The world is pouring trillions of dollars into coronavirus vaccines and economic stimulus efforts. But without strict measures, graft will prevent funds from reaching the right recipients
To misquote a superhero comic: "With great funding comes great responsibility." Anytime there is money sloshing around and through the halls of government, authorities need to double down on transparency and controls—or risk a hemorrhage of funds. The world has seen examples of graft and misappropriation of money in situations ranging from international sporting events to devastating tsunamis. Public health crises are at least as vulnerable to abuse.
It is now clear that restoring something that approximates a pre-pandemic lifestyle depends on the development, manufacturing, and global deployment of effective therapeutics and vaccines. Many world leaders have stepped up: Earlier this month, in response to a call by the World Health Organization (WHO) to accelerate pharmaceuticals and technology to treat the coronavirus, a pledging event co-led by the European Commission raised $8 billion. While extraordinary, this number pales in comparison to the more than $8 trillion in global stimulus funds distributed since the beginning of the crisis. Without stringent anti-corruption safeguards in place, it is not difficult to predict wasted public funds, weakened government institutions, and ultimately, devastating effects on communities and individuals. But by proactively identifying and deterring certain behaviors, the world has a chance to make the fullest use of an unprecedented flow of global aid money.
First, a public health crisis can set the stage for governments to directly determine prices for medical products, a process that can create endless opportunities for corruption across a supply chain. To prevent that outcome, governments and multilateral organizations should establish a transparent, verifiable royalties structure that balances incentives for private sector research with the need for affordable, equitably distributed drugs, medical equipment, and vaccines—and apply these rules universally. Pharmaceutical companies will struggle to balance already palpable investor pressure with global demand for affordable products, protracted research and development timelines, and an unrelenting sense of urgency. Meanwhile, nongovernmental organizations and public officials are calling for intellectual property-sharing, including compulsory licenses, which grant permission for third-party production of patented products without the patent owner's permission in exchange for a royalty set by the government. The need for market incentives can be addressed in part by setting royalties for compulsory licenses that reflect the extraordinary and speculative investment companies decide to make. But without transparent, fair, and comprehensive pricing and licensing measures, governments and NGOs will be left to individually negotiate with pharmaceutical companies. And transactions in which governments have substantial discretion, such as telecommunications and defense contracts, are among the most vulnerable to corruption, kickback schemes, and manipulation for the benefit of big donors. Transparency and consistency can guard against these risks.
Second, governments need to double down on their vigilance within markets, cross-border cooperation, and legal enforcement to deter bad actors. For example, a rush to increase the number of compulsory pharmaceutical licenses may dilute oversight and quality control, and risk a race to the bottom for unqualified manufacturers that, even without a pandemic, profit from unsafe and counterfeit drugs. There are well-traveled routes for black-market products from the countries where they typically originate—with India and China accounting for around 80 percent—to common destinations in Africa, Europe, and the United States. But by ramping up intelligence coordination among global agencies, interventions in illicit trade networks, and more frequent cargo checks—the same tools employed by organizations such as the United Nations Office on Drugs and Crime and Interpol—the distribution of counterfeit pharmaceutical products can be curtailed. Enforcing laws that have extraterritorial jurisdiction to prosecute these crimes across borders, along with platforms for collaboration and added pressure from multilateral organizations such as the UN, would encourage governments to prioritize these measures.
Once viable products reach the market, those who are desperate and able to pay will always pay. Under the current circumstances, one should also expect to see distributors that control the sale and delivery of scarce resources engaging in illicit price-gouging, and others accepting kickbacks and enriching themselves at the expense of the needy. Governments have the legal tools to address this sort of financial crime, but enforcement will have to become a very public priority, and substantial penalties will have to be assessed to provide sufficient deterrence in a lucrative market. While countries have shown varying levels of commitment to prosecuting commercial bribery more generally, prioritizing the punishment of exploitative practices amid an international health crisis should be politically palatable even to reluctant regimes.
Third, to avoid fratricidal competition, governments must establish international supply networks for essential equipment, tests, therapeutics, and vaccines—and ensure these systems are run by politically neutral bureaucrats rather than partisan politicians. The scramble to secure test kits, personal protective equipment, and ventilators has already spurred competition on a smaller scale, pitting governors against governors in the United States and European leaders against one another. In the United States, Maryland's governor and first lady leveraged diplomatic connections to directly negotiate the purchase of 500,000 test kits from South Korea. That was good news for Maryland residents, but it's hardly a scalable solution. Without an international alliance in place to ensure equitable distribution, global competition for pharmaceuticals and equipment will move along similar paths, with leaders driven to exploit whatever connections are available to them. Some will be legitimate and transparent, as in Maryland, while others will be far less so.
