Making Medicines in East Africa: Cost, Quality and Compromises

In East Africa, imported medicines greatly contributed to social development by improving access to low-cost, high-quality drugs. But what impact do imported medicines have on the local pharmaceutical industry? The literature on development often assumes that the provision of affordable social services would have to come at the expense of industrial development. This seems to be particularly the case when the imported commodities are given for free, as donations. In contrast, I show that in Kenya and Uganda the donation of drugs did not inhibit but rather contributed to industrial upgrading: some pharmaceutical companies now produce more complex drugs and follow much higher quality standards. Two features of drug donations by the Global Fund to Fight AIDS, Tuberculosis and Malaria contributed to this surprising outcome: the creation of a market that did not a-priori exclude local manufacturers, and effective monitoring. A third condition, however, required support beyond the one provided by way of social development: access to technical know-how. These findings suggest interesting insights into the potential contribution of foreign aid to industrial development.