Credit: CDC
Forty percent of all malaria-caused deaths in sub-Saharan Africa occur in the Democratic Republic of Congo and Nigeria, according to the World Health Organization. The private sector "supply chain" manages 74% of the drug volume in Congo and 98% in Nigeria where malaria-stricken patients rely on "drug shops" and other for-profit retail outlets to get life-saving medicine.
New research forthcoming in Management Science determines that the "shelf life" of malaria-fighting drugs plays a significant role in how donors should subsidize the medicine in order to ensure better affordability for patients.
New concerns over the emergence of drug resistant parasites are yet one more reason that private donors who fund malaria drug programs remain intent on making medicine available and affordable to patients. Artemisinin-based combination therapies, known as ACTs, are considered the best anti-malarial drugs but the lack of affordable ACT supplies for the poor motivates private donors to intervene and improve access.
In "Subsidizing the Distribution Channel: Donor Funding to Improve the Availability of Malaria Drugs," Terry Taylor, associate professor, UC Berkeley's Haas School of Business, and co-author Wenqiang Xiao, New York University's Stern School of Business, analyzed purchase subsidies vs. sales subsidies.
Donors structure their purchase and sales subsidies per each product unit. A purchase subsidy is a discount or rebate offered to the retailer at the point of sale or when he places his order. In contrast, the retailer only benefits from a sales subsidy when he sells the product to the consumer.
By analyzing the product characteristics (short vs. long life), customer population (degree of heterogeneity or diverse makeup), and the size of the donor's budget, Taylor and Xiao found that for long shelf life products, such as ACTs (with a 24 to 36-month life from the factory to expiration), donors should only offer a purchase subsidy. In contrast, if a product has a short shelf life, a sufficiently large donor budget and a diverse customer population, it is optimal to offer a sales subsidy in addition to a purchase subsidy. Why?
"The sales subsidy becomes more attractive for perishable products because you don't have to subsidize a purchased product that doesn't sell," says Taylor.
Unlike previous research, the study's micro-level approach focuses on distribution channel details such as demand uncertainty, supply-demand mismatch, and the impact of subsidies on stocking and pricing decisions.
"In principle, it would seem that you would want to use both levers to influence stocking and pricing decisions," says Taylor. "However when we took both into account, our model shows that the purchase subsidy is more effective in increasing consumption of the medicine and ultimately, saving lives."
Taylor hopes these findings will help guide donors in improving the private-sector distribution channel for malaria drugs. He hopes that in the future, the study's results could also help inform subsidy decisions for other global health products such as oral rehydration salts, the first-line of treatment for childhood acute diarrhea in developing countries.
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More information: Study: http://ift.tt/1DEfj82 lor_subsidizing2.pdf
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Credit: CDC
Forty percent of all malaria-caused deaths in sub-Saharan Africa occur in the Democratic Republic of Congo and Nigeria, according to the World Health Organization. The private sector "supply chain" manages 74% of the drug volume in Congo and 98% in Nigeria where malaria-stricken patients rely on "drug shops" and other for-profit retail outlets to get life-saving medicine.
New research forthcoming in Management Science determines that the "shelf life" of malaria-fighting drugs plays a significant role in how donors should subsidize the medicine in order to ensure better affordability for patients.
New concerns over the emergence of drug resistant parasites are yet one more reason that private donors who fund malaria drug programs remain intent on making medicine available and affordable to patients. Artemisinin-based combination therapies, known as ACTs, are considered the best anti-malarial drugs but the lack of affordable ACT supplies for the poor motivates private donors to intervene and improve access.
In "Subsidizing the Distribution Channel: Donor Funding to Improve the Availability of Malaria Drugs," Terry Taylor, associate professor, UC Berkeley's Haas School of Business, and co-author Wenqiang Xiao, New York University's Stern School of Business, analyzed purchase subsidies vs. sales subsidies.
Donors structure their purchase and sales subsidies per each product unit. A purchase subsidy is a discount or rebate offered to the retailer at the point of sale or when he places his order. In contrast, the retailer only benefits from a sales subsidy when he sells the product to the consumer.
By analyzing the product characteristics (short vs. long life), customer population (degree of heterogeneity or diverse makeup), and the size of the donor's budget, Taylor and Xiao found that for long shelf life products, such as ACTs (with a 24 to 36-month life from the factory to expiration), donors should only offer a purchase subsidy. In contrast, if a product has a short shelf life, a sufficiently large donor budget and a diverse customer population, it is optimal to offer a sales subsidy in addition to a purchase subsidy. Why?
"The sales subsidy becomes more attractive for perishable products because you don't have to subsidize a purchased product that doesn't sell," says Taylor.
Unlike previous research, the study's micro-level approach focuses on distribution channel details such as demand uncertainty, supply-demand mismatch, and the impact of subsidies on stocking and pricing decisions.
"In principle, it would seem that you would want to use both levers to influence stocking and pricing decisions," says Taylor. "However when we took both into account, our model shows that the purchase subsidy is more effective in increasing consumption of the medicine and ultimately, saving lives."
Taylor hopes these findings will help guide donors in improving the private-sector distribution channel for malaria drugs. He hopes that in the future, the study's results could also help inform subsidy decisions for other global health products such as oral rehydration salts, the first-line of treatment for childhood acute diarrhea in developing countries.
Explore further: Discovery of how malaria kills children will lead to life-saving treatments
More information: Study: http://ift.tt/1DEfj82 lor_subsidizing2.pdf
Medical Xpress on facebook
Related Stories
Discovery of how malaria kills children will lead to life-saving treatments
Malaria kills a child every minute. While medical researchers have successfully developed effective drugs to kill the malaria parasite, efforts to treat the effects of the disease have not been as successful. ...
Officials debate whether to scrap malaria program
The future of a pricey malaria program meant to provide cheap drugs for poor patients may be in jeopardy after health officials clashed over its effectiveness in two new reports.
'Coca-Cola' model for delivering malaria meds is a success, researcher says
(Medical Xpress)—A controversial program that uses the private market to provide affordable malaria treatments to people in Africa has dramatically increased access to care and should be continued, according to a policy article by scholars including Ramanan Laxmin ...
New global subsidy for malaria medicines must ensure quality of care
A new subsidy designed to increase access to life-saving antiretrovirals must remain focused on quality patient care if it is to succeed, argues Tido von Schoen-Angerer and colleagues in this week's open access journal PLoS Me ...
The perils of delivering anti-malarial drugs through private sector examined
(Medical Xpress)—Getting high-quality anti-malarial drugs to people in places like Zanzibar and Mozambique is a tricky business.
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Jordan reports five swine flu deaths since Jan 1
Five people have died in Jordan since the beginning of the year from swine flu, the health ministry said Sunday, adding that it has recorded 130 cases of the virus.
Ebola-hit Liberia sets out on road to recovery
Clinging to cheap kitchenware and the hope of a better life, Fatima Kamara hawks her goods to travellers when she should probably be doing her homework.
Meningitis epidemic kills 45 in Niger
A meningitis epidemic that broke out in January in Niger has so far killed 45 people, the health minister told AFP on Saturday.
Blue Bell suspends operations at Oklahoma ice cream plant
Blue Bell Ice Cream announced Friday that it has suspended operations at an Oklahoma production facility that officials had previously connected to a foodborne illness linked to the deaths of three people.
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