Malawi currently faces several major challenges with its health care system. Delivery of care is rather poor. The techniques and prescriptions are rather antiquated. There are few properly trained health workers and skilled clinicians; and there not enough institutions to educate them than. In my opinion, the most pressing is the shortage of essential medicines, consumables, and equipment nationwide.
I hate fancy pants economic terms! But the marketplace for pharmaceuticals and medical technology is very complex. So let me try to decompose it as simply as possible, as I have seen it.
The Malawian healthcare supply market has several major players: the Ministry of Health, the District Hospitals and their finance departments, pharmaceutical and laboratory vendors and NGO’s. Each has a hand in the current fallout of the system.
The government fails to provide enough aid to its health facilities, particularly in regards to pharmaceuticals. The Malawian government has a hub called the Central Medical Store (CMS) Trust which provides medicine, equipment, consumables, etc. to its district hospitals and government health facilities at lower prices than those charged by private vendors. In recent years, CMS forecasting for the supply chain has failed on many fronts such as properly account for increased drug consumption during rainy seasons, track disease progression, train HSAs and pharmacists how to accurately use logistics forms and so on. As a result, facilities continue to be under-resourced despite increases in patient-intake.
Second, there are problems with corruption and mismanagement within the finance department at the district-level. Each district hospital has a finance department with a budget allocated for drugs. Instead of stepping up when the CMS falters, they’ve responded by:
Opting not to buy more medications and equipment to save the hospital money
Splitting the money with private vendors and their buddies at local stores who then write them a receipt for items they claim to have purchased (corruption)
Inflating their accounting records (corruption)
Purchasing goods on honest terms, but negotiated terribly, increasing prices
The hospital assumed loans with terms of they could not repay (mismanagement)
Simply waiting until foreign aid arrived to “save” them (mismanagement)
Unfortunately, President Banda has not given the country much hope in this regard. In a recent press release, she stated that corruption and mismanagement were so rampant she would be unable to solve them.
Third, the local vendors for pharmaceuticals and medical equipment have major bargaining power. Pharmaceutical and medical equipment are unlike any other retail commodity you buy because your life depends on their effectiveness and availability. Pharmacy managers know that; and there are very few good ones in Malawi. So they will do several things to ensure a higher markup (difference between the price you sell a product and the cost to manufacture it) to increase profit. First, they buy items from manufacturers in China and Southeast Asia who produce them cheaply. I love negotiating with a vendor and hearing the old, “Don’t buy from (vendor x) because he gets it from China. I’m not saying China is bad, but come on do you really trust him.” THEY ALL SAY IT. Many of the local vendors are in fact distributors for Asian manufacturers. Second, these vendors collude on pricing. Collusion is a bad effect of any developed market without legal oversight; it’s illegal in the US (But it happens all the time. Just check out a recent example by major U.S. private equity firms http://dealbook.nytimes.com/2013/03/13/private-equity-firms-fail-in-effort-to-dismiss-antitrust-case/).
Collusion is where two or more vendors collaborate to provide goods using unfair economic practices to rig a market. The way it usually works is they survey the entire population and separate them into consumer segments (for example one segment is the wealthy group that only buys luxury because they can and want to show off, a middle class group that’s budget conscious, a group that is only into what’s new and cool, a group only interested into cheap goods, etc.). And then they will work together and say,” I will only produce X amount and charge X price for X segment. You will produce Y amount and charge Y price for Y segment. Z vendor will produce Z amount and charge Z price for Z segment,” etc., etc. They produce just enough and charge different set prices that increase the profits for themselves. At face value, this practice looks harmless. But it eliminates fair competition and technological advancement. So prices theoretically never drop and the products take a very long time to improve. Buyers (very poor people in this case) are forced to pay set prices until their money is milked. In the case of drugs, that’s really bad. If you are a buyer (government agency or patient) but cannot pay the determined price, then you are out of luck.
Finally, foreign aid and NGOs have sometimes left the MOH hanging on false hope (although they are not entirely at fault). One factor is that the financial crisis stopped the flow of aid; European governments and NGOs halted donations to address the global crisis. Second, Malawian foreign aid also came with strict stipulations that the previous government regime was unwilling to accept or Malawian citizens deemed culturally inconsiderate. Terms ranged on multiple issues. Some terms centered on monetary policy (such as lifting the fixed currency rate which would bolster international trade) while others dealt with human rights (like enforcement of homosexual marriage). Due to resistance at the negotiation table, there were major delays in the timing and delivery of foreign aid. Thus, the government and health facilities did not receive money in time to subsidize the purchase of drugs and medical technology.
The unsustainable macroeconomic policies instituted by previous regimes have only exacerbated the current problem. The floating exchange rate terribly impacted the transportation of medical goods and services as well as people’s disposable income. The exchange rate (Malawian kwacha relative to the US dollar) jumps up and down every day. This has spiked the price of fuel, which in turn raises the price of everything else.
Health facilities and people just do not have the money to spend on drugs after buying everything else. So, in my opinion, these factors have been the difference between getting aspirin or suffering through a migraine and it’s very sad.
There is a hopeful resolution to this problem. Recently it was announced the UK Department for International Development fund has committed to assisting the CMS with providing medicines nationwide.