In a New York Times op-ed, Roger Bate reveals the results of our study assessing the quality of anti-tuberculosis drugs from 17 low- and middle-income countries – and they’re not pretty. Our findings are particularly worrying because of the sheer prevalence of TB: The World Health Organization estimates there were 8.8 million TB cases in 2010, which caused 1.4 million deaths.

We find that nearly 10% of all samples failed basic quality tests (and many more would likely have failed more stringent testing). Unsurprisingly, the failure rate was highest in African cities (17%), but even middle-income nations like Russia, Turkey, Brazil, Thailand, and China had a worryingly high failure-rate (4%).

This is partly an import-export issue. Porous borders, overburdened customs officials, and ill-conceived drug-approval systems allow non-registered medicines to reach millions of patients. Unsurprisingly, non-registered drugs fail quality tests more often.

But it isn’t only a customs problem. More than half of our failed samples contained over 10% of the required active pharmaceutical ingredient, indicating that they were not simply counterfeits smuggled in by drug gangs. These substandard medicines had either been poorly manufactured, improperly stored, or nefariously designed to trick quality assessors.

No government has the capacity to conduct in-depth drug quality assessments at its borders. Instead, countries rely heavily on companies’ drug-production certifications, only occasionally assessing the quality of products on the market.

This can allow certified companies to get away with under-dosing products or allow the sale of degraded or expired products. Not only does this mean failures are harder to catch – they are also more dangerous. More than half of our failing samples had been produced by legitimate companies.

Medicines with insufficient drug dosage contribute to drug-resistance, which is already an immense problem in combating tuberculosis. Treating drug-resistant tuberculosis can cost up to $200,000 per patient, and may not work.

It’s time to recognize that the regulatory problems in the developing world could have serious implications for treating tuberculosis here at home.

* Luanda, Angola; Lubumbashi, Democratic Republic of Congo; Cairo, Egypt; Addis Ababa, Ethiopia; Accra, Ghana; Nairobi, Kenya; Lagos, Nigeria; Kigali, Rwanda; Dar es Salaam, Tanzania; Kampala, Uganda; Lusaka, Zambia.
† Chennai, Delhi, Kolkata.
‡ Bangkok, Thailand; Beijing, China; Istanbul, Turkey; Moscow, Russia; Sao Paulo, Brazil.
API = active pharmaceutical ingredient.

The Indian government promised that the subsidized Aakash tablet would increase university students’ access to the internet, providing them with better learning opportunities. But poor planning and execution plagued the venture from the start.

In slashing costs, the device was stripped of its utility. Aakash can only access the internet through a Wi-Fi network—problematic in a country like India—and browsing is slow. Educational apps with low operating requirements or access to the standard Android app inventory could have mitigated this, but Aakash provides neither. The tablet is riddled with technological problems as well: Its battery power lasts at most 3 hours, and overheats after just an hour or two. Flimsy materials, an unresponsive touch-screen, slow data processing, and limited storage further diminish its utility.

Infighting between producer Datawind and testing institution IIT Rajasthan, exacerbated by the Indian government’s lack of specificity on the tablet’s testing requirements, led to multiple rejections of the first model. The project was eventually abandoned in favor of an upgraded Aakash II.

Aakash exemplifies the Indian government’s faulty perspective on education—while its goal is laudable, poor planning and heavy-handed government involvement created massive inefficiencies. As I argue along with Sadanand Dhume in YaleGlobal, the same problems plague India’s primary education system. Increased spending on education has not been properly wedded to an understanding of how the extra funds will actually improve student’s learning.

In order to keep India economically competitive, Indian students do need access to high-quality learning opportunities, but poorly conceived silver-bullet solutions like Aakash are not the answer.

The Global Fund’s AMFm program subsidizes the cost of artemisinin combination therapies (ACTs), the best malaria treatments available, in order to increase access to these drugs for patients in the developing world. Although malaria is primarily a childhood disease, 70 percent of the Global Fund’s antimalarial orders are for adult doses. The Global Fund’s massive medicine orders dominate global antimalarial drug purchases, sometimes override existing demand-driven supply chains. Companies catering to the Global Fund ignore existing customers, in some cases leading to empty pharmacies across Africa and Asia. These are projected to worsen in 2012.

