Solving market failure while saving children’s lives – the case of malaria

22 May 2019

David Reddy, CEO, MMV and Harald Nusser, Head of Novartis Social Business

This piece first appeared in the Economic Standard.

In the 1990s, treating children with malaria in Africa was a grueling experience. The parasite had become resistant to the most common antimalarial treatments, and death rates were climbing – fast. There was a pressing need for new antimalarials, but there was no incentive for the pharmaceutical industry to develop them. The market in the developed world for such treatments was too small.

This was a classic example of what economists would call market failure. During this period, Novartis pushed forward the science, building on the work of the Nobel Prize-winning Chinese scientist Tu Youyou, who discovered that the Artemisia annua plant could treat malaria. This led to the development of a new and highly effective treatment for malaria, called artemisinin combination therapy (ACT). And Novartis was funding the research out of corporate philanthropy.

ACTs were a great success, but there was a big problem. The medicine developed by Novartis was designed for adults, not for children – the group most at risk. Over 70 per cent of deaths from malaria are in children under five years old.

By this time, however, steps had been taken by the international community to try and address the lack of incentives to develop new malaria medicines. In 1999, the Medicines for Malaria Venture (MMV) was established with backing from major donors and the Bill & Melinda Gates Foundation, tasked with the development of desperately-needed new malaria medicines. In 2003, MMV signed an agreement with Novartis to develop an ACT specifically for children. At that time, a child was dying every 30 seconds from malaria.

This was a challenging problem. The ACT pills tasted very bitter – children would spit them out. Syrups or liquids, often used for child medicines in high-income countries, were bulky and difficult to transport. After looking at many different options, the solution was a sweet-tasting tablet that disperses in a small amount of water – something that could easily be given to a fevered young child.  

But developing the medicine was only the start. MMV and Novartis had agreed this new child-friendly medicine had to be affordable and acceptable to malaria-endemic countries.

Part of this effort was to make sure it could be used easily by healthcare workers. MMV and Novartis worked hard to ensure the medicine was available for different weight bands to make correct dosing easy, and that the innovative packaging allowed caregivers with low literacy to administer the medicine correctly.

Some malaria-endemic countries didn’t see the need for specialized medicines for children – they had to be persuaded. And Novartis supported affordability by agreeing to distribute the medicine at no profit. New bulk purchasers such as the Global Fund to Fight AIDS, TB and Malaria were able to smooth out some of the bumps in demand.

Ten years since launch in 2009, over 370 million child treatments have been distributed in sub-Saharan Africa. In 2018, a child dies from malaria every two minutes – a massive improvement thanks to progress in malaria control across the board. But it shows how we still have a long way to go. For example, studies suggest that in many countries still only a minority of children are getting accurate diagnosis and the right treatment. Substandard and fake medicines proliferate. Supply chains are often inadequate. Diagnostics need to be more widely available. Solving these issues is challenging, and cannot be done overnight.

Meanwhile, the market failure that hindered industry development of new antimalarials in the 1980s and 1990s has been partially addressed – working in partnership with organizations like MMV mean companies can share the cost and risk of drug development. And furthermore, there are some guarantees that there will be a functioning market for new products, particularly through the Global Fund. But many of these mechanisms are dependent on the generosity of Western donors and philanthropists and there are concerns regarding the sustainability of this model. Increased domestic government investment, estimated at 28% of malaria program financing in 2017, will create more sustainable markets for malaria commodities, increase access and accelerate progress.

MMV and Novartis are extending their public–private partnership to develop the next generation of antimalarials for children – medicines which may also offer the simplicity and impact of a single dose cure. Having such new options will be critical if resistance to ACTs, already seen in Asia, becomes a reality in Africa (which most expect over the next decade). The partnership is also working on a new type of ACT designed for babies weighing under five kilograms, a very vulnerable group. The initial success with the dispersible medicine has led to many further collaboration opportunities.

Back in the 1990s, the international community saw that there was a lack of incentives for the private sector to invest in malaria. A small number of companies, like Novartis, acted, and now there is a pipeline of new treatments in development should the current ones fail. These treatments will help many more African children survive the disease. But the most sustainable solution over the long term is to support Africa to develop economically, and for its governments to spend more on health. This will drive the development for a true market for malaria treatments, one created by Africans themselves.