WHO announced in late April a multilateral collaboration for equitable access to coronavirus vaccines, tests, and treatments. A successful global alliance, however, will require unwavering commitment from all heads of state. While some national governments may be able to address uneven resources domestically, mitigating the risk of resource-hoarding by wealthy nations to the detriment of countries with greater or more immediate need requires global cooperation. To address viral outbreaks, a multilateral agreement could draw on the framework of the global Ebola vaccine emergency stockpile—funded in 2019 by Gavi, the Vaccine Alliance—which incorporated transparency and fair pricing measures from the outset. The target and scope of the program can adapt to reflect evolving recommendations by WHO's Strategic Advisory Group of Experts on Immunization and the tender process is managed by UNICEF. Though political discrepancies may be inevitable, relying on a collectively governed, transparent, and inclusive multilateral panel of experts to make informed decisions about the deployment of drugs and vaccines can reduce the likelihood of perceived injustice and shady bilateral deals.
Fourth, the public and private sectors must overcome long-standing cultural stigma and finally support and protect whistleblowers. The Organization for Economic Co-operation and Development Working Group on Bribery has warned that corruption could undermine coronavirus crisis responses and urged greater support for people who raise an alarm over graft. Whistleblower protections, in particular, vary extensively in both substance and application worldwide: Far too many are narrow in their scope and feeble in their application, and most lack meaningful anti-retaliation protections. To advance efforts to uncover corruption, corporations and governments both must publicly and consistently embrace whistleblower protection measures, which should provide a clear path for reporting, either anonymously or confidentially, that guarantees defined legal and employment protections.
Fifth, countries should fund and defend investigative journalism—especially at a time when traditional revenue models are under unprecedented threat. High-quality, objective, professional reporting is a powerful tool for countering financial crime, particularly when whistleblowers are hesitant to be publicly identified. Reporters can investigate and expose malfeasance while protecting confidentiality, and, often, their presence alone deters corruption. A strong media will also be critical in tracking financial flows of the pandemic response for years to come.
Recent emergency power grabs, such as the one in March by Hungarian Prime Minister Viktor Orban, endanger the viability of independent journalism by enabling political leaders to silence reporters they accuse of spreading misinformation. To counter these abuses of power, governments that support democracy and free, independent press should continue to fund NGOs, diplomatic missions, and other institutions abroad that provide on-the-ground support for human rights, democratization, and anti-corruption efforts. To determine where funds should be directed, reporting and accountability are critical: Foreign and domestic government agencies and independent watchdogs should closely track how emergency power grabs evolve. And as the world recovers from the crisis, international development banks should condition loans and aid on the finite term and ultimate discontinuation of emergency power measures—especially those that repress civil society and objective journalism—to ensure they do not become permanent installations.
Sixth, organizations should elevate and entrench the decades of anti-corruption best practices developed by global regulators. The World Bank and other international organizations have emphasized that typical accountability measures, including meticulous record-keeping and tracking the movement of supplies, must be maintained well after the crisis has subsided. The world should not miss the chance now to install auditable controls to help deter and hold accountable bad actors in the future. Both government and corporate procurement safeguards have evolved over time to address increasingly sophisticated corrupt schemes. An effective crisis response will require the public and private sectors to engage in ongoing risk assessments, continue funding and providing support for compliance, and resist the rush to scale back safeguards under cover of the pandemic.
Close to $500 billion is lost annually to fraud and abuse in the health care sector, and financial misconduct is exacerbated by any sudden and critical imbalance of supply and demand. Well-worn channels of corruption remain pervasive. Shifting supply chains can lead to rushed or haphazard vetting, enabling corruption at the delivery stage. Established money-laundering tactics support the efficient diversion of emergency funds to shell companies and offshore accounts. Preventing the devastating effects of corruption will require heightened vigilance by government, corporate, and nonprofit leaders, along with civil society—but governments and global watchdogs have the ability to do more than one thing at a time. None of this is impossible if authorities avoid the impulse to shrug it off as the unfortunate cost of doing business during a public health crisis.
Alexandra Wrage is president of TRACE, founded to advance commercial transparency worldwide. Twitter: @AlexandraWrage
Disclaimer: This article first appeared on foreignpolicy.com, and is published by special syndication arrangement.