Treasury Secretary Hank Paulson will today visit the A to Z Textile Mills factory in the Tanzanian city of Arusha. This will invariably be seen as an endorsement of Africa's only anti-malaria bednet producer, which may seem like a good idea: A to Z is a well-managed firm, and it is already increasing the supply of bednets in East Africa. But in a wider context, offering such overt U.S. support to the idea of aid-driven local production is not sensible policy.
As I have documented, arbitrary bureaucratic interventions and corrupt practices cost thousands of lives every year across Africa. Pharmaceuticals often sit on quaysides and spoil in the heat, while clinics suffer shortages that directly affect the health of their patients. Local production may avert the perils of customs officers seeking backhanders; but a more direct approach would be to stamp out the corruption that is hampering distribution. This would expedite distribution, improve the reliability of supply, and reduce costs immediately.
But the murky world of international health politics rarely encourages straightforward and sensible action. Last week in Geneva the health activist community discussed how to end the patent and pricing systems of the research-based pharmaceutical companies, which activists claim keep prices high in poor countries and restrict research. One proposed "solution" would stipulate that prizes for research breakthroughs should partially replace patents—it has even been endorsed by Democratic presidential candidate John Edwards.
Many developing countries, whose people desperately need the drugs developed by the pharmaceutical industry, impose duties and taxes on those drugs at various stages of importation. Along with wholesaler and retailer markups, this nearly doubles their import price by the time they reach the patient. Again, a more direct approach to reducing drug costs would be to remove these tariffs and taxes, as most of the nations of Southern Africa have done.
In tandem with left-wing activists, the media has promoted an image of pharmaceutical companies as greedy and callous—profiting from the sick and the helpless—which has spurred a campaign for alternatives to branded drugs. But this campaign pays little regard to the quality of drugs, or to patient safety. While effective bednets are quite easy to produce with basic facilities and skills, pharmaceuticals are another matter. Both the World Health Organization (WHO) and the Global Fund to Fight AIDS, Tuberculosis, and Malaria have carelessly promoted generic production without due quality control and safety procedures.
The consequences were predictable. In 2004, one year into its three-year plan to get 3 million people on antiretroviral treatments, the WHO had to de-list 18 HIV drugs from its approved drugs list because they could not be shown to actually work. The Global Fund recently suffered a similar humiliation, when it surreptitiously withdrew 22 malaria drug formulations from its approved list for lack of provable efficacy.
In both cases either the drugs were found to be substandard or the manufacturer could not provide evidence of their bioequivalence. The two largest agencies entrusted with providing health advice and funding clearly had not paid enough attention to the quality of the products they agreed to purchase with taxpayer money. Patients may have died as a result.
Tanzania's A to Z Textile Mills is a private operation that receives investment and advice from the Sumitomo Corporation of Japan. While its products may be slightly more expensive than those of its international competitors, they appear to be of good quality. The A to Z factory also benefits the Tanzanian economy, employing several thousand people. It may well deserve the official U.S. support offered by Paulson's visit today.
Still, the A to Z experience is not necessarily representative of local production in the developing world. Production of antiretroviral and anti-malaria drugs requires far more sophisticated techniques than bednet production. Countries may not possess the requisite facilities, and the drugs produced may be substandard. The U.S. government should steer clear of directly or indirectly endorsing them and instead focus on rooting out corruption, and replacing ineffective infrastructure, which remain the real problems.