Globally, in 2019 there were an estimated 229 million cases of malaria, including 384,000 deaths [1]. While substantial gains have been made against malaria, especially in the past 20 years, more progress will be required to reach global elimination goals. A critical element to successful malaria case management is prompt, accurate diagnosis of malaria. Historically, this has been conducted through diagnosis by expert microscopists. However, there are limitations to this strategy related to costs, training, and proximity to patients. In the early 2000s, rapid point-of-care tests began to change the landscape, enabling fast test results with minimal training. Availability of rapid tests prompted the World Health Organization (WHO) to change its policy recommendations in 2010, from presumptive treatment to a “test and treat” policy, where patients are only given antimalarial drugs following a positive parasitological diagnosis [2, 3]. The widespread use of rapid diagnostic tests (RDTs) is vital to this policy, and the magnitude of their use has increased rapidly in the past decade [4]. In 2018, WHO estimated 412 million RDTs were sold globally, 259 million of which were distributed by national malaria control programs [5]. However, prior to the disruptions to the market caused by COVID-19, estimates from Unitaid projected demand for RDTs would increase 26.3% between 2018 and 2021 based on continued expansion of their use in both the private and public sectors [6].
Despite this expansion of RDT purchasing, large gaps in malaria diagnostics use at the point of care persist. Between 2015–2018 in sub-Saharan Africa, the median percentage of febrile children who received a malaria diagnostic test (whether RDT or microscopy) was 66% in the public sector and 40% in the private sector [5], meaning a substantial proportion of febrile children were still not being tested adequately for malaria. Prompt diagnosis and treatment is not only vital to patient health, it can also reduce costs on the health care system [7], including major reduction in the presumptive use of artemisinin combination therapies [8]. Improving the ability to diagnose malaria quickly and accurately remains a crucial component of the global effort to reduce the burden of malaria on patients and health systems. Rapid diagnostic tests have many advantages over microscopy to achieve this, including no need for instrumentation, no need for reliable electricity, and the reduced amount of training needed for RDT use compared to microscopy [9].
Malaria RDT market characteristics
Donor-funded procurement represents half the RDT market by volume, with the Global Fund to Fight AIDS, Tuberculosis, and Malaria’s (Global Fund’s) Pooled Procurement Mechanism and the US President’s Malaria Initiative being the largest institutional buyers [10]. An additional 20% of the market is RDT purchases made by designated country procurement agents using Global Fund grant dollars [10]. In 2019, according to the 2020 World Malaria Report, US$3.0 billion was invested in malaria control globally, US$1.2 billion (39%) of which was disbursed through the Global Fund [1]. Nearly half of the Global Fund's 2017 disbursements were spent on health product procurement, including RDTs [11]. The Global Fund plays a significant and deliberate role in shaping markets for global health commodities to maximize access to health products [11]. One of the mechanisms supporting transparency about affordability of health products such as RDTs is the Global Fund’s Price and Quality Reporting (PQR) platform. One of the stipulations of a country receiving grants from the Global Fund is that all grant-funded purchases of key pharmaceutical and health products, including malaria RDTs, must be reported to the PQR database [12]. This extensive publicly available database thus provides an “an indicative picture of the range of prices paid by reporting grant recipients” [12]. In addition to this price transparency, the Global Fund also works to enhance product quality of RDTs it procures by requiring that products purchased with its funds meet the minimum quality standards defined by WHO.
WHO supports RDT procurement and availability in multiple ways. WHO, in collaboration with the Foundation for Innovative New Diagnostics (FIND) and the US Centers for Disease Control and Prevention, has historically provided thorough product quality testing of RDTs through its Malaria RDT Product Testing Programme. Since its inception in 2008, the program evaluated 332 products across the eight rounds of testing, from which all data are published and available publicly [4, 13–19]. The program was recently discontinued in 2019, and future replacement evaluation efforts remain uncertain [20]. The results of these evaluations principally provide data on each RDT product’s panel detection scores as a measure of quality (see definition in Methods section) for both P. falciparum and P. vivax detection, as well as false positive rates, thermal stability, and ease of use, among other RDT characteristics. Compliance of RDT procurement with WHO minimum quality standards has been improving since the publication of the first round of product evaluation results, with 26.8% of products meeting all WHO minimum quality standards in 2011 to 79.4% of products by the final evaluation round in 2018 [21]. This shift can be partially attributed to increased awareness of the product testing program from both the purchaser and the manufacturer side [22]. In addition to the product testing program results, WHO publishes guidance documents for procurement of malaria RDTs such as the Recommended selection criteria for procurement of malaria rapid diagnostic tests [23], which emphasizes the importance of the panel detection score, false-positive rate, and invalid rate, and then notes that once the minimum standards for those criteria are met, then heat stability, ease of use, and training requirements should be considered. After those criteria, the WHO procurement guidance states: “Price: After consideration of all the above factors, good procurement practice requires that the price be taken into account.”
