[Ip-health] Removing taxes and tariffs on essential medicines

[Philip Coticelli]

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[ Picked text/plain from multipart/alternative ]
Please find below an article appearing in today's National Review Online
concerning taxes and tariffs on essential medicines.  The full paper by
Roger Bate et al. can be downloaded here:
http://www.aei.org/publications/filter.all,pubID.24749/pub_detail.asp

Philip Coticelli
Africa Fighting Malaria
www.fightingmalaria.org

http://article.nationalreview.com/?q=3DYzU0MGZmNTIwOTFkNzYxZWE5OGU5NTUxNWE5=
YmE4OTY=3D

Drug Snares
Tariffs on drugs take their toll in poor nations.

By Roger Bate & Kathryn Boateng

Throughout the developing world, hospitals have become places where patient=
s
don't bother to go; it's not that they aren't sick =97 there just are no dr=
ugs
for the doctors to prescribe for them. Two thirds of the world's population
and 80 percent of Africans do not have adequate access to drugs. While
manufacturers' pricing and grotesque poverty-levels are partly to blame, a
major culprit is the governments of these poor countries, which impose
tariffs, taxes, and customs duties on imported drugs. This is allegedly don=
e
for the sake of protecting domestic industries, but it is actually just
another way of raising funds. Some countries, such as Nigeria, Iran, and
India, have tariffs of over 15 percent, which, combined with other charges,
increase the prices of some drugs by more than 50 percent. Not only do thes=
e
price increases make drugs more scarce, but they also encourage corruption,
and with fatal consequences, as we explain in our
paper<http://www.aei.org/publications/filter.all,pubID.24749/pub_detail.asp=
>published
today.

Last month, confronted with compelling issues of global security and energy
prices, G8 leaders still managed to set aside the time to denounce the
severe public-health effects of tariffs on medical interventions in their
final communiqu=E9: "We encourage governments around the world to consider
eliminating import tariffs and non-tariff barriers on medicines and medical
devices, where appropriate, as a measure to reduce further the cost of
health care for the poor and expand their access to effective treatments."

And at last year's G8 summit in Gleneagles, world leaders identified
eliminating corruption as a key component for establishing the necessary
conditions for economic growth in poor nations. In our latest research, we
analyzed the link between tariffs and corruption and found evidence that
tariffs provide opportunities for irregular payments and delays of product
shipments.

The paper is the product of months of interviews and surveys in the field,
providing us with first-hand accounts of experiences with drug delivery in
developing countries from charitable, corporate, multilateral, and bilatera=
l
aid agencies. Most respondents reveal that tariffs on essential medicines
are a "serious threat" to access to medicines. We found numerous instances
in which organizations donating products were asked to pay questionable
"administrative handling" fees and other "custom support" fees. In one case=
,
donated drugs destined for use in South Africa were repeatedly delayed
because of several bureaucratic requirements which took years to resolve,
and only after the donor secured the services of appointed local
distributors. The frustration of many philanthropic drug-donating
organizations was succinctly expressed in one interview thus: "The necessit=
y
to invest both time and effort to address such delays is a significant
deterrent to [our] ongoing commitment."

But the pernicious effects of tariffs on the availability of essential
medicines permeate deeper still.  The burden caused by high and frequently
altered tariff rates creates an opportunity for public officials to extract
bribes; since local officials often have asymmetric knowledge about what is
a correct fee, as well as the authority to charge it locally, this allows
them all sorts of leverage, such as allowing them opportunities to waive
official fees if paid a bribe. Also, random or capricious intervention by
customs officials makes criminals of importers by often leaving them little
choice but to pay bribes to avoid delays, especially where goods with short
shelf lives (for example, antibiotics that need refrigeration) are
concerned. Such corruption contributes to the instability of access to
medicines in a country. Clearly, the corrupting influence of tariffs is
detrimental to any ongoing efforts to improve health in a nation.

Among the specifics we found our survey are the following: Vietnamese
officials routinely demand bribes; delays and unofficial administrative
payments are routinely demanded in Nigeria, and it is almost as bad in
Uganda, Kenya, and Ethiopia. Also, in about a third of the cases we studied
(36 out of 105), bribes were demanded; and in 85 percent of the cases,
delays occurred and non-official payments were demanded.

Tariffs and taxes on essential medicines account for a negligible
contribution to national income, and thus are of little benefit to the
governments of developing countries; the effect of the conditions they
create, however, is disproportionate and damaging. Today, rallying behind
the G8 are other multilateral initiatives =97 such as the United States Tra=
de
Representative (USTR) and the Swiss and Singaporean collective initiative t=
o
remove tariffs on essential medicines =97 striving to bring the era of tari=
ff
imposition on essential medicines to an end.

Leaders of developing countries should not wait for U.S. and EU action, but
should restart the Doha Development round by taking the simple, initial ste=
p
required to help their own people =97 implementing national tariff policies
that eliminate tariffs and taxes on essential medicines. This action will
come at little cost to their revenue base, and will bring about an
immeasurable gain for their people.

* =97 Roger Bate is a resident fellow of the **American Enterprise
Institute*<http://www.aei.org/>
*. and Kathryn Boateng is a research assistant at AEI. Their
**paper*<http://www.aei.org/publications/filter.all,pubID.24749/pub_detail.=
asp>
* on the issue was published earlier this week.*