Should new antimalarial drugs be subsidized?

Malaria kills over a million people each year. The loss of chloroquine due to the spread of parasite resistance is largely responsible for the resurgence of malaria. A new class of antimalarial drugs called artemisinins are available, but are unaffordable to most people in malaria-endemic countries and may quickly face the same fate as chloroquine unless they are combined with a partner drug. Subsidies for artemisinin combination treatments may be warranted on second-best grounds as they deter use of single-ingredient drugs, for which externalities from the risk of resistance evolution are larger. Furthermore, by expanding total effective drug use, subsidies reduce infection transmission externalities among individuals. However, use of combination treatments could still lead to drug resistance and the subsidies themselves entail welfare consequences. This paper develops a conceptual and numerical framework for understanding the conditions under which subsidies for artemisinin combinations can be justified on economic efficiency grounds.