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Continued from Previous…… This series is based on report compiled by Jilian Clare Cohen1, Monique Mrazek2, and Loraine Hawkins3 for World Bank.
Governments have the responsibility to install reliable institutional policies, processes, and administrative structure to ensure the outcome of public welfare. Both the main arms of healthcare system vis-à-vis pharmaceuticals need government attention. First is the manufacture/production/quality control of medicines being manufactured by the Pharma companies. Second is the system of medicines procurement by the government, its pricing, storage, and logistics across the health infrastructure. Although provincial governments in Pakistan spend billions of rupees on procurement of medicines, medical disposables, hospital consumables, and hospital equipment and accessories, the fact remains that most people must pay medical expenses from their pockets. The paper referred above looks at the performance of both arms separately. [Quote]
WHY IS THE PHARMACEUTICAL SYSTEM VULNERABLE TO CORRUPTION?
The pharmaceutical system is susceptible to fraud and corruption for a variety of reasons. First, the sale of pharmaceutical products is lucrative, the more so because the final customers (patients and their families) are more vulnerable to opportunism than in many other product markets, due mainly to asymmetric information. Pharmaceutical suppliers (drug manufacturers, importers, wholesalers, prescribers, pharmacists) are profit maximizers and will choose to behave in ways that maximize their interests. There is nothing wrong with profit maximization so long as behavior does not go beyond legal norms, and in the health sector, professional ethical norms. The sale of counterfeit drugs is particularly attractive where the opportunity for arbitrage exists. In 2002, for example, preferentially priced HIV drugs produced by GlaxoSmithKline that were destined for poor patients in Africa were intercepted and illegally resold in Europe at a substantial mark-up by a Dutch wholesaler.
The second reason why the pharmaceutical sector is susceptible to fraud and corruption is that it is subject to a significant degree of government regulation, such that if there are not appropriate checks in place, government officials may have a monopoly on several core decision points in the pharmaceutical supply chain, and may have the capacity for individual discretion in making regulatory decisions. Government intervention is justified in the pharmaceutical sector given the imperfect nature of the market and the need to improve the efficiency of resource allocation. Also, regulation is rationalised on the grounds of protecting human life and public health by ensuring that only safe and efficacious medicines are made available in the market. However the trade-off is that in some sectors, the incidence of corruption may be higher where the state retains a major role in the economy and where its bureaucracy is pervasive. While there is a need for government intervention on the grounds of public safety and to an extent to improve efficiency and access, without transparency and an accountability framework, state regulation in the pharmaceutical sector can experience regulatory capture, permit individual deviance from norms and be open to corruption in general.
If there are no robust institutional checks and oversight mechanisms in place, government regulators may be able to make discretionary decisions about what drugs should be selected. Weak legislative frameworks result in poor outcomes (high prices, problems in drug quality, availability of supply) and create opportunities for unethical and corrupt behavior.
The third reason why the pharmaceutical sector is vulnerable to fraud and corruption is because the supply chain is extremely complex, often involving up to thirty different parties before the product reaches the end user, thus creating the opportunity for the introduction of counterfeit and substandard drugs. Additionally, it can be difficult to distinguish authentic pharmaceutical products from counterfeit or sub-standard ones. In many countries with weak regulation and enforcement of drug distribution standards, the sale of counterfeit, unregistered or expired drugs are very common. The WHO estimates that about 25 percent of drugs consumed in poor countries are counterfeit or substandard. It is very difficult to control such practices particularly where patients and even health professionals are not able to differentiate between legitimate and fake drugs. Counterfeiters are often very skilful at copying the form, colour, trademarks and packaging of legitimate products. While in many markets patients tend to have more confidence in recognized foreign produced drugs, the high prices for the legitimate versions of these relative to purchasing power drives many consumers to seek lower cost alternatives which in many cases are not legal, safe or reliable. These actions have had significant social costs both in terms of access to drugs particularly for the poor but also in terms of the quality and safety of the drug supply. It is only when there is blatant sloppiness in copying, or when unfortunately serious health consequences occur, that patients and health care providers are able to identify counterfeit medicines. [Unquote]
All the above resonates very well with the situation in Pakistan. Profit maximization is done in a bold and visible manner, and government officials carry disproportionate authority which they use aggressively to make money. Counterfeit drugs problem is there, but the extent is neither defined nor measured.
To be Continued……
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- Jilian Clare Cohen – Toronto, Canada
- Monique Mrazek – Latin America
- Loraine Hawkins – London