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Ramanan Laxminarayan

From The Lancet, 1941
Case 1. Policeman, aged 43.

Admitted Oct. 12, 1940. Suppuration of face, scalp and both orbits, starting from a sore at the corner of the mouth a month earlier. Primary infection Staph. aureus; secondary, Strep. pyogenes. Sulphapyridine 19 g. given from Dec. 12 to 19; no improvement; drug-rash. Jan. 19: incision of multiple abscesses on face and scalp. … [A] resulting arm-abscess, incised, gave Staph. aureus pus. General infection of left eye; cornea perforated Jan. 21. Eye eviscerated Feb. 3. Feb. 12: all incisions suppurating, in scalp, face, both orbits, and right arm. Lungs involved, with purulent expectoration containing both the pyogenic cocci. … Penicillin 200 mg. given intravenously. … Striking improvement after total of 800 mg. penicillin in 24 hours. Cessation of scalp discharge, diminution of right-eye suppuration and conjunctivitis. Arm discharge seemed less. … Feb. 16: much improvement. … Right eye almost normal. Some discharge still from left eye and arm. … Feb. 17: penicillin supply exhausted. Total administered, 4.4 g. in 5 days. Patient felt much improved; no fever; appetite much better; resolution of infections in face, scalp and right orbit. —Abraham, Chain et al. 1941


From The Washington Post, January 27, 2006

Brandon Noble needs crutches to walk, and he has been relegated to spending much of his time at home on his sofa. When he’s lying in bed at night and needs to move his left leg to get comfortable, he must lift it with his arms or nudge it with his right leg. He struggles to play with his children. But while Noble might have the typical limitations of a brokendown football player, the career of the Washington Redskins’ defensive tackle isn’t threatened by damaged ligaments or cracked bones. At 31, Noble has been sidelined by a staph infection, suffered after being injured, that in some cases is potentially fatal.

“It’s been an incredible couple of years here,” Noble said. “It’s like I’m a modern-day Job.” For the second time in a year, Noble is being treated for methicillin-resistant Staphylococcus aureus, or MRSA, a sometimes debilitating illness that is becoming increasingly common in the general population, according to national health experts. It is a growing concern for the NFL, which has experienced a recent increase in MRSA cases. —Maske and La Canfora 2006


The excerpt from The Lancet describes the first-ever patient cured by penicillin—a policeman suffering from an invasive infection that had begun with a simple thorn scratch on his cheek. As difficult as it is to imagine today, our ability to treat common bacterial infections goes back only 65 years. Yet the rapid rate of emergence of pathogens resistant to these wonder drugs has already returned us to an era when community-acquired, difficult-to-treat strains of Staphylococcus aureus are increasingly common. A simple scratch can lead not just to painful death for sick patients in hospitals but to long, debilitating illnesses even for healthy athletes, as in the second excerpt, from The Washington Post.

Increasing bacterial resistance to antibiotics is a leading problem facing the public health community both in the United States and abroad. Pneumonia, sexually transmitted diseases, and infections of the skin and bowels are some of the illnesses that have become harder to treat because of drug resistance. An indication of the scale of the problem is given by the prevalence of high-level penicillin resistance in Streptococcus pneumoniae in the United States, which has risen from 0.02 percent in 1987 to over 20 percent in 2004 (CDC 2005). From 1974 to 2004, the prevalence of methicillin-resistant Staphylococcus aureus (MRSA) in hospitals has climbed from roughly 2 percent to more than 50 percent in many U.S. hospitals. According to the U.S. Food and Drug Administration, “Unless antibiotic resistance problems are detected as they emerge, and actions are taken to contain them, the world could be faced with previously treatable diseases that have again become untreatable, as in the days before antibiotics were developed.”

