UNRISD Research and Policy Brief 7

Commercialization and Globalization of HealthCare: Lessons from UNRISD ResearchUsing market mechanisms in the provision of health services and seeinghealth care as a private good are approaches that have featured prominentlyin health sector reforms across the world. UNRISD research on global and localexperiences of health care commercialization challenges this framework. Itcalls for reclaiming public policies that promote the purposes that healthsystems are set up to serve: population health and the provision of care for allaccording to need.

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In the struggle for developmental, inclusive anddemocratically rooted social policy, health is abattleground on which competing visions of theethical and political basis of society are fought out.Health systems act as powerful drivers of socialexclusion or inclusion: key markers of a country’spublic ethics and state-society relations.

Health care is also an important “test case” forproponents of market-led policy in the social spheres,since it was an early field for the promotion ofliberalization and the development of private sectorsupply. Yet the commercialization of health care ishighly contested, because of well-understood marketfailures and because of ethical commitments to accessto care that emphasize universal service provision andgovernment engagement in health care. Hence, policytoward health care commercialization focuses attentionon a widely contested market/non-market boundaryin social policy.

UNRISD research on health care commercializationbegan from an understanding of health policy as part

UNRISD Research on Commercialization of Health Care, 2003–2005This Research and Policy Brief summarizes findings from two UNRISD projects: Commercialization of HealthCare: Global and Local Dynamics and Policy Responses, and the health-related research for a broader project, TheSocial Challenge of Development: Globalization and Inequality. These interlinked projects brought togetherresearchers from 20 mainly developing and transitional countries to undertake primary research on theextent and differentiated nature of health care commercialization and globalization, its implications for accessand inequality, and the scope for effective policy responses to create inclusive, effective and accountablehealth systems.

Within these themes, topics included the strategies of multinational companies and the health implications ofglobal industrial regulation; the impact of transnationalization of health care corporations on middle-incomecountry health systems; commercialization of the public sector of health care itself and its consequences;international migration of health care staff; public-private interactions and health equity; and experiences ofuniversalization of care in commercializing health systems. Primary research was undertaken in Argentina,Brazil, Bulgaria, China, Ghana, India, Lebanon, Malaysia, Mali, Mexico, the Republic of Korea, the RussianFederation, Singapore, South Africa, Switzerland, Tanzania, the United States and Viet Nam. The projectsdemonstrated that economists and health policy experts can work effectively together within a conceptualframework that treats commercialization of health care as a process to be judged on its merits, rather than apremise on which health policy is built.

of broader social and public policies. Health systemsare the institutional expression of these policies,rooted in legal rights, values and politicalcommitments. Health care forms part of wider healthsystems, which also encompass public health, healthpromotion and assessment of health implications ofother policies. Health services must aim for universalaccess to care according to need, and solidarity inprovision and financing—and have to be judgedagainst these aims. In this framework,commercialization should be evaluated as a means tothese ends.

“Commercialized” health care means the provision ofhealth care through market relationships to those ableto pay; investment in and production of services, andof inputs to them, for cash income or profit, includingprivate contracting and supply to publicly financedhealth services; and health care finance by individualpayment and private insurance. Commercializationthus encompasses and provides a single framework ofanalysis for understanding a number of intersectingprocesses such as private sector expansion, marketliberalization and privatization of state assets.Commercialization of health care in this sense has

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been promoted directly and indirectly by economic pressuresand international policy leverage since the 1980s, and has beenthe precondition of international market integration, or“globalization”, in health.

Research FindingsResearch FindingsResearch FindingsResearch FindingsResearch FindingsNo comfort for commercializers: CommercializationNo comfort for commercializers: CommercializationNo comfort for commercializers: CommercializationNo comfort for commercializers: CommercializationNo comfort for commercializers: Commercializationis associated with worse access and outcomesis associated with worse access and outcomesis associated with worse access and outcomesis associated with worse access and outcomesis associated with worse access and outcomesThere is a striking lack of evidence from cross-countrycomparative data that health care commercialization has apositive impact on health care access and health outcomes.Yet commercialization has come to dominate most low-income countries’ primary care. The lower a country’saverage incomes, the more likely a population will face themost poverty-inducing form of health finance: out-of-pocketpayment. Health care largely free at the point of use, financedby general taxation or social insurance, is both the choiceand the privilege of wealthier countries: higher “social”expenditure on health relative to gross domestic product(GDP) is closely associated with both higher averageincomes and better health outcomes.

