Bioprospecting, drug choices and conservation of biological diversity under free trade

Using a two-period general equilibrium model with an open economy, this paper shows under which conditions bioprospecting might work for the conservation of biodiversity and under which conditions it might fail. The paper emphasizes the importance of a systematic search process using prior information on the plant species and the health characteristics for successful bioprospecting. The paper reinforces the usual factors that affect land conservation through bioprospecting. Lower costs of the bio-prospecting process or manufacturing of drugs; large royalty payments and a low discount rate in the South will lead to conservation through bioprospecting. Strategic pricing in the model provides some novel findings. A large number of bio-prospected drugs; and the invention of drugs that cure high occurrence or high disutility diseases—lead to conservation through bioprospecting. On the other hand, free trade impacts can increase the alternative use value of conserved land and lead to land conversion. Long delays in successful bioprospecting; the strategic nature of the market and general equilibrium impacts ruling out a larger set of bio-prospected drugs; and drug companies’ ignorance of many southern-specific diseases for low earning potentials—may also result in failure of the bioprospecting process. The paper concludes that bioprospecting is a weak tool for biodiversity conservation in the South and other biodiversity conservation tools have to be used to reinforce the benefit generated by bioprospecting.