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Innovation and Antibiotic Use within Antibiotic Classes: Market Incentives and Economic Instruments

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  • Markus Herrmann
  • Bruno Nkuiya
  • Anne-Renée Dussault
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    Abstract

    We analyze a monopolist’s incentive to innovate a new antibiotic which is connected to the same pool of antibiotic treatment efficacy as is another drug produced by a generic industry. We outline the differences of antibiotic use under market conditions and in the social optimum. A time and state-dependent tax-subsidy mechanism is proposed to induce the monopolist and generic industry to exploit antibiotic efficacy optimally.

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    File URL: https://www.create.ulaval.ca/sites/create.ulaval.ca/files/Publications/create2013-3.pdf
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    Bibliographic Info

    Paper provided by CREATE in its series Cahiers de recherche CREATE with number 2013-3.

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    Date of creation: 2013
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    Handle: RePEc:lvl:creacr:2013-3

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    Postal: Faculté des sciences de l'agriculture et de l'alimentation, Pavillon Paul-Comtois, 2425 rue de l'Agriculture, local 4424, Québec, Qc, G1V 0A6
    Phone: 418-656-2131 poste 5098
    Fax: 418-656-7821
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    Web page: http://www.create.ulaval.ca
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    Related research

    Keywords: Economics of antibiotic resistance; antibiotic innovation; monopoly; generic industry; social optimum; economic instruments;

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    References

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    1. 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.
    2. GAUDET, Gérard & HERRMANN, Markus, 2007. "The Economic Dynamics of Antibiotic Efficacy under Open Access," Cahiers de recherche, Centre interuniversitaire de recherche en économie quantitative, CIREQ 04-2007, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    3. Ramanan Laxminarayan, 2002. "How Broad Should the Scope of Antibiotics Patents Be?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 84(5), pages 1287-1292.
    4. Karp, Larry, 1992. "Social Welfare in a Common Property Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(2), pages 353-72, May.
    5. Laxminarayan, Ramanan & Brown, Gardner M., 2001. "Economics of Antibiotic Resistance: A Theory of Optimal Use," Journal of Environmental Economics and Management, Elsevier, vol. 42(2), pages 183-206, September.
    6. Carolyn Fischer & Ramanan Laxminarayan, 2004. "Monopoly extraction of an exhaustible resource with two markets," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 37(1), pages 178-188, February.
    7. 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.
    8. Rudholm, Niklas, 2002. "Economic implications of antibiotic resistance in a global economy," Journal of Health Economics, Elsevier, Elsevier, vol. 21(6), pages 1071-1083, November.
    9. Fischer, Carolyn & Laxminarayan, Ramanan, 2005. "Sequential development and exploitation of an exhaustible resource: do monopoly rights promote conservation?," Journal of Environmental Economics and Management, Elsevier, vol. 49(3), pages 500-515, May.
    10. Markus Herrmann & Ramanan Laxminarayan, 2010. "Antibiotic Effectiveness: New Challenges in Natural Resource Management," Annual Review of Resource Economics, Annual Reviews, Annual Reviews, vol. 2(1), pages 125-138, October.
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