1960S ECONOMICS AND MODERN MEDICINES -- A FATAL COMBINATION
July 28, 2008
In recent years, the international community has decided Africa's health care crisis is due to the lack of pharmaceuticals, many of which have to be imported from overseas. Many African countries are now actively building local domestic pharmaceutical industries, in hopes of becoming self-sufficient in drug production to drive down prices, says the Fraser Institute.
The health community seems to have forgotten the economic lessons of the 1960s -- primarily, that if there is no sound economic reason for an industry to exist in a particular region, a government will only create problems by trying to force it into existence, says Fraser. Moreover, there are good reasons why an internationally competitive pharmaceutical industry has not emerged spontaneously in Africa:
- Building pharmaceutical plants to the highest standards of safety and hygiene require large amounts of capital and expertise, which many countries lack.
- Many components of these plants must be imported from Europe and the United States; this requires foreign currency, which is often in short supply in Africa.
- The raw materials and active ingredients required often incur import taxes, driving up the final cost of a drug.
- The cost of expensive generating equipment and diesel fuel also must be factored in to the final cost of the drug.
- Ensuring good manufacturing standards is difficult in much of Africa; in fact, less than 70 percent of African countries have a properly functioning drug regulatory system.
- The success of local production relies on the ability of African companies to manufacture exact molecular replicas of brand name drugs; otherwise, there is no guarantee they will work on patients the same way.
- Even slight deviations in the levels of active ingredients in an AIDS drug can encourage mutations, create drug resistance, and even result in death.
Source: Philip Stevens, "1960s Economics and Modern Medicines- A Fatal Combination," Fraser Forum, June 2008.
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