The impact of this long-heralded crisis is unfolding in hospitals and communities across the United States. According to the Centers for Disease Control and Prevention, 2 million patients in American hospitals each year are infected during their hospital stay. Of these, 90,000 die; in 70 percent of the cases, the bacteria that kill them are resistant to at least one commonly used antibiotic. This means that every day in the United States, approximately 172 men, women, and children—63,000 or more every year—die from infections caused by antibiotic-resistant bacteria in hospitals alone. The number, which exceeds U.S. mortality from AIDS, may actually be higher because many deaths attributed to other causes, particularly those of elderly patients suffering from a myriad of problems, may in reality be due to antibiotic-resistant infections.

Major reports in recent years have called for steps to address this growing threat before it engulfs the medical system (ASM 1994; OTA 1995; Harrison and Lederberg 1998), yet there has been astonishingly little action from policymakers. Antibiotics continue to be used widely both in medicine and in agriculture for growth promotion, and there are few requirements for hospitals to contain the spread of resistant pathogens. Confusion over antibiotic resistance in the public policy realm arises, in part, because the medical community is grappling with what is essentially a problem of missing incentives. Those who use antibiotics, be they patients, physicians, or farmers, have few incentives to consider the negative impact of that use on society. In the language of economists, antibiotic resistance is a negative “externality” associated with the use of antibiotics, much as pollution is an undesirable externality associated with the use of automobiles. Standard responses like increasing surveillance and launching public information campaigns on the hazards of resistance—however necessary a part of an overall policy response—may have only a limited impact. Moreover, the problem of antibiotic resistance is not restricted to how antibiotics are used but is related to other factors, such as infection control and patent law. Viewed broadly, antibiotic resistance is both a biological and a behavioral problem that needs a combination of technological, educational, and incentive-based responses.

In this report, we examine the problem of antibiotic resistance from a natural resources and incentive-based perspective. We explore policy solutions that will enable society to make the best use of existing antibiotics, sensibly encourage the discovery of new antibiotics, and give drug firms a greater incentive to sell these new drugs responsibly. We describe specific actions and changes that, if implemented, could have a lasting impact on our ability to use antibiotics in a sustainable manner. The proposed changes go beyond simply tinkering with the current system; we identify deep weaknesses in how we develop, regulate, and use antibiotics.

This report is the result of a two-year study by researchers at Resources for the Future, the University of Chicago, the National Institutes of Health, and Emory University. It objectively evaluates a range of policy options for dealing with antibiotic resistance. The policy options discussed in this report were debated at four consultations with clinicians, epidemiologists, lawyers, economists, and representatives from hospitals, health insurance and managed-care organizations, health care quality organizations, accreditation agencies, pharmaceutical companies, and government agencies; participants provided invaluable insights into the incentives behind choices concerning antibiotic use and development. Each consultation dealt with a specific set of issues: supply of new antibiotics, payers’ incentives with respect to resistance, role for government agencies, and incentives for health care providers. Our purpose at this stage was not to try to develop consensus around any specific policy proposal, but rather to have each policy idea evaluated as critically as current evidence would permit and to identify knowledge gaps that prevented a more informed evaluation. The study focused on antibiotic use in medicine and did not explicitly address the problem of antibiotic overuse in agriculture for growth promotion, but clearly it is also important to change incentives for how the drugs are used in that context.

The next phase of the Extending the Cure project will expand the process of policy research and dialogue and develop a comprehensive manual of incentive-based policy options that government and other policymakers can use to make a real difference in the fight against antibiotic resistance.

Antibiotic effectiveness as a natural resource

Antibiotic effectiveness is a natural resource, much like oil, fish, or trees. Whether effectiveness is renewable (like trees or fish) or nonrenewable (like oil) depends on whether resistance declines when antibiotic use is withdrawn.1 Any antibiotic use today, whether appropriate or not, imposes selection pressure on resistant bacteria that diminishes our ability to use the antibiotic in the future. The fundamental tension between how we use antibiotics today and our ability to use them in the future offers crucial insights for thinking about drug resistance (Laxminarayan and Brown 2001; Laxminarayan 2003).

