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Should New Anti-Malarial Drugs be Subsidized?

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Author Info
Laxminarayan, Ramanan () (Resources for the Future)
Parry, Ian W.H. () (Resources for the Future)
Smith, David L.
Klein, Eili () (Resources for the Future)

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Abstract

We use analytical and numerical models to explain and quantify the welfare effects of subsidies for artemisinin combination treatments (ACTs), a valuable new class of antimalarial drugs. There are two (second-best) efficiency rationales for such subsidies: by expanding drug use, they reduce infection transmission from one individual to another, and they slow the evolution of drug resistance by deterring use of substitute monotherapy drugs for which resistance emerges more rapidly than for ACTs. Our analysis merges epidemiological models of malaria transmission among individuals and mosquitoes, evolution of drug resistance, and economic models of the demand for alternative drugs; parameter values for the simulations are representative of malaria prevalence in sub-Saharan Africa. We find that large subsidies for ACT are welfare improving across many plausible scenarios for malaria transmission, drug-demand elasticities, and evolution of drug resistance; the benefits of the policy are often several times larger than the costs.

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Paper provided by Resources For the Future in its series Discussion Papers with number dp-06-43.

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Date of creation: 25 Sep 2006
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Handle: RePEc:rff:dpaper:dp-06-43

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Related research
Keywords: antimalarial drugs; resistance externality; transmission externality; subsidies; welfare effects;

Find related papers by JEL classification:
I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Laxminarayan, Ramanan, 2003. "ACT Now or Later: The Economics of Malaria Resistance," Discussion Papers dp-03-51, Resources For the Future. [Downloadable!]
  2. Chima, Reginald Ikechukwu & Goodman, Catherine A. & Mills, Anne, 2003. "The economic impact of malaria in Africa: a critical review of the evidence," Health Policy, Elsevier, vol. 63(1), pages 17-36, January. [Downloadable!] (restricted)
  3. Rudholm, Niklas, 2002. "Economic implications of antibiotic resistance in a global economy," Journal of Health Economics, Elsevier, vol. 21(6), pages 1071-1083, November. [Downloadable!] (restricted)
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