The proposed cure for the world’s health problems is worse than the disease

Mexico City – A central theme of the global forum on health research and the associated Ministerial meeting, taking place here until Saturday, is that too little is spent on developing drugs for the diseases suffered by the poor. Activists here are touting a proposed new global R&D treaty, which would give government a larger role in dictating new drug developments. However, the problem has been misdiagnosed and the proposed cure may be worse than the disease.

The premise of the meetings here in Mexico City is the idea that only ten per cent of global health research is devoted to conditions that account for 90 per cent of the global disease burden – the so-called ‘10/90 gap’. In spite of its rhetorical appeal, however, the 10/90 gap is a myth.

Most disease and death in poor countries are the result of poor nutrition, indoor air pollution, dirty water, inadequate sanitation, and a lack of access to healthcare and education. Significantly more people die from diarrhoea each day than from all the so-called ‘neglected’ diseases combined. The same is true for smoke-induced respiratory diseases and malnutrition. Moreover, drugs already exist for most of the diseases of poverty.

The tragedy is that nearly all of the death and misery associated with diseases of poverty could be avoided if the world’s poorest people could actually gain access to the myriad cheap medicines and preventative techniques that already exist. However, all too often governments deliberately hinder their peoples’ access to essential medicines by pursuing counterproductive and obstructive policies.

Millions of poor people are priced out of treatment by their own governments, which impose a range of punitive taxes and tariffs on medicines. In Nigeria, for example, the government imposes a total of 34% of taxes and tariffs on medicines. The rate for Sierra Leone is 40% and even applies to vaccines. In fact, the government of Sierra Leone raises about as much in taxes and tariffs on medicines as it spends on public health.

Many poor country governments also allocate vastly more to military expenditure than to healthcare. The government of Burundi, for instance, spends 7.6 per cent of its GDP on defence, but a mere 2.1 per cent on healthcare. For Ethiopia the ratio is 5.2 and 1.4. The government of Eritrea spends an astonishing 23.5 per cent of GDP on its military and only 3.7 per cent on health. It is highly improbable that the citizens of these countries would choose to spend their money this way.

More fundamentally, much of the disease burden of low-income countries is caused by their governments’ failure to create the conditions in which wealth can be created. Greater prosperity creates a virtuous circle, which allows people to improve their nutrition and sanitation, as well as having better access to education and healthcare.

The governments of poor countries often hinder the creation of wealth, imposing obstacles in the way of owning and transferring property, imposing unnecessary regulatory barriers on entrepreneurs and businesses, and restricting trade through extortionate tariffs. It is these and other political failures that have left poor populations without the necessary resources to access the medicines that could so easily transform their quality of life.

The WHO has observed that a healthier population is better able to engage in economic activities and thereby generate extra income, creating a virtuous circle. This is no doubt true. However, it does not necessarily follow that improving the health of the population will kick-start this process. If people are prevented from engaging in economic activities, then no amount of improvement in population health will enable people to escape from the lowest rung.

What of the suggestion that the public sector can successfully take on the burdens of pharmaceutical R&D? This is the premise underlying a proposal to create a ‘Global R&D Treaty’ being bandied around here in Mexico by various activists. The historic experience suggests this proposal is insanely optimistic at best and dangerous at worst. The public sector has proved to be extremely ineffective at identifying and developing treatments for diseases.

Lack of accountability is a major problem. Public sector researchers are rarely ‘results oriented’ in the same way that the private sector is. As a result, there is less incentive to ensure that funds are appropriately used. In the late 1980s, a public-sector project to develop a vaccine for malaria led to millions of dollars disappearing into researchers bank accounts. By contrast, private sector pharmaceutical companies have been forced by competitive pressures to develop technical skills and commercial acumen that enable them to make decisions about which molecules are worth developing into drugs.

Well-meaning attempts to reform the system through which R&D is conducted may have the unintended consequence of undermining the incentive system which has produced so many successful drugs for treating patients of rich and poor countries alike. If heavy taxation and regulation are imposed on these companies, as is advocated in the proposed Global R&D Treaty, companies will have far less incentive to invest in the risky and costly business of researching and developing drugs.

The current system of R&D has been immensely successful in anticipating demand and shouldering the considerable cost of turning scientific ideas into drugs that are both safe and effective. We should be seeking to strengthen this system, not burying it – for the sake of the future health of both poor and rich alike. Meanwhile, if governments really care about improving the health of the poor they should remove the barriers they put in the way of economic development and access to medicines.

Author: Philip Stevens is Director of Health Projects at International Policy Network and the author of The Diseases of Poverty and the 10/90 Gap, published this week by IPN. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the Free Market Foundation.

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FMF Feature Article / 16 November 2004 - Policy Bulletin / 29 September 2009

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