An Evaluation of Factors Affecting Drug Quality: Evidence from the Antimalarial Market in Uganda

The quality of healthcare, and specifically medicines, is reportedly low in developing countries. We purchase and test 879 antimalarial drugs from 459 outlets in 44 randomly selected parishes (131 villages) in Uganda to estimate the average rate of drug quality. We focus on artemether-lumefantrine (AL), the first-line treatment for malaria in Uganda. Purchased drugs are tested for quality using a handheld spectrometer. Our methodology allows us to differentiate between counterfeit and substandard drugs; counterfeit drugs are different than a high quality drug of the same brand, while substandard drugs are different and also likely medically ineffective. Data are then linked to surveys of drug vendors at the same outlets to test hypotheses of how low quality drugs arrive at market. In contrast to previous literature, we find that AL is widely available and drug quality is relatively high in the study area. While 17% of samples are counterfeit, only 3.4% of purchased drugs are substandard. We subsequently establish three new empirical facts regarding low-quality drugs. First, substandard drugs are typically dilutions of high quality doses, rather than dosages of all ineffective tablets. Dilution increases noise and makes it more difficult for customers to recognize when they have been sold a substandard dosage. Second, we show that counterfeit dugs are priced slightly lower, but substandard drugs are priced the same as high quality drugs. These results are consistent with consumer deception as opposed to a low willingness to pay for quality. Third, a small percentage of vendors are complicit in selling deceptively ineffective medicines. However, identifying which vendors and outlets sell low-quality medicines is difficult.