While these problems are deeply disconcerting, the core issue is that the program discourages the antimalarial market from functioning properly. The AMFm’s subsidy creates incentives for pharmacies and first-line buyers participating in the subsidy program to turn a profit by selling the drugs above the subsidized cost. Without adequate oversight, this imbalance could lead to theft on a massive scale. The pricing asymmetries in the antimalarial market have created opportunities for hefty profits for those willing to sell subsidized ACTs to non-registered pharmacies or smuggle them across international borders.

In a preliminary analysis, Roger Bate, Lorraine Mooney, and I find that AMFm drug diversion is an acute problem. Stolen products were sold in 11 out of 14 cities studied. In all five AMFm countries surveyed, non-participating pharmacies were selling subsidized drugs. In 2 out of 5, more than half the pharmacies surveyed sold stolen medicines.

Theft is equally prevalent in non-AMFm countries: AMFm products were available for purchase in at least 6 of 9 countries studied. In two countries, more than half the pharmacies surveyed sold AMFm drugs.

Medicine diversion is not only worrying because it defeats the purpose of the subsidy—putting high-quality medicines in the hands of patients who need them most—it also undermines the rule of law in countries with low judicial capacity. The limited evidence available suggests that this program has opened up new avenues for corruption, attracted criminal gangs, and shored up revenues for narcotics traders. By creating perverse incentives for misbehavior and failing to compensate with adequate oversight, the AMFm program provides easy opportunities for theft. By inflating demand and disrupting markets, it may permanently damage markets, to the detriment of the patients who rely on these markets to provide lifesaving drugs.

Policy-related constraints were more severe for firms operating in the formal sector and for those in urban areas. This comes as no surprise; the informal sector operates outside of government regulation, and institutional capacity to enforce laws in the rural areas is much lower. However, policies not conducive to business growth are particularly harmful in formal, urban employment because these sectors provide the best jobs. The Bank found that jobs in the formal sector lead to the greatest increase in productivity and the biggest gains in poverty reduction. Moreover, jobs in urban areas are growing more quickly than jobs in rural areas and employment growth in urban areas is more likely to involve the switch from farm to more productive non-farm labor.

Over the past ten years, South Asia created an average of 800,000 new jobs per month and absorbed a growing labor force at increasing productivity levels. However, with the working-age population burgeoning, the region must accommodate 1 million to 1.2 million new entrants per month over the next two decades at rising productivity levels to maintain high levels of growth and a strong poverty reduction rate, according to the World Bank—a 25 to 50 percent increase over current job creation levels. Addressing the damaging constraints the region’s governments place on businesses is a necessary first step.

Since 2005, Sudan’s oil revenues have been split 50/50 between the North and South. The South has received about $10 billion in oil revenues over the past five years, which accounts for nearly 98% of its revenue. Without this critical income in the short term, the government would collapse and unpaid soldiers would likely reignite regional conflict.

Yet the long-term stability and prosperity of the South depends on the new government’s ability to raise income levels for its citizens by cutting corruption and removing constraints on business. Worryingly, the recruitment of top opposition leaders into the main political party indicates that South Sudan may be moving towards yet another single-party state. This shift would allow politicians to wield power through payoffs and patronage networks rather than being accountable to the populace.  Raising taxes by an average of 17.5% annually—as the new government proposes—would exacerbate the problem, encouraging bureaucratic corruption and pushing even more citizens into the informal sector. With per capita GDP at a meager $90 annually, the effort to diversify government revenues by heavily taxing the population would result in a desperately difficult business environment, hampering long-term growth.

This fate is not inevitable for landlocked, dry, resource-rich, and initially human capital poor African countries. Botswana, for example, has sustained impressively high per capita GDP growth rates for nearly a decade. The country has also succeeded in suppressing corruption and making significant gains in literacy and overall poverty reduction, distributing the benefits from the diamond trade equitably across the country, and placing Botswana solidly in the ‘middle-income’ category. Botswana likely owes its  success to  strong governing institutions, a well-functioning police force, and low levels of corruption.

Though the oil deal will likely determine whether the region relapses into war, the South Sudanese government must look further down the road if it hopes to make the South a viable state. The greatest long-term challenge facing the South Sudanese government will be combating corruption and resisting the urge to use oil revenues to insulate itself from accountability to its populace. The second hurdle will be equitably translating oil revenues into public goods. The final challenge will be creating a business environment which encourages entrepreneurship rather than pushing even more citizens into the informal sector.