Rescuing the Golden Age of Antibiotics: Can Economics Help Avert the Looming Crisis?

Countries world wide face an imminent global health crisis. As resistant bacteria render the current stock of antibiotics ineffective and the pipeline of back-up drugs runs dry, pharmaceutical companies are abandoning their research in antibiotics. In this paper we ask: Why are pharmaceutical companies closing antibiotic research labs when the stakes are so high? Implementing a simple dynamic framework, we show that the environment for new antibiotics is relatively hostile, compared to other medicines, due to market failures that result in excessive use and acceleration of natural selection. The analysis reveals, however, that increased competition between drugs can actually slow down the rate of resistance without, in some cases, diluting research incentives. Bolstered by scientific evidence, this result arises from a fundamental interplay between economic and biological externalities. We propose a patent-antitrust regime for achieving efficient drugrnresearch and usage that calls for a revised justification of the patent system.rn