Within the health markets of a set of mainly low-incomecountries for which we have data, furthermore, the poorestpeople were more likely than the better-off to depend on privaterather than public care: the opposite to the usual supposition.The greater the commercialization of primary care, the greaterwas the exclusion of children from treatment when ill, andalso the greater the inequality in rates of consultation forchildren when ill and rates of immunization. The relationshipwas particularly strong for sub-Saharan African countries.

Of all the types of commercialization studied, it was fee-for-service provision in conditions of generalized poverty that hadthe strongest association with low-quality care, exclusion andneglect. The deterioration of care and working conditions inlow-income health services was also the underlying driver ofhealth professionals’ migration, notably from sub-SaharanAfrica, to work in higher-income systems.

Commercialization of the public sectorCommercialization of the public sectorCommercialization of the public sectorCommercialization of the public sectorCommercialization of the public sectorundermines its effectivenessundermines its effectivenessundermines its effectivenessundermines its effectivenessundermines its effectivenessEven in low-income Africa, public expenditure on health isprogressive: the poorest groups gain more benefits,proportionally, than their share in cash income. And morepublic spending is better: governments that spend more relativeto GDP have better, and better distributed, health outcomes.In Asia, universalist public health systems free at the point ofuse, such as in Sri Lanka, not only have above-averageoutcomes even at low incomes, but are also more redistributive.

However, commercialization of the public sector itself threatensits core role in health systems. For example, the study in Malishowed how public and community health centres that chargefees in conditions of generalized poverty tend to lose theirpublic health vocation and become “semi-commercial facilities”that rely on the sale of consultations and drugs. In transitionalRussia, “spontaneous commercialization” within a health sectormoving nominally from public to social insurance funding,and offering nominally universalist provision, was shown tohave hugely exacerbated inequality of access by associating

better-quality care with payment. The separation of healthfinance from health care provision in conditions of under-funding has distorted incentives and generated fraud in asystem where private medical insurance intermediaries extractprofits without improving access to care.

The public sector of health care can play its redistributive andpublic health role only if its principles of operation differ fromthose of commercialized services. Policy pressures tocommercialize operations, accommodate private interests andshift to material incentives have altered behaviour in the publichealth sector, while private sector provision in many developingcountries relies heavily on public resources, from equipmentto trained staff. Research in India underlined the impact ofcommercialization on the values and aspirations of professionalstaff, as the more individualized culture of private sector medicalcareers has come into conflict with a public sector culture thatcontinues to be more consultative and public-interest-based.Such changes in professional values are profound and longterm: in the current era of nascent international acceptanceof the need to rebuild public provision and trust, a preconditionof success will be combating the devaluation of publiccommitment and ethics.

Health care is a risky and unstable sector forHealth care is a risky and unstable sector forHealth care is a risky and unstable sector forHealth care is a risky and unstable sector forHealth care is a risky and unstable sector forprivate investment, and multinational firms’ risk-private investment, and multinational firms’ risk-private investment, and multinational firms’ risk-private investment, and multinational firms’ risk-private investment, and multinational firms’ risk-reduction strategies can be damaging and divisivereduction strategies can be damaging and divisivereduction strategies can be damaging and divisivereduction strategies can be damaging and divisivereduction strategies can be damaging and divisiveIn middle-income countries, commercialization in the healthcare sector has been strongly influenced by the increased entryof large health care corporations, and by foreign privateinvestment in provision and insurance. Such manifestationsof globalization in health are, however, patchy and unstable:health care is a risky sector for private investment, andmultinational investors focus closely on risk-containment. Inthe research, European and Asian multinationals were foundto display distinctly different investment strategies from thoseof US–based firms. European and Asian multinationals inhealth care, which operate in quite strongly regulatedenvironments on their home continents, focused on lobbyingfor the creation of economic “infrastructure” for privateinvestment, including charging and tendering systems thatwould allow them to compete; on limiting their risk exposureby reducing asset ownership; and on undertaking a mix ofpublic contracting and growing provision for “high-end” acutepatients with an eye to long-term involvement.

