The Economics of Antibiotic Resistance

Antibiotic resistance (ABR) is a major challenge that already contributes to almost five million deaths per year. Without action, this number will likely rise substantially. In this paper, we provide the first comprehensive assessment of the economic drivers of ABR, arguing that ABR in large part arises from extensive unresolved market (and regulatory) failures on both the supply and demand side. Each of these failures is well-understood from other contexts in economics. Specifically, ABR is a common pool problem that arises from too-rapid depletion of the stock of working antibiotics and insufficient replenishment with new antibiotics. We identify specific unresolved failures in the market for antibiotic innovation, in pricing structures that undermine its insurance function and in the production of known antibiotics on the supply side. We also identify failures on the demand side, including an underinvestment in preventative action, mismatch problems in the market for human antibiotic use and un-internalised negative externalities in pharmaceutical production and agriculture. We conclude by briefly considering how to resolve these market failures.