Just as it is difficult to create a policy to manage a cod fishery optimally without understanding the biological dynamics of fish, an effort to craft policy solutions to the antibiotic resistance problem requires a clear understanding of the evolutionary biology of resistance. The problem of resistance is, at  its heart, an evolutionary game played between humans and microbes: humans try to stay ahead of microbes by creating new antibiotics, and microbes evolve by developing resistance to our drugs. Unfortunately for humans, microbes evolve resistance to antibiotics faster than we are likely to create new ones. The basic evolutionary biology and epidemiology of resistance and their relationship to potential policy levers are described in Chapter 2 of this report.

Antibiotics are different from other resources in that their use has both positive and negative externalities (impacts on other people). The negative impact is that, just as one fisherman’s catch makes other fishermen worse off by leaving fewer fish in the ocean, one patient’s use of antibiotics makes other people worse off by increasing the likelihood that their infection may not be treatable. The positive impact, however, is that the patient’s use of antibiotic could make other people better off by reducing the risk that his infection will be passed on to them.

Dealing with antibiotic resistance does not always place individual well-being at odds with that of the rest of society. An effective way of lowering the need for antibiotics is preventing the spread of infection through better infection control in hospitals and other health care settings and in the community, particularly in places like day-care centers and nursing homes. Vaccination also has the potential to lower the need for antibiotics (a vaccine to prevent pneumococcal disease is already available). However, as long as antibiotics are inexpensive to the patient—because of low-cost generics or insurance coverage or both—they are used as a substitute for other forms of infection control.

Antibiotic effectiveness is an open-access resource that any individual physician or patient can tap. Even a pharmaceutical firm that owns a patent on an antibiotic does not control its effectiveness, since other firms likely manufacture similar drugs in the same class of antibiotics.2 An important condition for the wise use of a natural resource is that there be clear and well-defined ownership. When there is no clear owner, then many users acting in their own self-interest tend to overuse the resource, leading to collapse, as famously described by Garrett Hardin in his paper, “The Tragedy of the Commons” (1968).3 Private ownership offers individual owners an incentive to conserve a resource so as not to diminish its future value (Scott 1955; Buchanan 1956). Since there is no single owner of antibiotic effectiveness in any single “functional resistance group”4 of antibiotics, suboptimal use is unavoidable. The incentives that shape the behavior of patients, physicians, and health care organizations, including hospitals, when dealing with drug resistance are addressed in Chapters 3 and 4.

The potential for overuse and misuse of antibiotics leads to market failures that justify regulatory intervention. Antibiotics are fundamentally different from other drugs because of the resistance externality, but for the most part, the system by which they are approved and used fails to recognize their special status. The government may have a role to play in ensuring that antibiotic effectiveness is used carefully. The roles of other federal agencies, like the Centers for Disease Control and Prevention (CDC), the Food and Drug Administration (FDA), and the National Institutes of Health (NIH), are addressed in Chapter 5, and the specific role of Medicare and Medicaid is discussed in Chapter 6.

Finally, we can draw important lessons in how to stimulate research and development into new antibiotics by studying other natural resources and understanding the tension between making better use of antibiotics and investing in new antibiotics (Chapter 7). In the past few decades we have become familiar with the tension between making better use of existing oil resources and exploration for new oil fields. Improving the efficiency with which we use oil lowers the incentives to invest in exploration, and conversely, an increase in exploration activity can lower the value of current stocks of oil. Similarly, efforts to make better use of existing antibiotics by discouraging inappropriate prescribing by physicians or misuse by patients can help slow the development of resistance but also reduce incentives for pharmaceutical manufacturers to invest in new antibiotics. And efforts to restrict antibiotic use or to conserve new, powerful antibiotics for emergency situations also have consequences for incentives to develop new antibiotics.

