Antimicrobial Resistance as an Economic Time Bomb: Why Drug- discovery incentives are a fiscal Policy Problem

 Antimicrobial Resistance as an Economic Time Bomb: Why Drug- discovery incentives are a fiscal Policy Problem

Abstract:
This piece examines Antimicrobial Resistance (AMR) as a structural fiscal policy failure, rather than entirely a biological crisis, while situating the analysis within the geopolitical realignment of pharmaceutical supply chains and India’s evolving strategic position in global antibiotic economy. The argument draws on three intersecting datasets and methodologies. Epidemiological burden estimates are sourced from the Global Research on Antimicrobial Resistance (GRAM) consortium’s 2022 systematic analysis, which analysed 471 million individuals records in about 204 countries to conclude with mortality and disability adjusted life year (DALY) estimates for 23 pathogens and 88 pathogen-drug combinations (Murray et al., 2022). In Naghavi et al., 2024, longitudinal update extends this dataset through 2021 with forecasts to 2050, thus enabling analysis of trend rather than cross-sectional snapshot measure. Economic burden estimates are derived from the EcoAMR series (McDonnell et al., 2024), the World Bank multicountry general equilibrium model (World Bank, 2016), the OECD’s SPHeP - AMR model, and from a 2025 study from the London School of Hygiene and Tropical Medicine (Naylor et al., 2025). All of these decompose AMR’s fiscal consequences into direct healthcare expenditure, loss in labour productivity which is measured through human capital approach and macroeconomic GDP effects analysed under both replacement and persistence scenarios. Pharmaceutical supply chain data are derived from a cross-sectional analysis of US antibiotic importation records spanning 1992 to 2024 (Socal et al., 2023) and drug shortage surveillance data taken from FDA and ASHP reports covering January 2017 to June 2022 (Suda et al., 2023). Together, all these three data sources allow the argument to move from clinical burden to fiscal consequence and further to supply chain vulnerability. The conclusion talks about the failure to develop new antibiotics as a market failure that has measurable fiscal costs and that India occupies a structurally paradoxical position within this failure as India stands as the world’s leading antibiotic manufacturer and as one of the most AMR-burdened countries. Correcting this incentive structure in India is a fiscal policy decision that belongs in finance ministries as much as it does in health ministries. 

Keywords: Antimicrobial Resistance, fiscal policy, drug discovery, pharmaceutical supply chain, market failure, geopolitical fragmentation. 

The Quiet Pandemic:
Most people apprehend antimicrobial resistance as a hospital problem and that as something that happens to immunocompromised patients in intensive and critical care wards, but data suggests otherwise. In 2019, bacterial antimicrobial resistance was directly responsible for the death of 1.2 million people globally, with another 4.95 million deaths that were associated with infections where antimicrobial resistance made treatment harder to a greater extent (Murray et al., 2022). The GRAM Consortium which surveyed 471 million individual records, spanning 204 countries, quantifies that disease burden at 52.8 million disability-adjusted life years, which is a measure of overall disease burden. This is a figure that has exceeded the combined burden of HIV/AIDS and malaria. Naghavi et al. (2024) used the same methodology that involved  forecasts from 2021-2050 to conclude that AMR-caused deaths could reach 10 million annually by mid-century, with areas of South and Southeast Asia and Sub-Saharan Africa being the most hit. 

If policymakers and Governments were aware about this issue, why is so little done about it?

The answer is structural. These numbers do not exist in isolation from the supply chains that produce the drugs meant to address them. New drugs are commercially unwelcomed because stewardship principles, which is the careful and responsible management of resources demand their limited use. So, the market logic concerning pharmaceutical investment works directly against the public health logic which makes the availability of antibiotics which is a public good necessary (Cueni, 2019). The incentive scheme is broken, thus making it a challenge to fix. 

Why Pharma Walked Away?
Pharmaceutical companies have largely exited the research and development for antibiotic production and supply process. To evaluate why pharmaceutical companies have dropped R&D, it helps to think about the investment decision of drug developers. The standard metric is Net Present Value (NPV), which evaluates if the project will make more money than it costs or not, after apprehending that a dollar today is worth more than a dollar tomorrow. For most drugs, the NPV calculates a positive number that eventually leads to a worthwhile investment, but, for antibiotics, it drops in value and does not yield any profitable value. Sciaretta et al. (2016) conducted a systematic review for the Transatlantic Task Force on Antimicrobial Resistance wherein the estimated NPV of developing a new antibiotic costs approximately negative $42.6 million, while the NPV of neurological drugs ranges from around $720 million to $1.15 billion, hence making the commercial logic work. For the NPV threshold to become commercially rational, it should reach around $200 million which brings the current gap between actual returns and the threshold under a structural problem. 

