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Overcoming Market Obstacles to New Antibiotics

The pharmaceutical industry is at its best when private profitability and social good coincide, as it does when useful new drugs attract large market shares. Unfortunately, In the field of antibiotics development, the divergence between profit-seeking behavior and the public good is taking the world to the brink of crisis.

LONDON – From the strict perspective of some investors, astute financial management by a company to bolster its share price is a good thing. By this narrow logic, when it comes to the pharmaceutical industry, we should be unconcerned if drug firms’ share prices are boosted not by new discoveries, but by financial maneuvers, such as share buybacks or tax inversion.

But the pharmaceutical industry is not an industry like any other. It is intrinsically bound up with the public good, having historically provided the medical innovation that is essential to society’s ability to fight disease. Furthermore, while patients are the consumers, the actual buyers are often governments. Even in the United States, public purchasers account for at least 40% of the prescription drug market.

Governments also bankroll much of the research underlying the industry’s profits. The US government is the world’s largest funder of medical research and development; globally, taxpayers finance a third of spending on health research. So it should come as no surprise when policymakers insist that the industry’s efforts at innovation be channeled into areas that provide the most benefit to taxpayers and patients, rather than those – like financial maneuvers – that might be most profitable for the industry in the short term.

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