Tomorrow (April 25) marks the World Health Organization’s inaugural World Malaria Day, designed “to inform the general public of the obstacles encountered and progress achieved in controlling malaria.” We can expect a fair amount of self-congratulation: malaria treatment has improved in recent years, with donors providing more funding and buying better drugs.  

But problems remain, especially with artemisinin, which for the past decade has been the most effective drug against the parasite. Resistance to artemisinin has been found in Southeast Asia, where it has been used the longest and where substandard and fake drugs (which encourage resistance) are prevalent.   

Combining artemisinin with other drugs in the same treatment is the best method to prevent resistance: the parasite succumbs to a multiple attack before it can evolve a defense to any single drug in the combination. Yet because artemisinin combination therapies (ACTs) are more difficult and expensive to make than monotherapies and other older, less effective therapies (such as chloroquine), they have not been adopted on a broad scale. 

Sub-Saharan Africa bears the highest burden of disease and death from malaria; and, as the world’s poorest region, it is least able to afford large quantities of new ACTs. Most Africans that want an anti-malaria drug are likely to buy the cheapest monotherapy available. Even when public funds exist, corruption in finance ministries means that ACTs are often not purchased. 

On the production side, WHO criticism has led some companies to stop selling artemisinin monotherapies. But the WHO has only so much influence. Recent research found that at least eight companies continue to produce and sell monotherapy tablets in six African countries, including Cipla (based in India), Dafra (Belgium), ETDZS (China), Guilin (China), Kunming (China), Mepha (Switzerland), QUALIPHARnv/sa-Arenco (Belgium), and Shelys (Tanzania). 

Malaria treatment has also been plagued by poor demand projections. The plant (Artemisia annua) used to produce artemisinin takes seven months to yield its crop, with subsequent processing dictating a 14-month lead time for the drug. Once manufactured, the drug has a relatively short shelf life of two years. Accurate forecasting is essential for manufacturers to produce the right amount at the right time. 

Because many developing countries lack authoritative national statistics on malaria, the United Nations Children’s Fund and the WHO have stepped in to estimate disease prevalence and forecast demand. But their estimates tend to rely on “need,” a normative concept of how many people should be treated in an ideal world, rather than on demand, a positive concept of what can and will be bought in the actual world. Because WHO “need” estimates often provide the rationale for funding from donor agencies, they tend to be negotiating positions rather than realistic projections, nearly always overestimating actual demand. 

WHO estimates often rely on 'need,' a normative concept of how many people should be treated, rather than on demand, a positive concept of what can and will be bought.

In 2004, the WHO projected that the global need for ACTs in 2005 would be over 130 million treatments. This projection proved to be way too high; in 2005, maximum demand was only 25 million treatments. Major suppliers such as Novartis and Sanofi-Aventis relied on WHO estimates and, as a result, were forced to either destroy unused products or declare substantial losses when the anticipated demand never materialized. In December 2006, Novartis temporarily shut down its production facility in Suffern, New York, to prevent the production of too much medicine with a short shelf life; Chinese farmers had begun to complain that they had no buyers for their Artemisia annua. With an excess of supply, prices of Artemisia annua have plummeted, and now the WHO fears that farmers and artemisinin producers may withdraw from the market, reducing the overall supply of drugs and creating a risk of future shortages. 

In the short run, unrealistically high demand estimates are costly for companies. In the long run, they are costly for the millions of people afflicted by malaria. If drug companies must weather too many losses as a result of misjudging malaria demand, they may decide to invest in drug development for other diseases. The WHO argues that its forecasts are better today. But to be useful to companies, they have to be provided at least 12 months in advance, and the WHO forecasts are not. 

Better arrangements need to be made between international aid agencies—such as the UN Global Fund, the WHO, the President’s Malaria Initiative, and the World Bank—and the companies that produce good-quality drugs. The only official arrangement between a producer and any multilateral agency, the Memorandum of Understanding (MOU) between the WHO and Novartis, is outdated. The document stipulates that Novartis will supply its malaria drug Coartem to the WHO (acting as a procurement agent for countries buying drugs) at no profit, in a timely fashion, and in sufficient amounts to meet international forecasts. But the original price agreed to ($2.40 per adult dose) is well above the public sector price Novartis can now offer ($1.40 per adult dose). As a result, the WHO has been unable to generate sufficient demand for the product. The MOU also risks being seen as exclusionary (although producing large amounts of drugs without profit—or even at a loss—for a tiny, volatile market is not likely to offer many benefits). 

Better than the current MOU would be a new agreement between agencies and all pharmaceutical companies that demonstrate the capability to supply high-quality ACTs. Companies would agree to supply a certain amount of drugs at cost plus a small profit. This price would vary as conditions changed over time. Donors would agree in advance to purchase them at an agreed price, fixed for the term of the contract. Donors would also be charged with forecasting demand. 

In normal markets, corporations bear most of the responsibility for forecasting demand. But when prices are set at a level at which companies make little or no profit, as is the case with anti-malaria drugs, such a policy discourages investment. 

Unfortunately, instead of addressing this problem, the international malaria community has begun pursuing an expensive alternative: a new funding mechanism to spend almost $2 billion over five years to subsidize the price of ACTs. Subsidizing ACTs would encourage their use, but it would do nothing to address the dilemmas of poor demand forecasting and irresponsible drug use. Meanwhile, it would jeopardize the future supply of consistent, high-quality anti-malaria medicines: an expensive mistake, in more ways than one. 

Roger Bate is a resident fellow at the American Enterprise Institute. This article is adapted from his new Health Policy Outlook,“Rolling Back Malaria: Rhetoric and Reality in the Fight Against a Deadly Killer,” released this week.