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Antibacterial resistance and the cost of affecting demand: the case of UK antibiotics

Author

Listed:
  • Farasat A.S. Bokhari

    (Centre for Competition Policy and School of Economics, University of East Anglia)

  • Franco Mariuzzo

    (Centre for Competition Policy and School of Economics, University of East Anglia)

  • Weijie Yan

    (Centre for Competition Policy and School of Economics, University of East Anglia)

Abstract
Consumption of general purpose broad-spectrum antibiotics is associated with rising levels of antimicrobial resistance. Additionally, industry reports suggest that lack of profitability associated with narrowly targeted pathogens is a potential reason why firms are not undertaking new antibiotic related R&D. In this paper we use aggregate sales data on antibiotics from the UK to estimate a structural demand model and evaluate market performance of firms by spectral activity. We find that broad-spectrum antibiotics are more profitable than narrow-spectrum drugs, though the profitability has increased over time for both types due to a decline in costs, the costs of narrow stay higher. We simulate counterfactual scenarios to evaluate the effectiveness of cost-side interventions to shift demand from broad- to narrow-spectrum drugs. Using the last full year of data, simulations show that if unit costs of broad-spectrum were as high as those of narrow-spectrum antibiotics (say due to a unit tax), demand for broad-spectrum would fall by 28.1%, while that of narrow-spectrum would increase by 43.8%. The total cost of such an intervention would be $962 per thousand individuals or a total of $61.26 million, and is inclusive of change in consumer welfare and additional cost of testing for pathogens. Impact of other more selective taxes on subsets of broad-spectrum drugs is also analyzed.

Suggested Citation

  • Farasat A.S. Bokhari & Franco Mariuzzo & Weijie Yan, 2019. "Antibacterial resistance and the cost of affecting demand: the case of UK antibiotics," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2019-03, Centre for Competition Policy, University of East Anglia, Norwich, UK..
  • Handle: RePEc:uea:ueaccp:2019_03
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    References listed on IDEAS

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    Cited by:

    1. Dubois, Pierre & Gökkoca, Gökçe, 2023. "Antibiotic Demand in the Presence of Antimicrobial Resistance," CEPR Discussion Papers 18358, C.E.P.R. Discussion Papers.

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    More about this item

    Keywords

    antimicrobial resistance; pharmaceuticals; demand estimation; policy simulation; welfare change;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics

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