Government Failure?

The previous post spoke well of the government for its intervention in a market failure scenario. In the situation mentioned, 70 million (mostly poor) Filipinos were being deprived of proper health care by being forced to buy expensive medicines, in a cartel like (oligopoly) situation.

A follow up to that story, however, will show that the government action to correct market failure is fast threatening to become a classic example of "Government failure".

The Philippine Government created the "Botika ng Bayan" (People's Drugstore) in order to make affordable medicines accessible, especially to the poor. In order to show the strengths of the program, the cheap product prices, printed in colored canvass, stands outside the branches. At present, it has 5,800 branches and by 2007, the goal is to expand to 7,800 local offices.

What fuels skepticism over the project are experiences that include:

1. Two visits to a branch showed that the outlet was already closed by 7PM. An inquiry with the guard revealed that the branch is open until 10PM.
2. A third visit to the same branch (12 noon), found the outlet again closed (lunch break?).
3. A fourth visit (2pm) revealed that the drugstore had run out of a particular brand of anti-allergy medication (among those advertised to be cheap). The staff believes that it will be a while (months) before a fresh batch of that particular brand will be available. The branch had also ran out of "Ventolin"- an anti asthma spray. Can't believe this, I came out empty handed and the meds that I needed were not even rare!!!

Has the project ran out of supplies? Are there stocks in the other branches? If so, why aren't they distributing it to support the outlets that had ran out of it? If not, why? Are they having supply chain problems?

Geesh!!! If I am running an enterprise with 5,800 retail stores, this situation will never happen. Man, profits are derived from sales and the absence of stocks is a grave sin!

Some economists contend that despite good intentions, governments have a tendency to create more trouble than the private sector. Inefficient allocation of resources (stocks) , personal pursuits , lack of incentive to do well, tendency to look at short term solutions and imperfect information are some of the things being seen as the root cause.

For the Botika ng Bayan, whatever the reasons are, it is not serving the population efficiently at this point.

A suggestion: Outsource to the private sector, the distribution of the low priced medicines.