Campaign for Fighting Diseases Blog

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.

Taxed to death

Interesting article in the UK Guardian here about the Global Fund, which is threatening to pull the plug on grants to Nigeria over transparency issues.

Where the article falls down is on the cost of drugs issue.  The Guardian hack says that Nigerians can't afford ARV medicines because of the health user-fees imposed on the country by the World Bank and IMF programmes of the 1980s.

That's not really the point. The point is that all medicines imported in Nigeria are subject to eye-wateringly high taxes and tariffs - imposed by none other than the government of Nigeria!

A 2003 study by the European Commission showed that the Nigerian government inflates the cost of imported medicines by some 34 per cent with its various levies. This is a highly regressive form of taxation, because it hits the poor and sick hardest.

So before we start bleating about costs and asking the west for more aid, we should ask the governments of these countries to do something simple, easy and right. Make all medicines - both domestic and imported - free of any kind of tax.

You can read more about taxes and tariffs on medicines here.