From Black to Gray: Improving Access to Antimalarial Drugs in the Presence of Deceptive Counterfeits

In malaria-endemic countries, the limited availability of affordable antimalarial medication has contributed to the widespread distribution of counterfeit drugs. This paper examines such markets to determine how philanthropic donors can best allocate limited funds to subsidize the purchase or sales of antimalarial drugs via private-sector distribution channels. We develop a game-theoretic model of the antimalarial supply chain wherein the retailer strategically sources legitimate drugs from a donor-certified supplier, potentially counterfeit drugs from an uncertified supplier, or both. In contrast with the extant literature, we demonstrate that, in the presence of counterfeits, exclusive reliance on purchase subsidies may no longer be optimal. Specifically, under donor budget constraints, offering sales subsidies that incorporate both legitimate and counterfeit drugs may be preferable or, in some cases, abstaining from subsidy provision completely. Additionally, we evaluate the implications of three pertinent nonsubsidy strategies deployed to combat counterfeit drugs: imposing penalties for sourcing counterfeits, eliminating subsidies on counterfeit drugs with traceability technology, and implementing price controls. Our study concludes with extensive numerical analysis calibrated to malaria data from Mozambique. Overall, this paper offers strategic guidance for improving outcomes in the presence of counterfeit drugs. Our results highlight the need for governments and donors to carefully consider market-specific factors, such as retailers’ pricing power and donors’ budget constraints, when designing subsidy schemes and access policies for life-saving medicines. These insights could potentially be extrapolated to address similar challenges in other endemic disease contexts, offering a broader framework for enhancing public health in resource-constrained environments. This paper was accepted by Jeannette Song, operations management. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2023.00885 .