[MUSIC] Hello, my name is doctor Raymond Pong and I'm an associate professor at the health economics unit, University of Birmingham. And one of my main research interests relates to the economics of antimicrobial resistance. Antimicrobial resistance is a global threat which is estimated to cost around $100 trillion by 2050. There is therefore an urgent need to deal with this problem. And in this lecture we'll be looking at some of the ways in which the discipline of economics can be applied to the problem of antimicrobial resistance. So, in today's lecture we would look at how economists have conceptualized antimicrobial resistance as an externality. We will also examine some policy options such as taxes and permits which can be used as incentives for changing antibiotic consumption behavior and dealing with the problem of antimicrobial resistance. In economics, antimicrobial resistance is considered to be an externality, specifically a negative externality. And this implies that the costs and benefits associated with the consumption of an antibiotic unlikely to be felt directly by either the consumer of the antibiotic or the supplier of the antibiotic, has an impact on the overall welfare of society. In a free market with no externalities, social cost is equal to private costs and social benefit is equal to private benefit. In this situation, social welfare is maximized when demand equals supply. However in the case of antibiotics, consumption creates a situation where social costs and benefits would not be equal to private costs and benefits. This results in a welfare loss to society, since the consumers and suppliers of antibiotics do not face the true cost of consumption. This would generally result in the over consumption of antibiotics which contributes to the development of microbial resistance and leads to ineffective antibiotics as a cost which is borne by future generations. So, when we consider antimicrobial resistance from a patient and doctor of the nation perspective, the use of antibiotics has positive consequences. First, the consumption of the antibiotic makes the patient feel better. Prescribing antibiotics also has positive consequences for the physician as well, since prescribing meets the patient's demands and also addresses some of the uncertainties associated with the diagnosis or the condition. On the whole, from the perspective of the patient and the doctor, we should use antibiotics even if there's a small chance of improvement or benefits. From a societal perspective on the other hand which includes the patient's and clinician's perspective, there are positive consequences from the consumption of antibiotics which we've seen in the previous light. However, it also has some negative consequences in terms of the development of antimicrobial resistance. So, from a societal perspective, it is sort of a balancing act between taking antibiotics in some circumstances where it is really needed and not in other circumstances where it's not needed. So, this is the sort of balancing acts that I was referring to in the previous slide, susceptibility to antibiotics is a scarce resource. So, the question is, how can we ensure that we consume antibiotics in such a way as to make sure that there is susceptibility to antibiotics in the future and also ensure that patients present needs are met. So, how can society go about balancing these? What are some of the economic policy solutions to the problem of antimicrobial resistance? So, what we said earlier is that antimicrobial resistance is not necessarily taken into account in private decisions. And one of the reasons for this is that not all the costs are borne by the consumer and some care in the future. And this is in terms of the development of antimicrobial resistance. So, taxes and permits are examples of policies that can help with ensuring that consumption of antibiotics is optimal. The whole idea of the tax is to help deal with excess consumption of antibiotics as a result of the imposition of a tax on antibiotics. We would have a situation where the price is raised so as the law of demand states the higher the price the lower the quantity demanded. So, people would start consuming less of antibiotics and a new equilibrium is established in the market. Ideally the level of tax is set to the level of externality in the market. So, that upsets the externality and society's welfare is maximized. The tax imposed would likely reduce the consumption of antibiotics. However, this will depend on how high the taxes, how much money people have, and also whether there are alternatives and how much these alternatives cost. It should also be noted that there are several issues associated with taxes, one of which relates to setting an appropriate level to offset the externality. There is however uncertainty as stated with the size of the externality. And the question is how do we determine the size of this negative externality? The second problem relates to who pays for the tax? Is it the patients or the healthcare providers who pays for the tax? So, it's a big question to be answered. Demand for health is also an elastic and this simply means that demand is not very responsive to price. This is particularly so in high income settings. As a result, taxes may not effectively reduce the consumption of antibiotics. There are also some equity issues. For example, attacks which raises the price of antimicrobials will lead to a situation where poorer people would be priced out and will not be able to afford the antibiotics. And this is a particularly an issue for low and middle income countries. Another mechanism that can be used is what we call permits, here rules are set in order to limit the quantity that can be prescribed for a particular period, for example a year, a month, and so on. So how this may work is when we have a situation where permits are located with a physician on the basis of factors such as their patient population and so on. One problem relates to the that relates to the use of permits is monitoring and policing. The question is how do we monitor whether prescribers have exceeded their permits. Also even if we do manage to monitor, there's going to be a huge administrative costs involved. Another problem with this approach is that it does not directly address inappropriate use. So we have talked about how we can use incentives to reduce consumption of antibiotics. However, one possible solution is to develop new antibiotics. This is particularly important when an existing antibiotics are not effective against resistant bacteria. It should, however, be noted that there are several challenges associated with the development of new antibiotics fest. The cost of developing new antibiotics is very high. For example, it is estimated that it costs about $1 billion us dollars to develop a new antibiotics. However, they return from this investment in development of the antibiotics. It's quite low for several reasons compared to the return on investment for drugs related to diseases such as chronic diseases. It is therefore clear that there is a problem with the current economic model, since it does not reward development of antibiotics. Second, the research and development process for new antibiotics is time consuming and expensive and often fails. For example, it can take up 10-15 years to get an antibiotic into the market. So in order to encourage the development of new antibiotics, there are some economic incentives that can be used. These are normally classed as push incentives and poor incentives push incentives are aimed at subsidizing the drug development costs. Such incentives include grants, public and private partnership and tax credits, pull incentives, on the other hand, reward the successful development of drugs and they include reimbursements, speeding up the market approval process and market entry rewards. So to summarize, we have looked at how economists have conceptualized the problem of antimicrobial resistance as an externality and also looked at how economic policy options such as taxes and permits can be used to reduce the over consumption of antibiotics. I believe economics has a major role to play in the fight against antimicrobial resistance. First, economics can help to quantify and understand the true cost embedding of antimicrobial resistance. Second economics can help to ensure effective antibiotic stewardship by contributing to development of effective economic policies. And third economics can help efforts to encourage the development of new antibiotics through designing appropriate incentives. Thank you. Mhm. Mhm.