Plagues, Policy, & Patents: Addressing Overuse of Antibiotics

Abstract:     
In response to the intensive use of antibiotics since their discovery in the 1930s, bacteria increasingly have evolved resistance to these critical medications. Because of this evolutionary process, antibiotics have an unusual characteristic that gives rise to a negative externality: Current use erodes their future usefulness. Society is squandering the limited supply of this precious resource for low-value uses, such as treating minor infections. The price of this profligacy? Patients in the future may die from bacterial infections that become resistant to all antibiotics.

This negative externality is a market failure, calling for governmental measures to rationalize antibiotic use. Applying the economic literature on exhaustible resources, this article argues that the state should grant infinite-term patents on antibiotics. In addition to encouraging pricing that will prolong the useful life of antibiotics, infinite-term patents may create incentives for drug makers to hold some antibiotics in reserve to meet the extraordinary demand that will arise if and when there is a bacterial plague. The government also should subsidize the use of tests to determine the nature and resistances of infections, increase subsidies and research spending on vaccinations, and gather more information about the extent and nature of the threat posed by resistant bacterial pathogens.

JEL Classifications: H0, H4, I0, I1, K0, Q3, K00, K11

Working Paper Series