The institutional fallout arising from this NPV failure has been significant. Eighteen major pharmaceutical companies exited the antibiotic research and development market between 1990s and 2019. Between 2016 and 2019 alone, AstraZeneca, Sanofi, Novartis and Allergan, all shut down their antibacterial programme. Every other small biotech that achieved regulatory approval for a new antibiotic drug in the decade of 2020s eventually went bankrupt or left the field. There is a noticeable failure in Bacterial research and development because bacterias are highly adaptable and they constantly keep developing new resistances, hence it becomes necessary to keep developing new antibiotics over time. Antibacterial drugs are commercially attractive because new antibiotics must always be kept on reserve and it incurs a huge cost on the pharmaceutical firms, with minimum NPV. This is more of an incentive problem. 

Quantifying the Fiscal Damage:

When AMR is framed just as a health problem, the discussion stays with the health ministry, but when it is framed as a fiscal problem, the discussions broaden. At the direct healthcare cost level, a 2025 WHO modelled study estimated that anti-biotic resistant infections impose a median $693 billion annually in global hospital costs (Naylor et al., 2025). The EcoAMR series calculates that AMR currently increases global healthcare cost by $66 billion per year, rising to $159 billion by 2050 and to $325 billion if resistance rates follow the trajectory of worst performing countries (McDonnell et al., 2024). Labour productivity losses add further to the discussion. The human capital approach, which was applied to mortality and morbidity data from the GRAM consortium, forecasts around $194 billion in annual productivity losses attributed to resistance related deaths (Naylor et al., 2025). Moreover, the OECD’s SPHeP-AMR model based on employment, absenteeism and presenteeism, along with the utilization of healthcare, has determined GDP losses in a range of 0.5 to 1.6 percent among OECD member countries through a persistence scenario. Global GDP will decrease at a rate of 1.1 percent per year (low-impact scenario) and 3.8 percent (high-impact scenario) until 2050, especially with regard to low-income countries (World Bank, 2016). All of this suggests a simple observation that governments are already paying for the consequences of AMR in their public health systems. The cost of inaction is not a future liability waiting for later, rather it is an expenditure that grows every year. 

A Market Failure, India’s Paradox, and What Governments Can Do?

Decoding from an economics viewpoint, the current happenings with antibiotic discovery is not mysterious, rather it fits into an established category which is the problem of public goods. An antibiotic held in reserve generates substantial social value while producing close to zero private revenue for its developer. The social return usually exceeds the private return, and no market mechanism steps in to correct this divergence on its own. In Pigouvian terms, the market underprovides socially necessary goods and the corrective logic directs unambiguously towards public intervention, either by allocating supply side subsidies or pitching in mechanisms that compensate innovators for social value rather than the quantity of units sold (Sciarretta et al., 2016).

Three fiscal instruments have gathered the most policy traction, amongst all:

Push incentives like grants, public-private partnerships, and direct R&D subsidies through programmes such as CARB-X and BARDA which helps to reduce upfront development cost, but can also leave the post approval commercialization problem unaddressed.
Pull incentives, specifically market entry rewards (MERs), addressing the revenue side by providing lump-sum payments upon regulatory approval and modelling, places the minimum effective reward at around $2.6 billion over ten years span (NCBI Bookshelf, 2022). 

Subscription models which were initiated by the UK NHS and Sweden, pay a fixed annual fee regardless of the volumes dispensed while also removing the commercial incentive to over-prescribe entirely (Gerbach and Bottcher, 2023). Policy consensus recommends a hybrid of all three. 

India now sits at an important global table. India supplies around 20 percent of the world’s generic drug volumes, yet sources 60 to 70 percent of its own active pharmaceutical raw materials from China through imports, with dependence levels as high as 90 percent for certain antibiotic APIs (Socal et al., 2025; ARC Advisory Group, 2024). Hence, during the COVID’19 pandemic, India was pushed to restrict exports of 26 drugs including antibiotics when Chinese supplies halted (Observer Research Foundation, 2025). On record, India bears 297,000 AMR-attributed deaths annually. India contributes 80 to 90 percent of global antibiotic production alongside China, yet it somehow lacks the fiscal capacity to fund the upstream incentive reforms that are needed to introduce new drugs into the market (Murray et al., 2022). The PLI Scheme which allocated around INR 6,940 crores and with a record of 32 API projects in completion by 2024, initiated to address supply chain fragility, but has remained just a scheme, rather than an integrated national strategy to connect discovery incentives, supply chain resilience, and stewardship into a coherent framework (Observer Research Framework, 2025). Without multilateral coordination, all efforts remain fiscally inefficient by structure and countries that need new antibiotics in a hurry retain the least capacity to finance them (Sulis et al., 2022).

The Cost of Inaction is already being Paid:

The $66 billion annual rise in AMR- related healthcare costs is today’s reality. The 1.27 million deaths recorded in 2019 have already taken place and without upstream investment in discovery incentives and supply chain resilience, these costs grow to $159 billion annually by 2050, with damage potentially affecting the globe, more like the 2008 financial crisis (Murray et al., 2022; McDonnell et al., 2024; World Bank, 2016). The knowledge to address resistance exists at the preclinical stage and an incentive architecture, which is the need of the hour, is absent. Today’s India which is at the intersection of manufacturing capacity and geopolitical opportunity is a better place than most to initiate this argument multilaterally. We lack the incentives, which is a policy issue and not a natural phenomenon. 

References:
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