New Business Models for Sustainable Antibiotics

Centre on Global health Security Working Group Papers, Chatham House (The Royal Institute of International Affairs), Working Groups on Antimicrobial Resistance, Paper 1, February, 2014

Boston Univ. School of Law, Public Law Research Paper No. 14-10

Boston Univ. School of Law, Law and Economics Research Paper No. 14-10

34 Pages Posted: 20 Feb 2014

Date Written: February 18, 2014

Abstract

Antibiotics are powerful drugs that prevent many deaths each year. Modern medicine relies on them as a safety net. Many invasive medical procedures would be much more dangerous without effective antibiotics. Global trade, travel and security would be threatened by a resurgence of untreatable infectious diseases. Antibiotics are a precious global resource that must be managed on a sustainable ecological basis, akin to fisheries.

But today, antibiotics are either managed in a haphazard fashion or mismanaged. They are vulnerable to premature destruction through resistance. Physicians, hospitals, drug companies, payers, patients and food producers often face perverse financial incentives that encourage inappropriate use of these drugs and undercut incentives to create new ones. Many stakeholders believe that an antibiotic crisis is fast approaching or may already be upon us. Owing to the long lead times for antibiotic research and development (R&D), society must act a decade before the need becomes immediately urgent.

Therefore an important task is to fix these broken economic incentives. Any solution must overcome three obstacles simultaneously. They are:

● Inadequate market incentives for companies to invest in R&D and bring new products to market at the right time;

● Inadequate market incentives to protect these valuable resources from overuse and premature resistance; and

● Inadequate market incentives to ensure global access to life-saving antibiotics.

Creating new drugs will achieve no lasting success if the underlying incentives for inappropriate use are not addressed, or if the drugs do not reach patients in need. The solution must be sustainable over generations and across the planet.

Antibiotic delinkage may offer the most promising avenue for a sustainable, global approach. Delinkage recognizes that rewarding producers and sellers on the basis of volume is fundamentally inappropriate. This paper explores all the antibiotic delinkage models in the existing literature, bringing some order to a variety of proposals. While resistance affects antibiotics, antivirals, antiretrovirals and antifungal agents, this paper focuses primarily on antibiotics.

Keywords: antibiotics, infection control, antibiotic conservation, antibiotic business models, antibiotic effectiveness, public health, market incentives, inadequate market incentives, sustainable antibiotics

JEL Classification: I12, I18, I19, K32, K39

Suggested Citation

Outterson, Kevin, New Business Models for Sustainable Antibiotics (February 18, 2014). Centre on Global health Security Working Group Papers, Chatham House (The Royal Institute of International Affairs), Working Groups on Antimicrobial Resistance, Paper 1, February, 2014 ; Boston Univ. School of Law, Public Law Research Paper No. 14-10; Boston Univ. School of Law, Law and Economics Research Paper No. 14-10. Available at SSRN: https://ssrn.com/abstract=2397957

Kevin Outterson (Contact Author)

Boston University School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States

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