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Should New Anti-Malarial Drugs be Subsidized?

Author

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  • Laxminarayan, Ramanan

    (Resources for the Future)

  • Parry, Ian W.H.

    (Resources for the Future)

  • Smith, David L.
  • Klein, Eili

    (Resources for the Future)

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.

Suggested Citation

  • Laxminarayan, Ramanan & Parry, Ian W.H. & Smith, David L. & Klein, Eili, 2006. "Should New Anti-Malarial Drugs be Subsidized?," RFF Working Paper Series dp-06-43, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-06-43
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    File URL: http://www.rff.org/RFF/documents/RFF-DP-06-43.pdf
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    References listed on IDEAS

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    1. Darius Lakdawalla & Tomas Philipson & Y. Richard Wang, 2006. "Intellectual Property and Marketing," NBER Working Papers 12577, National Bureau of Economic Research, Inc.
    2. Tomas Philipson & Stephane Mechoulan, 2003. "Intellectual Property & External Consumption Effects: Generalizations from Pharmaceutical Markets," NBER Working Papers 9598, National Bureau of Economic Research, Inc.
    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.
    4. Laxminarayan, Ramanan, 2003. "ACT Now or Later: The Economics of Malaria Resistance," RFF Working Paper Series dp-03-51, Resources for the Future.
    5. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Jean-Claude Berthélemy & Josselin Thuilliez, 2014. "The economics of malaria in Africa," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01045213, HAL.
    2. Srivastava, Divya & McGuire, Alistair, 2015. "Patient access to health care and medicines across low-income countries," Social Science & Medicine, Elsevier, vol. 133(C), pages 21-27.
    3. Schaefer, K. Aleks, 2016. "Anti-Malarial Biotechnology, Drug Resistance, and the Dynamics of Disease Management," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235716, Agricultural and Applied Economics Association.
    4. Jean-Claude Berthelemy & Josselin Thuilliez, 2014. "The economics of malaria in Africa," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01045213, HAL.
    5. Milusheva,Sveta, 2020. "Using Mobile Phone Data to Reduce Spread of Disease," Policy Research Working Paper Series 9198, The World Bank.
    6. Biswal, Arun Kumar & Jenamani, Mamata & Kumar, Sri Krishna, 2020. "The impact of RFID adoption on donor subsidy through for-profit and not-for-profit newsvendor: Implications for Indian Public Distribution system," Socio-Economic Planning Sciences, Elsevier, vol. 69(C).
    7. Divya Srivastava & Alistair McGuire, 2016. "The determinants of access to health care and medicines in India," Applied Economics, Taylor & Francis Journals, vol. 48(17), pages 1618-1632, April.
    8. Terry A. Taylor & Wenqiang Xiao, 2014. "Subsidizing the Distribution Channel: Donor Funding to Improve the Availability of Malaria Drugs," Management Science, INFORMS, vol. 60(10), pages 2461-2477, October.
    9. Milusheva, Sveta, 2020. "Managing the spread of disease with mobile phone data," Journal of Development Economics, Elsevier, vol. 147(C).

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    More about this item

    Keywords

    antimalarial drugs; resistance externality; transmission externality; subsidies; welfare effects;
    All these keywords.

    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, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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