Can Competition and Patent Policies Avert the Antibiotic Crisis?

Abstract

Countries worldwide face an antibiotics health crisis. Resistant bacteria are rendering the current stock of antibiotics ineffective, and the pipeline of back-up drugs is running dry. Canada contributes more than its share to this global problem, with per-capita doses of antibiotics exceeding those of many of its peer countries in the Organisation for Economic Co-operation and Development. In a simple dynamic framework, we identify an efficient policy that reduces overuse and hence prolongs the lives of antibiotics. The policy includes (a) narrow patents to allow substitute drugs; (b) a flexible competition policy to permit limited coordination between competitors; (c) a regulatory standard on new substitute drugs to contain cross-resistance; and (d) a Pigouvian tax to reduce post-patent generic output. Complementing this patent-competition-regulatory-tax regime, additional incentives not dependent on sales, such as subsidies, prizes, and expedited regulatory reviews, may be necessary to promote development of new antibiotics.