Rich nations and the World Bank are wasting money and risking lives by continuing to “push unproven and discredited private healthcare programmes” in poor countries, claims international aid agency Oxfam, which calls on them to “put their blind optimism about the market behind them.”

The Word Bank uses its “unmatched” policy influence worldwide to promote privatised health, despite a lack of evidence, says Oxfam in a new report. For example, a third of drugs dispensed by private vendors in China are counterfeit, and most anti-malarial drugs provided by private facilities in seven sub-Saharan African countries have failed quality tests, it says, adding that the World Bank itself has acknowledged that the private sector generally performs worse on technical quality than the public sector.

“Donors’ romantic views of private-sector health providers are completely divorced from the facts,” says study author Anna Marriott. “For the most part, private health care in poor countries is made up of unqualified shopkeepers selling out-of-date medicines. Is that what you would want for your sick baby?”

The Bank’s private-sector arm, the International Finance Corporation (IFC) recently announced that it will mobilise $1 billion to finance the growth of the private sector’s role in Africa. Many other donors and influential groups - including the US Agency for International Development (USAID), the UK’s Department for International Development (DFID) and the Asian Development Bank - have followed its example, spending millions of aid dollars in funding large-scale programmes to contract-out service delivery to the private sector. In contrast, aid for primary healthcare services in poor countries has almost halved in the last decade.

Yet, says Ms Marriott: “if the past few months have taught us anything, it is that the market has its limitations and that governments need to take a lead. That is why President Obama is planning to scale up US investment in universal health care, while China has announced a $124 billion investment in public health provision to protect it citizens and stimulate economic growth.”

The IFC report, entitled The Business of Health in Africa, forecasts that by 2016, Africa’s health expenditure will reach $35 billion, up from $17 billion in 2005, and that around 60% of the $15-$20 billion in necessary new investments will be privately-funded. Despite being only part of the solution, the private sector is sometimes the only option for people living in remote rural areas and urban slums, it says.

Tadataka Yamada, head of the global health programme at the Bill & Melinda Gates Foundation – which partly financed the IFC report - said the study “makes a compelling investment case for private capital seeking financial and social returns on investment.”

However, Oxfam says that its analysis of the data used by the IFC to claim that over half of healthcare provision in Africa comes from the private sector reveals that nearly 40% of the “private provision” identified is just small shops selling drugs of unknown quality. In countries such as Malawi, these shops constitute over 70% of private providers, it adds.

The evidence shows that scaling-up private-sector provision is extremely unlikely to deliver health for poor people, while the rapid expansion of free, publicly-provided health care is a “proven way to save millions of lives worldwide,” it says.

For example, Lebanon has one of the developing world’s most privatised health systems, but its infant and maternal mortality rates are two and a half and three times higher, respectively, than in Sri Lanka, which spends less than half as much on health. A Sri Lankan woman can expect to live almost as long as a German woman, despite an income ten times smaller, the report notes.

Moreover, there is no evidence that private health care providers “are any more responsive or any less corrupt than the public sector,” says Oxfam, adding that regulating private providers is exceptionally difficult even in rich countries; for example fraud in the US system is estimated to cost $12-$23 billion a year.