Should New Antimalarial Drugs Be Subsidized?

34 Pages Posted: 17 Oct 2006 Last revised: 13 Feb 2014

See all articles by Ramanan Laxminarayan

Ramanan Laxminarayan

The Center for Disease Dynamics, Economics & Policy (CDDEP); Center for Disease Dynamics, Economics & Policy; Princeton University

Ian W. H. Parry

Resources for the Future

David L. Smith

National Institutes of Health (NIH)

Eili Y Klein

Center for Advanced Modeling in the Social, Behavioral, and Health Sciences, Department of Emergency Medicine; Johns Hopkins University - Department of Emergency Medicine

Date Written: September 1, 2006

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.

Keywords: antimalarial drugs, resistance externality, transmission externality, subsidies, welfare effects

JEL Classification: I18, H23, O15

Suggested Citation

Laxminarayan, Ramanan and Parry, Ian W. H. and Smith, David L. and Klein, Eili Y, Should New Antimalarial Drugs Be Subsidized? (September 1, 2006). RFF Discussion Paper No. 06-43. Available at SSRN: https://ssrn.com/abstract=937935 or http://dx.doi.org/10.2139/ssrn.937935

Ramanan Laxminarayan (Contact Author)

The Center for Disease Dynamics, Economics & Policy (CDDEP) ( email )

1616 P St NW
Suite 600
Washington DC, DC 20036
United States

Center for Disease Dynamics, Economics & Policy ( email )

1616 P Street, NW
Washington, DC 20036
United States

HOME PAGE: http://www.cddep.org

Princeton University ( email )

22 Chambers Street
Princeton, NJ 08544-0708
United States

Ian W. H. Parry

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States
202-328-5151 (Phone)
202-939-3460 (Fax)

HOME PAGE: http://www.rff.org/~parry

David L. Smith

National Institutes of Health (NIH) ( email )

9000 Rockville Pike
Bethesda, MD 20892
United States

Eili Y Klein

Center for Advanced Modeling in the Social, Behavioral, and Health Sciences, Department of Emergency Medicine ( email )

5801 Smith Ave
Davis Building, Suite 3220
Baltimore, MD 21212
United States

Johns Hopkins University - Department of Emergency Medicine ( email )

1830 East Monument Street
Suite 6-100
Baltimore, MD 21287
United States

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