The insights that emerge from thinking about antibiotic effectiveness as a societal resource are useful as we search for policy solutions. However, these broad insights, without greater detail, can get lost in the context of the complex, largely privately financed U.S. health care system. Therefore, we begin from a natural resources approach but go beyond this analogy to examine potential responses to the resistance challenge within the details, realities, and constraints of health care practice in the United States. The authors of this report discuss policy recommendations and offer open questions and researchable topics that will be critical for shaping policy solutions. At this time, death from a drug-resistant pathogen, although increasing in frequency, is not yet a concern for most Americans. Many infections that are resistant to common antibiotics typically respond to other, more expensive drugs. However, running out of the cheapest antibiotics is somewhat like running out of oil. Just as oil is relatively cheap and convenient but not our only energy source, so generic antibiotics are inexpensive and available but may not be the only way to treat infectious diseases. Losing drugs that cost pennies a dose and moving to more expensive antibiotics, the newest of which can cost thousands of dollars, can have a profound impact on the health care system as a whole, and especially on the poor and uninsured, who are most likely to have to pay for some part of their care.

Nevertheless, there may come a time when even our more powerful antibiotics will no longer be consistently effective against certain types of bacteria. The proposals in this report are meant to offer a guide to prepare for and respond to the inevitable crisis, when there will undoubtedly be far greater pressure on policymakers to act.5




1 This is determined by the fitness cost of resistance—the evolutionary disadvantage of resistant strains in the absence of antibiotics. See Chapter 2 for a more complete discussion.

2 Bacteria resistant to a specific antibiotic may also be protected from similar antibiotics without the need for any additional mutation.

3 The important caveat, as described by Anthony Scott, is that “the property must be allocated on a scale sufficient to insure that one management has complete control of the asset” (Scott 1955).

4 We use the term functional resistance group in a way distinct from the more common use of antibiotic classes. Today there are 16 classes of antibiotics, but there is often cross-resistance between different classes. Use of an antibiotic affects resistance to other drugs within the same resistance class but not to drugs in other resistance classes. See Box 2.1 (in Chapter 2) for a more complete explanation.

5 Sadly, most policy responses tend to come ex post rather than in preparation for a crisis. For example, in 1937, while Congress debated the regulation of pharmaceuticals, 107 people, mostly children, died from Elixir Sulfanilamide, which contained the poisonous solvent diethylene glycol. That incident prompted passage of the Federal Food, Drug, and Cosmetic Act of 1938, which required that the safety of new drugs be demonstrated before they could be marketed and sold.




Abraham, E. P., E. Chain, et al. (1941). “Further Observations on Penicillin.” The Lancet 231(6155): 177-89.

ASM (1994). Report of the ASM Task Force on Antibiotic Resistance. (accessed May 31, 2006). American Society of Microbiology.

Buchanan, J. M. (1956). “Private Ownership and Common Usage: The Road Case Reexamined.” Southern Economic Journal 22: 305-16.

CDC (2005). Active Bacterial Core Surveillance Report: Streptococcus pneumoniae, 2005—Provisional. (accessed May 31, 2006). Centers
for Disease Control and Prevention.

Hardin, G. (1968). “The Tragedy of the Commons.” Science 162:

Harrison, P. F. and J. Lederberg (eds.). (1998). Antimicrobial Resistance: Issues and Options, Workshop report. Forum on Emerging Infections. Washington, DC: Institute of Medicine.

Maske, M. and J. La Canfora. (2006). “A Frightening Off-Field Foe: Redskins’ Noble Battles Infection That Is Growing Concern for NFL” The Washington Post, Jan. 27, E1.

Laxminarayan, R. (2003). Battling Resistance to Antibiotics and Pesticides: An Economic Approach. Washington, DC: RFF Press.

Laxminarayan, R. and G. M. Brown. (2001). “Economics of Antibiotic Resistance: A Theory of Optimal Use.” Journal of Environmental Economics and Management 42(2): 183-206.

OTA (1995). Impacts of Antibiotic-Resistant Bacteria: A Report to the U.S. Congress. OT A-H-629. Washington, DC: Government Printing Office. Office of Technology Assessment.

Scott, A. (1955). “The Fishery: The Objectives of Sole Ownership.” Journal of Political Economy 63: 116-124.