The problem of drug-resistant antibiotics is a 'tragedy of the commons'

Kasim Kutay, CEO of Novo Holdings, wrote in a Nov. 9 article in the International Business Times that an underlying market breakdown is preventing the discovery of new antibiotics that treat "superbugs."

Superbugs are drug-resistant bacteria which cannot be killed even using multiple antibiotics. The more an antibiotic is used (in unnecessary prescriptions, as an ingredient in hand sanitizers, or in farm animal feed to prevent infection outbreaks in crowded settings), the more likely a mutated virus will survive that is resistant to the antibiotic that destroyed most of its brethren, Kutay wrote.

Superbugs "kill 700,000 people worldwide each year. And that annual toll could rise to 10 million people by 2050, largely because superbugs are evolving faster than we're creating new treatments," he wrote.

He goes on to describe the "broken" state of the antibiotic market. Because antibiotics that treat superbugs are preserved for use in rare cases, to prevent the development of superbugs resistant to the new antibiotics, these new medicines are inherently unprofitable compared with widely used drugs.

As a result, in the past 30 years, only one new class of antibiotics has been developed, and research-and-development investment in antibiotics has crawled to a halt.

One can think of this problem as being a gap in the effectiveness of the free market, or a sort of inverse "tragedy of the commons" — the game theory term for when no one individual profits from doing what's right for the community, and the community suffers as a result, including the individual players.

Superbugs are substantially caused by another tragedy of the commons — using antibiotics too broadly. Here too, any one company had immediate incentive — making money — to act in a way that reduced the efficacy of antibiotics, and no incentive at all to consider future the impact on society.

In August, 180 CEOs of major corporations signed a statement saying companies have obligations to society beyond their stockholders. It is dicey to ask companies to do more than make money, and not break the law doing so. This is the very power of capitalism: a single-minded focus on satisfying customers at the lowest prices.

But neither is it plausible to anyone who is not a true libertarian that the "invisible hand" of the market will clean up the messes we create. In the real world, the "invisible hand" misses spots.