Antimicrobial resistance, and health care as a negative externality

In 2019, the World Health Organization declared antimicrobial resistance one of the top ten global public health threats facing humanity. The idea that antibiotics may soon be ineffective, making relatively minor infections life-threatening again (as they were before antibiotics became widely available after World War II) is frankly scary. This is definitely a public health issue to watch.

The Conversation has a series of articles on antimicrobial resistance, published less frequently than is probably warranted. However, they have had a couple of articles in the last week, and this article in particular caught my attention, by Allen Cheng (Monash University):

The concept of antibiotics as a valuable resource has led to the concept of “antimicrobial stewardship”, with programs to promote the responsible use of antibiotics. It’s a similar concept to environmental stewardship to prevent climate change and environmental degradation.

Antibiotics are a rare class of medication where treatment of one patient can potentially affect the outcome of other patients, through the transmission of antibiotic resistant bacteria. Therefore, like efforts to combat climate change, antibiotic stewardship relies on changing individual actions to benefit the broader community.

An externality is the uncompensated impact of the actions of one or more people on a third party (a bystander). Externalities can be positive (they make the third party better off), or they can be negative (they make the third party worse off). Usually, economists think of health care as exhibiting positive externalities. Think about a vaccination for an infectious disease. It makes the person getting vaccinated better off, because they are less likely to get sick. It also makes other people better off, because they are also less likely to get sick (because there is one more vaccinated person who cannot pass on the infectious disease).

However, what Cheng is suggesting is that, in some cases, antibiotic use may create a negative externality, because one person using antibiotics in the wrong way increases the chances that an antibiotic-resistant bacteria emerges, which would make other people sick (and potentially, unable to be easily treated). So, while some aspects of health care have positive externalities, this seems like an example where the externality is negative.

What is to be done? Cheng suggests:

There is a lot we can do to prevent antibiotic resistance. We can:

• raise awareness that many infections will get better by themselves, and don’t necessarily need antibiotics

• use the antibiotics we have more appropriately and for as short a time as possible, supported by co-ordinated clinical and public policy, and national oversight

• monitor for infections due to resistant bacterial to inform control policies

• reduce the inappropriate use of antibiotics in animals, such as growth promotion

• reduce cross-transmission of resistant organisms in hospitals and in the community

• prevent infections by other means, such as clean water, sanitation, hygiene and vaccines

• continue developing new antibiotics and alternatives to antibiotics and ensure the right incentives are in place to encourage a continuous pipeline of new drugs.

Some of these suggestions may be more effective than others. However, I want to take a step back and see what is in the economists' toolkit for dealing with negative externalities. We need to recognise, though, that unlike canonical negative externalities like air pollution, the goal here is not to reduce all antibiotic use, but only to reduce inappropriate antibiotic use.

We can start by setting aside bargaining solutions to the externality. There are simply too many parties involved (all patients prescribed an antibiotic, all doctors, and all farmers who may want to use antibiotics) for a general agreement on antibiotic use to be negotiated. That leaves public solutions, which really comes down to command-and-control policies (that is, regulation), or market-based policies (for example, taxes).

Let's start with taxes. Taxes increase the price to consumers, and decrease the effective price received by producers, and therefore create incentives for less to be produced and consumed. That would be a good solution if we were interested in reducing antibiotic use in general, but that isn't the goal here. Except in one case, which is farm use of antibiotics. Taxing antibiotic use in agriculture, would reduce the use of antibiotics, and would probably be effective. The higher costs of production (arising from the greater direct cost of raising animals, as well as the greater indirect cost as less antibiotic use slows animal growth rates) would likely be passed onto the consumers of animal products, as well as reducing farm profits.

In the health sector though, regulation is the only remaining policy alternative. The first two of Cheng's suggested solutions fit in here - raising awareness and using antibiotics more appropriately. It does appear that governments are attempting these solutions already (for example, see here for the advice provided by New Zealand's Ministry of Health, or here for the advice provided by the Australian Government). Providing advice and recommendations is about as weak as policy can get. It is unlikely to drive substantial change. For one of the top ten global public health threats, governments should be doing more to reduce the inappropriate use of antibiotics.

I'm not usually in favour of adding layers of bureaucracy, all of which come with attendant costs. However, in this case the national oversight part of Cheng's recommendations is important. This could be implemented through initially tracking antibiotic prescriptions, then a program of random audits of patient records to ensure prescriptions are warranted, and the most appropriate antibiotic (based on what was known at the time) was prescribed. The tracking component need not be too onerous, because this information is already captured. Audits would require some funding (presumably through Te Whatu Ora Health New Zealand), but as cumulatively more audits are conducted, the audits could become better targeted over time towards unusual patterns of antibiotic prescription.

Antibiotic resistance is a serious public health concern, and is a negative externality arising from inappropriate antibiotic use. This is something that can be addressed, and should be.

[Update: I wrote a brief follow-up to this post]