Campaign for Fighting Diseases Blog

Wealth and health

The BBC covers today a new report from British pressure group, Save the Children, which claims that economic growth does not necessarily translate into a healthier population.

The report cites examples such as India, which still suffers high rates of child mortality despite having undergone a prolonged period of economic growth.

This report is saying nothing new. Reading between the lines, it is a fairly standard call for governments to redistribute wealth and intervene more heavily in the economy, in order to iron out the inequalities which they perceive to perpetuate ill health.

However, economic growth certainly does improve health of the individuals who are able to benefit from it, not least because it enables people to afford better sanitation and living conditions, which are key to addressing a large part of the disease burden in less developed countries. 

The point is not everyone is able to share in economic growth, largely because of counterproductive governance.  For example, if the poor do not have property rights, it makes it impossible for them to borrow capital to invest in their own businesses and education and climb up the economic ladder.  Meanwhile, the poorest countries erect massive, costly regulatory obstacles to entrepreneurship, meaning that only the politically well-connected and rich can start businesses and create wealth.  And so on.

Save the Children are right to point out that the poor are still suffering unacceptably poor health as a result of poverty.  Their diagnosis is way off the mark, because the redistributory measures they advocate would stifle economic growth and cut off the one mechanism that is vital for improving health.

It would be more constructive for Save the Children to talk about empowering the poor instead of clobbering the rich.

What is the rationale behind spending 0.7% of GDP on aid?

Last week I spoke at the New Zealand launch of Fighting the Diseases of Poverty in Wellington.  The event was superbly hosted by the New Zealand Business Round Table, and the discussant was Dr Peter Adams, head of NZAID. 

One comment from the audience urged the NZ government to reach the UN target of spending 0.7% of its GDP on aid by 2015.

However, I'm not sure what the empirical basis is for this target. Can aid not achieve its purposes at 0.75% of GDP, or even 0.1%?  To me, the figure seems to have been somewhat arbitrarily settled upon by aid campaigners, without real reference to the documented evidence on the relationship between aid and economic growth.

Perhaps aid campaigners are worried about their own future funding, as many of the biggest (such as Oxfam) derive a huge part of their budget from government.

A prize turnip of an idea

After years of campaigning, activists have narrowed the debate about health care in poor countries to a single premise: Patents drive up the cost of medicines, so patents are bad.

As part of this campaign, activist groups such as Medecins sans Frontieres and Knowledge Ecology International regularly cite the fact that few drugs have been developed for several tropical diseases. On the basis of this, they claim that markets are incapable of providing drugs that people need.

It takes quite a distortion of the evidence to support this claim.  Nevertheless, the NGOs argue that the current market-based system through which drugs are developed needs to be dismantled, and replaced with a system where government experts decide what needs to be researched.  They would then allocate 'prizes' to drug developers who are able to develop efficacious medicines that meet the terms of the prize.

Without breaking into much of a sweat, I can think of three immediate objections:

• This would result in the immediate politicisation of drug research, with research being allocated to political rather than clinical priorities.  I can't see how this would be an improvement on the current system.
• the value of the prize will never be a true reflection of the market value of the invention, no matter how clever the prize awarding committee.  If the prize is too low, companies will be reluctant to compete for future prizes, leading to fewer new drugs. If the prize is too high, the new system will squander taxpayers' money and divert effort from other areas of research.
• Prizes were widely used in the Soviet Union to stimulate research.  Not only did the USSR produce very few novel drugs, but many scientists risked life and limb trying to escape to the West where their talents would be properly rewarded.

Can any readers think of any more objections, or even reasons why I'm wrong? The comments are open.

World Bank: it's okay if drugs cost more

Following on from the last post about local pharmaceutical production, check out this op-ed in the Malawi Times (archived on the CFD site).

The column quotes a 2005 World Bank report which argues that “pride in a national industry and political pressure to make it work” are “significant assets in achieving (...) ultimate treatment goals.” Furthermore, such political goals may be worth the “potentially slightly higher costs per unit.”

In other words, the World Bank is saying it is worth promoting local production for political reasons, even if it is more expensive.

Great, eh?

Ricardo to global health community - protectionism doesn't work!

In the ongoing battle to improve access to medicines in the poorest parts of the world, the global health community is resurrecting a ghost from the 1950s: the promotion and protection of local pharmaceutical companies, who can then supply home markets without the need for unreliable foreign suppliers.

This latest version of the hoary 'infant industry' protectionist trade policy comes with the backing of a medley of NGOs, UN agencies and even the World Bank.

It seems that the results of this protectionism are as suspect as the theory.  In this new paper from the CFD, author Roger Bate takes a look at the economics of subsidising local drug production, and finds that it gives rise to a whole host of unintended consequences. 

Most dangerously for patients, it seems that many local pharma cos  do not have the skills or capacity to manufacture drugs to international standards - raising the spectre of increased drug resistance or clinical failure (otherwise known as death).

It seems that trying to defy basic laws of economics -- such as comparative advantage and specialisation - -  not only costs more, but comes with a significant health risk. 

Not only that, handing the control of industry to politicians opens up all kinds of opportunities for corruption.

Surely it would make economic sense to simply import drugs from countries that have the skills to do it safely and cheaply?

Perhaps it is time to send these new protectionists back to Economics 101.

Irresponsible ARV roll-out may undermine scientific breakthoughs

The Times of London has a good leading article on the approval in Britain of the new AIDS therapy Isentress, which it describes as a 'triumph of human ingenuity'.

The arrival of this new drug is indeed miraculous when considered against an increasingly burdensome drug regulatory environment, and the escalating political risks of investing private capital in AIDS research.

The column lets itself down, though, by reflexively and unfairly laying into the South African government's track record on AIDS treatment.  In early 2007, 140,000 of 983,000 eligible South African patients were receiving antiretroviral treatment — the highest number in the developing world. This number is increasing.

South Africa has attracted controversy because its AIDS treatment programme has not moved as quickly as AIDS activists would have liked (in addition to the health minister’s peculiar comments about beetroot).  However, it has always emphasised proper monitoring of patients and the use of certified drugs.  This certainly takes a while to put in place, but leaves SA well-placed to tackle its AIDS problem.

If African governments roll out treatment before infrastructure is ready, more patients will become resistant to existing drugs, leading to higher treatment costs and more premature deaths.  AIDS treatment programmes need to be rolled out slowly and responsibly, allowing time for the necessary infrastructure to be put into place. 

To blunder into an African country with no health infrastructure and promote an ultra-rapid roll out of treatment, as WHO has advocated in the past, risks quickly destroying the effectiveness of new drugs like Isentress.

That is a betrayal of patients, and a betrayal of the researchers whose hard work has brought us these miracle drugs.