The Anatomy of the Current Antibiotics Shortage

Why does the world seem to suddenly be fighting over antibiotics? For one thing, production is increasingly concentrated in two countries - China and India. For another, an entire industry seems surprised by the rapid increase in demand for drugs after the decline during the Covid-19 pandemic. Our results suggest three broad policy recommendations. First, health policies should invest into improvements of the demand tracking, planning, and forecasting infrastructure. Health policies should focus on shortages of drugs for which substitutes are also unavailable. Second, the health system seeks to guarantee the sufficient provision of drugs at low prices. The international division of labour that has emerged seems to provide price efficiency, but supply security risks have become increasingly evident. This implies a refocusing of policies towards greater supply resilience. Third, the market structure should not only mitigate supply risks, but the market design should ideally internalise supply security risks, thereby rendering ad-hoc policy interventions obsolete.