How property rights and patents affect antibiotic resistance

Abstract

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.

Economic Implications of the Dynamic Relationship between Antibiotic Use and Hospital-Acquired Infections

“…Economic studies have used this biological background to argue that it is within the interests of antibiotic suppliers holding property rights to conserve the effectiveness of their antimicrobial agents [6], or even that the monopolistic supply of antibiotics promotes conservation of antibiotic effectiveness compared with the case of perfect competition [7]. Another approach models the effectiveness of antibiotics as an exhaustible resource that does not recover effectiveness after periods of antibiotic stewardship [8].…”

“…In short, all these studies are based on the basic approach that considers the cost of resistance to be a negative externality of antibiotic use [9 -15]. Accordingly, the conclusions are that the problem of AMR should be counteracted on the macro level by reducing the overall antibiotic consumption with policy options that are traditionally associated with environmental economics such as regulation, permits, and charges [6,7,10,13].…”

Monopoly pricing of an antibiotic subject to bacterial resistance

“…Third, we assume that infected individuals do not know whether they suffer from the drug- 6 Analytically, theİ-isocline is derived by settingİ = 0, which gives I = 0 or w =w(I) = β(I−N )+rr ∆r−r f f . For f < ∆r/r f , the isocline has a positive slope, while it is negative for f > ∆r/r f .…”

“…For f < ∆r/r f , the isocline has a positive slope, while it is negative for f > ∆r/r f . If f equals the critical fraction ∆r/r f , theİ-isocline is a vertical line passing through I SS as defined in (6).…”

“…Finally, there is a unique steady state of the type characterized by (6). This steady state is shown in the Appendix to be given by:…”