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How property rights and patents affect antibiotic resistance


Author Info

  • John B. Horowitz

    (Department of Economics, Ball State University, Muncie, USA)

  • H. Brian Moehring

    (Business Economist, 3301 West University Ave., Muncie, USA)


Antibiotic resistance tends to increase when a patent on an antibiotic expires. Since other companies can now sell the antibiotic, more of the antibiotic is produced and prices fall. Because the benefits of reducing current production go to other firms, pharmaceutical companies will have little concern about future resistance. This 'open-access' problem causes excessive antibiotic use and resistance problems in the future. Extending patents is one solution. However, a pharmaceutical company that has patent protection on a drug that is cross-resistant may have little concern about future resistance. This is because when people use completely different antibiotics which cause bacteria to become resistant to the original antibiotic, then the benefits of reducing current production go to other companies. A single buyer such as national health insurance or private health insurance may also have an incentive to reduce antibiotic resistance since they bear the future cost of future resistance. However, insurance coverage reduces the price that patients pay at the margin and thus the patients are likely to use more antibiotics. National health insurance policies may even set the price of antibiotics so low that resistance problems are created even when the patent is in effect. Copyright © 2004 John Wiley & Sons, Ltd.

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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

Volume (Year): 13 (2004)
Issue (Month): 6 ()
Pages: 575-583

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Handle: RePEc:wly:hlthec:v:13:y:2004:i:6:p:575-583

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  1. Brown, Gardner & Layton, David F., 1996. "Resistance economics: social cost and the evolution of antibiotic resistance," Environment and Development Economics, Cambridge University Press, Cambridge University Press, vol. 1(03), pages 349-355, July.
  2. Laxminarayan, Ramanan, 2001. "Bacterial Resistance and the Optimal Use of Antibiotics," Discussion Papers, Resources For the Future dp-01-23, Resources For the Future.
  3. Smith, Richard D. & Coast, Joanna, 1998. "Controlling antimicrobial resistance: a proposed transferable permit market," Health Policy, Elsevier, Elsevier, vol. 43(3), pages 219-232, March.
  4. Coast, J. & Smith, R. D. & Millar, M. R., 1998. "An economic perspective on policy to reduce antimicrobial resistance," Social Science & Medicine, Elsevier, Elsevier, vol. 46(1), pages 29-38, January.
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Cited by:
  1. Markus Herrmann, 2009. "Monopoly Pricing of an Antibiotic Subject to Bacterial Resistance," Cahiers de recherche, CIRPEE 0946, CIRPEE.
  2. Stéphane Mechoulan, 2007. "Market structure and communicable diseases," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 40(2), pages 468-492, May.
  3. Patricia M. Danzon & Eric L. Keuffel, 2013. "Regulation of the Pharmaceutical-Biotechnology Industry," NBER Chapters, National Bureau of Economic Research, Inc, in: Economic Regulation and Its Reform: What Have We Learned?, pages 407-484 National Bureau of Economic Research, Inc.
  4. Richard D. Smith & Milton Yago & Michael Millar & Joanna Coast, 2006. "A Macroeconomic Approach to Evaluating Policies to Contain Antimicrobial Resistance: A Case Study of Methicillin-Resistant Staphylococcus aureus (MRSA)," Applied Health Economics and Health Policy, Springer Healthcare | Adis, Springer Healthcare | Adis, vol. 5(1), pages 55-65.
  5. Herrmann, Markus, 2010. "Monopoly pricing of an antibiotic subject to bacterial resistance," Journal of Health Economics, Elsevier, Elsevier, vol. 29(1), pages 137-150, January.


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