US multinationals were perceived in developing countries asmore unstable investors in the health sector, aiming at short-term profits. This instability appears rooted in the troubledindustry of US “managed care”: a private financing-and-provision format the corporations actively export. The late1990s saw a wave of US corporate investment in LatinAmerican health care, associated with corporate lobbying ofmultilateral organizations in favour of reforms that openedhealth care markets to private investment. In Brazil andArgentina, US firms invested, then quite rapidly sold on. InArgentina, which like Russia was going through economicreform and severe economic collapse in the 1990s and 2000s,and which had an established private sector of health careprovision for socially insured employees, the research showedthat foreign corporate investors participated in thetransformation of social security funds into a private managed

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care format, and engaged in leveraged buyouts, closures andresale across the sector.

Globalized commercial supply industriesGlobalized commercial supply industriesGlobalized commercial supply industriesGlobalized commercial supply industriesGlobalized commercial supply industrieswill not respond to public health prioritieswill not respond to public health prioritieswill not respond to public health prioritieswill not respond to public health prioritieswill not respond to public health prioritieswithout regulatory changeswithout regulatory changeswithout regulatory changeswithout regulatory changeswithout regulatory changesThe industries supplying health care inputs, notablypharmaceuticals, medical equipment and supplies, areincreasingly operating in internationally integrated markets,with rising exports and developing country firms that arebecoming multinational in their turn. Prices of drugs forpatients and health systems depend on market structure andcompetition, and commercial operators’ behaviour alsoresponds to the regulatory environment. The research showedthat new pharmaceutical research and development (R&D)by Indian firms, for example, is strongly oriented toward theneeds of wealthy countries’ markets; but if medicines are to beaffordable in developing countries, it is essential to sustaincompetition from generic producers.

Access to medicines and medical technologies is influencedby international industrial and trade policies and regulatoryactivities, including patent protection and standard setting.But supply industries are increasingly vocal and influentialadvocates of their own interests, and regulation is shaped bytheir initiatives and lobbying. The medical device industry,for example (largely US, European and Japanese) has beenstrengthening its international policy influence, exertingpressure to bring “borderline” items, such as drug deliverysystems and procedures, under the pharmaceutical patentregime. European and US policy makers seek to supportinnovation by and the profitability of their industrial base,and while industrial regulation is crucial to health system safetyand effectiveness, industrial policy rarely weighs health policyconsiderations effectively.

Policy ImplicationsPolicy ImplicationsPolicy ImplicationsPolicy ImplicationsPolicy ImplicationsConceive of health systems as core social institutionsConceive of health systems as core social institutionsConceive of health systems as core social institutionsConceive of health systems as core social institutionsConceive of health systems as core social institutionsHealth systems should be understood both as the institutionalexpression of ethically framed policy commitments and as socialinstitutions embedded in each society’s structure and values. Thisfocus on ethics and accountability should warn policy makersagainst allowing commercialization of the public sphere tocontribute to or, worse, legitimize exclusion from health care.

Health systems are an important means of redistribution andsolidarity, in which the healthy and rich must cross-subsidizethe ill and the poor. In times of crisis, moving towarduniversalization of access to health care can contribute tonation building. This is illustrated by government healthpolicies in the Republic of Korea in the wake of the 1997economic crash: democratization had strengthened an“advocacy coalition” pressing for universal national healthinsurance which, when implemented after 1997, broughtsignificant redistribution toward those on low incomes sufferingfrom the impact of recession.

Establish a coherent policy towardEstablish a coherent policy towardEstablish a coherent policy towardEstablish a coherent policy towardEstablish a coherent policy towardcommercializationcommercializationcommercializationcommercializationcommercializationCommercialization of health care is both a market-driveneconomic process and one that responds to policy decisions. At

present, commercialized health systems in developing countriesare largely unregulated, and formal regulation is very hard toachieve in liberalized markets. A more effective policyframework would focus on defining and enforcing the formand limits of commercialization appropriate to health systemobjectives at different levels of economic development and indiverse political contexts.

Key policy tools for this purpose include national healthfinancing mechanisms and public sector provision. At highermiddle incomes, the experience of the Republic of Koreademonstrates that even with a highly commercialized supplyside, health care access can be broadened, and itsredistributiveness improved, as long as health financing is viasocial—not individual private—insurance and is increasinglyextended to the whole population. At lower income levels,countries can finance a substantial health service through amix of tax funding, aid funding and nationally mandatedinsurance mechanisms. Such social funding mechanisms canbe powerful tools for accrediting and regulating the behaviourof private sector suppliers.

