Make Those Cows Pay for Their Penicillin; America’s animals take more drugs than its people do. About 80 percent of the 51 tons of antibiotics consumed each day in the U.S. are used in agriculture and aquaculture

Make Those Cows Pay for Their Penicillin

America’s animals take more drugs than its people do. About 80 percent of the 51 tons of antibiotics consumed each day in the U.S. are used in agriculture and aquaculture.Such unrestrained use of the drugs may help farmers grow bigger cattle, but it has a drastic side effect: It prods bacteria to evolve defenses, so that the drugs don’t work so well when given to people (or fish or animals, for that matter) suffering from bacterial infections. The loss of these drugs as medical weapons is also astoundingly expensive. The current stock’s potential to prolong human life is worth upward of $60 trillion, according to a new report in the New England Journal of Medicine.

And so it is welcome news that the authors of that report also have a novel way to protect this pharmaceutical treasure: Impose a fee on all uses of antibiotics outside of human medicine. Their market-based strategy is worth a try.

Using government regulation alone to end the use of antibiotics to boost animal growth has always been a tricky proposition. The Food and Drug Administration this month asked drug makers to voluntarily relabel agricultural antibiotics so as not to allow it, and by 2017 the agency will require that veterinarians supervise the drugs’ application in livestock. Fully enforcing this new mandate will take careful monitoring. Even then, farmers and their animal doctors will still be able to use antibiotics for the purpose of preventing disease in cows, chickens, fish and so on, rather than to help them grow.

Another strategy, contained in a bill now before Congress, would close the preventive-treatment loophole by gradually banning any use of antibiotics in animals that aren’t already ill or in close contact with infected animals. But this approach, too, would require a fresh army of veterinarians to monitor use. And it would bar some arguably legitimate uses of the drugs — for example, to treat animals at the point when they are entering a feedlot and are vulnerable to infections.

The strategy proposed by the economist Aiden Hollis of the University of Calgary and Ziana Ahmed of the University of Toronto would allow farmers or their veterinarians to make their own decisions about whether any particular use of antibiotics is worth paying the price. That price would include a user fee, assessed at the point of purchase.

Such a fee is analogous to the royalties that timber and petroleum companies pay to use federal lands. In this case, the limited resource is not timber or oil but the effective life span of an antibiotic drug.

Farmers would then have the incentive to use other strategies to promote animal growth — by improving the way the animals are housed or fed, for example — but would still be able to use the drugs when the expense was warranted. Revenue from the user fees could be invested in research and development of new antibiotics.

Keep in mind that drug resistance is a problem for farmers, too; they would benefit as much if not more than the rest of us if antibiotics were used less. And like everyone else, farmers have reason to be concerned at the human toll from antibiotic-resistant infections — more than 2 million cases a year in the U.S., and at least 23,000 deaths. User fees could provide that elusive but necessary incentive to reduce the use of antibiotics on the farm.

To contact the Bloomberg View editorial board: view@bloomberg.net.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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