TCS Daily

Corrupting Health

By Roger Bate - November 28, 2006 12:00 AM

GUATEMALA CITY -- Transparency International (TI) celebrated its 12th International Anti-Corruption Conference (IACC) last week in Guatemala.

Founded by ex-World Bankers and influential government officials from developing countries such as Kenya and Bangladesh, TI , which is one of the more effective and sensible global NGOs, has pushed the World Bank as well as increasing numbers of Governments to address corruption seriously.

Over 100 countries were represented at the conference; many of the delegates risk their livelihoods, and a few their lives, by fearless denunciation of corruption at home.

Dr. Ana Cecilia Magallanes Cortez from Peru was awarded the 2006 Transparency International Integrity Award at the opening ceremony. Dr. Magallanes, a fearless anti-corruption fighter, overcame enormous personal dangers to lead the force that successfully prosecuted 1,500 members of the criminal organization of General Vladimiro Montesinos, the collaborator of former president Alberto Fujimori. Unfortunately others couldn't be recognized; Christian Mounzeo an anti-corruption activist from Congo-Brazzaville was arrested at home before he could travel to the event.

Corruption is usually defined as the use of public office to further private gains, so the conference and analysis focused on the important areas of defense and the arms trade, money laundering, extractive industries and infrastructure. But healthcare is taking up more and more of government budgets globally and corruption is probably rising faster in healthcare than almost any other sector.

This a problem not just in poor countries but all over the world. Roy Poses, a medical professor from Brown University, described conflicts of interest, ethical concerns and occasional fraud in America. Fortunately, major corruption is estimated to be low in the US in the health sector.

Corruption in the health sectors of the poorest countries is high. A greater asymmetry of information between the professional (the doctor or hospital administrator) and the layman (patient) than in wealthy countries opens all sorts of opportunities for being prescribed the wrong treatment and procedures, or at least inappropriate billing.

Absenteeism and 'phantom employees' are major problems in clinics and hospitals. Maureen Lewis of the World Bank notes "among the most serious issues in developing countries is the high rate of absenteeism, which undermines service delivery and leads to closed public clinics that compromise the equity and health objectives of publicly financed health care." Absenteeism rates in the health service delivery are alarmingly high: 60 percent among physicians in one surveyed Dominican Republic hospital, an occurrence which is mirrored in other places such as Bangladesh and Uganda. In Uganda, for example, health workers are often found at home or involved in second jobs when they should be doing their primary job. Such routine corruption and disregard of oversight mechanisms take on even graver significance in emergencies when efficient medical care is most critical.

The increasingly large and legal market for pharmaceutical drugs is attracting criminal activity. Pharmaceuticals are high value and easily portable, and the penalty for stealing or smuggling them is far lower than for narcotics, so trade is brisk. This is especially the case in Africa where borders are porous to those prepared to pay bribes. Furthermore pharmaceutical markets are segmented internationally since companies recouping research and development costs want to charge efficient prices in vastly different settings for products with very low marginal costs. Antiretrovirals (ARVs) to treat HIV have 20-fold price differentials between western and African countries, which mean illegal but massive arbitrage possibilities exist for smugglers.

Botswana had a problem with the ARVs in its domestic AIDS treatment program. According to several Botswanan delegates a small proportion of these ARVs were being sold by non-Botswanan southern Africans into the markets of Zimbabwe, Namibia, Mozambique and South Africa. The southern African expatriates working in Botswana's health system had access to the drugs and decided to sell them in their local home market. Better management of drug procurement, storage, dispensing and other general monitoring systems are being put in place to address the problem. And while such problems were not widely discussed in the media, they were addressed by the increasingly open Botswanan Government.

Given my own research interests it was great to see members of TI so enthusiastic about the notion that medical taxes should be lowered because they restrict access to essential medicines. As the summary of the healthcare corruption workshop concluded: "TI can improve access to medicines and lower corruption by pushing countries to lower their medicinal tariffs." This will also boost trade and lower drug prices through increased competition. India recently lowered its drugs tariffs, which encouraged US drug company Gilead to enter the Indian market to sell its brand name ARV Viread. This forced Cipla to lower the price of its legally produced copycat version.

Eradicating corruption from the health sector through the removal of tariffs, and other import duties is vital yet it is unpopular with bureaucrats and often donors, who simply don't want the problem discussed, wishing it would disappear. It will not. Transparency International should be commended for investigating and bringing attention to corruption in health. Reducing this type of corruption in poor countries will probably do more for the sick than all aid put together.

Roger Bate is a Resident Fellow of the American Enterprise Institute.


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