Price Subsidies, Diagnostic Tests, and Targeting of Malaria Treatment: Evidence from a Randomized Controlled Trial

In response to parasite resistance to older malaria medicines, the global health community is planning to make new, more effective malaria treatments called Artemisinin Combination Therapies (ACTs) available over-the-counter at heavily subsidized rates throughout Africa. While this may go a long way toward reducing under-treatment (thereby saving lives in the short-run), it is also likely to increase over-treatment, wasting subsidy dollars and contributing to drug resistance (thereby making lives harder to save in the long-run). We use data from a randomized controlled trial conducted with over 2,700 households in rural Kenya to study behavioral responses to changes in ACT prices and quantify this tradeoff. We find that ACT use increases by 59 percent in the presence of an ACT subsidy over 90 percent. However, only 56 percent of those buying such a highly subsidized ACT at the drug shop test positive for malaria. We show that this share increases (without substantially compromising access) to 81 percent when the over-the-counter ACT subsidy is somewhat reduced and resources are redirected towards a subsidy for rapid malaria tests. Making such tests available over-thecounter more than doubles the rate at which illnesses are tested for malaria, confering benefits that extend beyond improved targeting of the ACT subsidy. ∗We thank the Clinton Health Access Initiative and Novartis Pharmaceuticals for financial support. We are very grateful to the Kenya Ministry of Health, KEMRI-Wellcome Trust Collaborative, Kenya CDC, PSIKenya, Jean Arkedis, Justin Cohen and Oliver Sabot for consultation and feedback on the study design and Asim Khwaja, Ramanan Laxminarayan, Anup Malani, Sendhil Mullainathan, Sarah Reber, John Strauss and numerous seminar participants for helpful feedback. We thank Katie Conn and Sarah Walker for excellent study coordination, Moses Baraza for smooth implementation of the project and the IPA-Kenya field officers for superb data collection. All errors are our own. †Jessica Cohen: Harvard School of Public Health and Brookings Institution, [email protected]. Pascaline Dupas: Stanford Department of Economics, [email protected]. Simone Schaner: Dartmouth College Department of Economics, [email protected]