Malaria RDT market dynamics
Three linked economic concepts are particularly useful in examining the market for Global Fund–procured RDTs and implications on market structure given the information made available to purchasers by the WHO-FIND product testing program. These concepts center on product quality, how firms compete, and market concentration.
The first concept is known as “the market for lemons,” where sellers have better information on the quality of the products they are selling than purchasers—that is, there is information asymmetry between the sellers and buyers. In this case, if purchasers are unable to accurately judge the quality of products they are buying, then purchasers’ lower expectations on average product quality cause their willingness to pay to fall. This eventually causes lower-quality goods to drive higher-quality goods, and potentially their sellers, out of the market [24]. The WHO-FIND product testing program should theoretically help purchasers judge the quality of the RDTs they are buying prior to purchase and avoid the market failure predicted by “the market for lemons.” Our analysis seeks to test that this is indeed the case and that the WHO-FIND program is helpful in avoiding this particular market failure.
The second concept is “vertical product differentiation,” which describes markets where manufacturers compete by having different levels of product quality compared to other firms [25]. In markets where products are primarily differentiated by a single characteristic of quality, purchasers with a higher willingness to pay will choose higher-quality products as they are willing to pay for quality improvements. If the costs of product improvements by firms result in products that are sufficiently differentiated, (i.e., there is a large marginal increase in quality for a given increase in cost), then there will be space in the market for many firms producing products of differing quality and prices that are attractive to consumers of differing willingness to pay. However, if an increase in costs, and associated prices, leads to only small marginal increase in quality, then there will be less space for firms to differentiate their products on quality. Thus, price competition will drive prices down and economies of scale will benefit large firms or those best positioned to invest in research and development that results in quality improvements. In this case, when there is little difference in price between the highest- and lowest-quality products, purchasers at any willingness-to-pay level can purchase high-quality products and consequently the lowest-quality manufacturers will be pushed out of the market, resulting in increased market concentration. Theoretical predictions of vertically differentiated markets resulting in higher levels of market concentration have been shown empirically in the pharmaceutical industry and a collection of European industries [26–28]. Panel detection scores provide an important measure of quality that differentiate RDTs from one another.
The third concept is market concentration, which we measure with the Herfindahl-Hirschman Index (HHI). More concentrated markets have a greater percentage of the market share produced by relatively few firms, and less concentrated markets spread the market share among a relatively larger number of firms. The HHI is commonly used by market regulatory agencies to ensure there is sufficient competition in a market. For example, the United States Department of Justice (DOJ) uses it to scrutinize potential mergers to ensure they do not lead to an over-concentrated and under-competitive market. The DOJ considers an HHI score below 1,500 as an unconcentrated market, between 1,500 and 2,500 as a moderately concentrated market, and above 2,500 as a highly concentrated market [29]. Manufacturer data and purchase volume are collected in the Global Fund’s PQR data, which allow the calculation of an HHI score over time.
Analysis objective
Past analyses have demonstrated that the average quality of available RDTs has increased significantly since 2008 [21, 22] and that average unit prices for malaria RDTs have declined in the past decade [10, 30]. However, price and quality have not been examined together across different RDT products, meaning a comparison of purchase prices at the RDT product-specific level (e.g., for products detecting the same species) remains a gap in our understanding of the malaria RDT market. The market concentration of RDT manufacturers in the Global Fund’s procurement orders has also not been measured with the HHI.
In this paper, we use data from both Global Fund procurement orders at the transaction level and the WHO-FIND product testing program at the product level to understand the relationship between price and quality of malaria RDTs. Specifically, we aim to investigate three unanswered questions:
1) Has the market share by quality of RDTs changed over time?
2) Is there substantial differentiation in quality given a change in price? That is, what is the relationship between unit price and RDT quality?
3) Has the Global Fund procurement market become more or less concentrated over time?
By examining these relationships using real-world procurement data and independent product quality evaluations, we hope to gain insight into the importance of price and quality to those making RDT procurement decisions at the national malaria control program level. The relationship between price and quality in the global RDT market may also be of interest to RDT manufacturers as they consider designing and pricing products for large-scale purchase by the public sector. The level of concentration in the Global Fund’s procurement orders may also be of interest to large purchasers and funders who want to ensure sufficiently diversified supply in order to avoid risks that could destabilize the market, such as a large manufacturer exiting the market. Several publications in the past decade have highlighted concerns about sustainability in the malaria RDT market, for reasons related to price, quality, market concentration, and trends over time [6, 10, 31]. The onset of the COVID-19 pandemic in 2020 also proved a major stressor on the manufacture of malaria RDTs, sparking continued conversation about long-term market sustainability for diagnostics of global health importance [32, 33].