Rebuilding public sector provision reshapes the market andcompetitive framework for the private sector at both middleand low income levels. This is illustrated by the experience ofMexico City, where the city government sought to universalizeaccess to health care by first establishing rights of the poor tomake claims on the public sector that matched the rights ofthe socially and privately insured to health care, and thenrebuilding public sector provision to respond to those claims.The approach has the beneficial effect of legitimizinguniversalist claims to care—in contrast to the delegitimizingeffect of marketization—in a characteristically stratified LatinAmerican system. In many parts of low-income Africa, thereis growing democratic pressure to find alternatives to fee-for-service health care; this reflects a recognition that individualfees undermine claims to access.

Ensure that health policies are notEnsure that health policies are notEnsure that health policies are notEnsure that health policies are notEnsure that health policies are notundermined by industrial and trade policyundermined by industrial and trade policyundermined by industrial and trade policyundermined by industrial and trade policyundermined by industrial and trade policyat the international and national levelsat the international and national levelsat the international and national levelsat the international and national levelsat the international and national levelsTrade and industrial policies profoundly affect the cost andeffectiveness of health systems worldwide, yet they are largelyconducted without reference to the requirements of health policy.A move to place health policy needs at the centre of industrial andtrade regulation is essential for several reasons. First, it wouldchallenge the “reverticalization” of international health policy—the move to technology-driven vertical interventions at the globallevel through public-private partnerships. Second, it would providepressure against the expanding leverage of industry interests overglobal policy frameworks. Third, it would emphasize the importanceof democratic decision making when policy priorities are being set,and refocus attention on policies to support health systemintegration within developing countries. As demonstrated by thestudy of medical device regulation, public health interests shouldbe present in regulatory forums from the start to avoid the probabilitythat international agreements will work only for shareholders tothe detriment of patients. Research findings also suggest that theremay be fewer differences in policy priorities between countries ofthe North and South than there are global differences betweenthe priorities expressed by health and trade policy makers, orbetween the interests of public and commercial sectors.

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Printed in Switzerland GE.07-02836-December 2007-4,000 UNRISD/RPB7e/07/6 ISSN 1811-0142

UNRISD Research and Policy Briefs aim to improve the quality of development dialogue. They situate the Institute’s research withinwider social development debates, synthesize its findings and draw out issues for consideration in decision-making processes. Theyprovide this information in a concise format that should be of use to policy makers, scholars, activists, journalists and others.

This Research and Policy Brief was completed in November 2007 by Maureen Mackintosh and Meri Koivusalo. UNRISD research on Commercialization of Health Care was fundedby the Government of Finland, the Geneva International Academic Network (GIAN), the Swedish International Development Cooperation Agency (Sida) and the United KingdomDepartment for International Development (DFID), in addition to the Institute’s core donors—Denmark, Finland, Mexico, Norway, Sweden, Switzerland and the United Kingdom.

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Copyright © UNRISD. Short extracts from this publication may be reproduced unaltered without authorization on conditionthat the source is indicated. For rights of reproduction or translation, application should be made to UNRISD, Palais desNations, 1211 Geneva 10, Switzerland. UNRISD welcomes such applications.

The United Nations Research Institute for Social Development (UNRISD) is an autonomous agency thatpromotes research on pressing social issues of development. Multidisciplinary studies are carried out in col-laboration with the Institute’s extensive network of scholars and research institutes, mainly in developingcountries.

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Developing countries can also assert much more effectiveregulatory control over private investment. Corporations mayactively seek regulatory frameworks that restrict low-costcompetitors. Clear understanding of firms’ objectives, and afocus on regulating quality rather than merely offering firmsprotection from market competition, can shape the role ofprivate corporate providers toward health system goals of cross-subsidy and inclusion. Inclusive health policy is particularlylikely to require strong constraints on private health insurers.In China, for example, the research documented a lively debateabout how the government might ensure that private insurersplay only a complementary and not a dominant role in urbanhealth finance.

Reclaim the “common sense” in health policyReclaim the “common sense” in health policyReclaim the “common sense” in health policyReclaim the “common sense” in health policyReclaim the “common sense” in health policyfor public health priorities and needsfor public health priorities and needsfor public health priorities and needsfor public health priorities and needsfor public health priorities and needsIn the 1990s, international health policy actors sought to shapea common-sense view of health care as a private market good.Resistance to this view has been profound, and is increasinglyevidence-based. Health systems will continue to be “mixed”,with very substantial commercial participation. But if healthsystems are to play their essential role in providing strongsocial underpinnings for functioning market economies, theycannot themselves be market-led. On the contrary, they mustserve social, ethical and professional objectives, and healthpolicy must shape the commercial elements of the system toserve those objectives effectively.

