the banking system have grown from tens of billions of dollars to several trillion dollars. This extraordinary rise poses a natural question: Are the rates paid in the market for reserves still sensitive to changes in the quantity of reserves when aggregate reserve holdings are so large? In today’s post, we answer this question by estimating the slope of the reserve demand curve from 2010 to 2022, when reserves ranged from $1 trillion to $4 trillion.

What Are Reserves? And Why Do They Matter?

Banks hold accounts at the Federal Reserve where they keep cash balances called “reserves.” Reserves meet banks’ various needs, including making payments to other financial institutions and meeting regulatory requirements. Over the past fifteen years, reserves have grown enormously, from tens of billions of dollars in 2007 to $3 trillion today. The chart below shows the evolution of reserves in the U.S. banking system as a share of banks’ total assets from January 2010 through September 2022. The supply of reserves depends importantly on the actions of the Federal Reserve, which can increase or decrease the quantity of reserves by changing its securities holdings, as it did in response to the global financial crisis and the COVID-19 crisis.

Reserves Have Ranged from 8 to 19 Percent of Bank Assets from 2010 to 2022

Sources: Federal Reserve Bank of New York; Federal Reserve Economic Data, FRED (“TLAACBW027SBOG”); authors’ calculations.

Why does the quantity of reserves matter? Because the “price” at which banks trade their reserve balances, which in turn depends importantly on the total amount of reserves in the system, is the federal funds rate, which is the interest rate targeted by the Federal Open Market Committee (FOMC) in the implementation of monetary policy. In 2022, the FOMC stated that “over time, the Committee intends to maintain securities holdings in amounts needed to implement monetary policy efficiently and effectively in its ample reserves regime.” In this ample reserves regime, the Federal Reserve controls short-term interest rates mainly through the setting of administered rates, rather than by adjusting the supply of reserves each day as it did prior to 2008 (as discussed in this post). In today’s post, we describe a method to measure the sensitivity of interest rates to changes in the quantity of reserves that can serve as a useful indicator of whether the level of reserves is ample.

The Demand for Reserves Informs Us about Rate Sensitivity to Reserve Shocks

To assess whether the level of reserves is ample, one needs to first understand the demand for reserves. Banks borrow and lend in the market for reserves, typically overnight. The reserve demand curve describes the price at which these institutions are willing to trade their balances as a function of aggregate reserves. Its slope measures the price sensitivity to changes in the level of reserves. Importantly, banks earn interest on their reserve balances (IORB), set by the Federal Reserve. Because the IORB rate directly affects the willingness of banks to lend reserves, it is useful to describe the reserve demand curve in terms of the spread between the federal funds rate and the IORB rate. In addition, we control for the overall growth of the U.S. banking sector by specifying reserve demand in terms of the level of reserves relative to commercial banks’ assets.

There is a clear nonlinear downward-sloping relationship between prices and quantities of reserves, consistent with economic theory. The chart below plots the spread between the federal funds rate and the IORB against total reserves as a share of commercial banks’ total assets.  When reserves are very low, the demand curve has a steep negative slope, reflecting the willingness of borrowers to pay high rates because reserves are scarce. At the other extreme, when reserves are very high, the curve becomes flat because banks are awash with reserves and the supply is abundant. Between these two regions, an intermediate regime–that we refer to as “ample”–emerges, where the demand curve exhibits a modest downward slope. The color coding of the chart reflects the shifts in the reserve demand curve over time. In particular, the curve appears to have moved to the right and upward around 2015 and then moved upward after March 2020, at the onset of the COVID pandemic.

Reserve Demand Has Shifted over Time

Sources: Federal Reserve Bank of New York; Federal Reserve Economic Data, FRED (“TLAACBW027SBOG,” “IOER,” and “IORB”); authors’ calculations.

This chart highlights two of the main challenges in estimating the slope of the reserve demand curve. First, the curve is highly nonlinear, which means that a standard linear estimation approach is not appropriate. Second, various long-lasting changes in the regulation and supervision of banks, in their internal risk-management frameworks, and in the structure of the reserve market itself have resulted in shifts in the reserve demand curve. A third challenge is that the quantity of reserves may be endogenous to banks’ demand for them. Therefore, to properly measure the reserve demand curve, one must disentangle shocks to supply from those to demand. As we explain in detail in a recent paper, our estimation strategy addresses all three of these challenges.

Estimating the Slope of the Reserve Demand Curve

Our approach provides time-varying estimates of the price sensitivity of the demand for reserves that can be used to distinguish between periods in which reserves are relatively scarce, ample, or abundant. The chart below presents our daily estimates of the slope of the demand curve, as measured by the rate sensitivity to changes in reserves. Although we do not have a precise criterion for when reserves are scarce versus ample, during two episodes in our sample, the estimated rate sensitivity is well away from zero. The first episode occurs early in our sample, in 2010, and the second emerges almost ten years later, in mid-2019. In two other periods—during 2013-2017 and from mid-2020 through early September 2022—the estimated slope is very close to zero, indicating an abundance of reserves. The remaining periods are characterized by a modest negative slope of the reserve demand curve, consistent with ample (but short of abundant) reserves. The overall pattern of these estimates is robust to changes in the model specification, such as including spillovers from the repo and Treasury markets or measuring reserves as a share of gross domestic product or bank deposits (instead of as a share of banks’ assets).

Rate Sensitivity Changed over Time, Following the Path of Reserves

Sources: Federal Reserve Bank of New York; Federal Reserve Economic Data, FRED (“TLAACBW027SBOG,” “IOER,” and “IORB”); authors’ calculations.

Interest Rate Spreads Alone Are Not Reliable Indicators of Reserve Scarcity

As we discuss in our paper, the time variation in the estimated price sensitivity in the demand for reserves is based on observations of small movements along the demand curve due to exogenous supply shocks. The location of the curve itself, however, also changes over time. That is, there is not a constant relationship between the level of reserves and the slope of the reserve demand curve.  

In our paper, we find evidence of both horizontal and vertical shifts in the reserve demand curve, with vertical upward shifts being particularly important since 2015. This finding implies that the level of the federal funds-IORB spread may not be a reliable summary statistic for the sensitivity of interest rates to reserve shocks, and that estimates of the price sensitivity in the demand for reserves provide additional useful information.

In summary, we have developed a method to estimate the time-varying interest rate sensitivity of the demand for reserves that accounts for the nonlinear nature of reserve demand and allows for structural shifts over time. A key advantage of our methodology is that it provides a flexible and readily implementable approach that can be used to monitor the market for reserves in real time, allowing one to assess the “ampleness” of the reserve supply as market conditions evolve.

Gara Afonso is the head of Banking Studies in the Federal Reserve Bank of New York’s Research and Statistics Group.

Gabriele La Spada is a financial research economist in Money and Payments Studies in the Federal Reserve Bank of New York’s Research and Statistics Group.   

John C. Williams is the president and chief executive officer of the Federal Reserve Bank of New York.  

How to cite this post:
Gara Afonso, Gabriele La Spada, and John C. Williams, “Measuring the Ampleness of Reserves,” Federal Reserve Bank of New York Liberty Street Economics, October 5, 2022, https://libertystreeteconomics.newyorkfed.org/2022/10/measuring-the-ampleness-of-reserves/.


Disclaimer
The views expressed in this post are those of the author(s) and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the author(s).

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