Anti-Malarial Biotechnology, Drug Resistance, and the Dynamics of Disease Management

In the presence of market imperfections, there is no guarantee that society will benefit from technological change. This research analyzes the impact of biotechnology designed to bypass agricultural processes in the production of pharmaceutical products. High quality pharmaceuticals often exist alongside less effective treatments with a common active phytochemical ingredient. In this context, antimicrobial resistance generated by the consumption of one product also affects the efficacy of the other product. These interdependencies fundamentally alter the effects of biotechnology on retail markets, agricultural input markets, and antimicrobial resistance. I construct a dynamic epidemiological-economic model of the global market for anti-malarials to analyze the potential economic and public health costs associated with the introduction of a recently developed semi-synthetic production technology by which to procure artemisinin for use in artemisinin-based combination therapies (ACTs) used in the treatment of malaria. I find that in addition to decreasing the price of ACTs, semi-synthetic production technology also lowers the price of low quality monotherapy treatments and increases resistance to all forms of artemisinin. Despite these adverse effects, the development of semi-synthetic artemisinin leads to a present-value gain of approximately $2 billion in social welfare over a seven-year time horizon.