A better common sense in international health policy willrecognize that effective, ethical and inclusive health systemsare both relevant to framing broader social and economicpolicies and global regulatory measures, and also impose certainrequirements. International policies toward, and frameworksof support for, national health systems must be reoriented tosupport equity and inclusion. National, regional and globalpolicy measures in other areas, such as trade and industrialpolicies, must avoid placing limitations on the policy spaceavailable for national health policies. In the current contextof commercialization and corporate involvement in globalpolicy agendas, this reassertion of public policy space willrequire rethinking regulatory approaches and frameworks,including questioning the role of public-private partnershipsand the current emphasis on selective technology-driveninterventions in global health.

Publications and FPublications and FPublications and FPublications and FPublications and Furururururther Rther Rther Rther Rther ReadingeadingeadingeadingeadingProject booksProject booksProject booksProject booksProject booksComeliau, C., S. Gillioz, M. Carton, Y. Flückiger, M. Mackintosh

and F.-X. Merrien. 2006. Le Défi Social du Développement:Globalisation et Inégalités. IUED and Karthala, Paris.

Mackintosh, M. and M. Koivusalo (eds.). 2005. Commercializationof Health Care: Global and Local Dynamics and Policy Responses.UNRISD and Palgrave, Basingstoke.

Contributions to the Journal of InternationalContributions to the Journal of InternationalContributions to the Journal of InternationalContributions to the Journal of InternationalContributions to the Journal of InternationalDevelopment (Policy Arena), Vol. 18, No. 3, 2006Development (Policy Arena), Vol. 18, No. 3, 2006Development (Policy Arena), Vol. 18, No. 3, 2006Development (Policy Arena), Vol. 18, No. 3, 2006Development (Policy Arena), Vol. 18, No. 3, 2006Blam, I. and S. Kovalev. “Spontaneous commercialization,

inequality and the contradictions of Compulsory MedicalInsurance in transitional Russia.”

Datzova, B. “The difficult transition to National Health Insur-ance in Bulgaria.”

Mackintosh, M. “Commercialization, inequality and the limits totransition in health care: A Polanyian framework for policyanalysis.”

Mackintosh, M. and S. Kovalev. “Commercialization, inequalityand transition in health care: The policy challenge in developingand transitional countries.”

McIntyre, D., L. Gilson, H. Wadee, M. Thiede andO. Okarafore. “Commercialization and extreme inequality inhealth: The policy challenges in South Africa.”

Other publications related to the UNRISD researchOther publications related to the UNRISD researchOther publications related to the UNRISD researchOther publications related to the UNRISD researchOther publications related to the UNRISD researchChaudhuri, S. 2007. “The gap between successful innovation

and access to its benefits: Indian pharmaceuticals.” EuropeanJournal of Development Research, Vol. 19, No. 1, pp. 49–65.

Iriart, C. and H. Waitzkin. 2006. “Argentina: No lessonlearned.” International Journal of Health Services, Vol. 36, No. 1,pp. 177–196.

Koivusalo, M. 2006. “The impact of economic globalization onhealth.” Theoretical Medicine and Bioethics, Vol. 27, pp. 13–34.

Mackintosh, M. 2007. Planning and Market Regulation: Strengths,Weaknesses and Interactions in the Provision of Less Inequitableand Better Quality Health Care. Commissioned Health SystemsKnowledge Network Working Paper. WHO Commission onthe Social Determinants of Health. www.wits.ac.za/chp/hskn.htm, accessed in November 2007.

Mensah, K., M. Mackintosh and L. Henry. 2005. The “SkillsDrain” of Health Professionals from the Developing World: AFramework for Policy Formulation. Medact, London. http://medact.org/content/Skills%20drain/Mensah%20et%20al.%202005.pdf, accessed in November 2007.

Sen, K. and A. Mehio-Sibai. 2004. “Transnational capital andconfessional politics: The paradox of the health care systemin Lebanon.” International Journal of Health Services, Vol. 34,No. 3, pp. 527–551.