If you try to make a balloon smaller by squeezing it, you should be careful. It tends not to work well. Balloons will bulge out in unanticipated places – if they don’t pop.

Restrictions on markets can have similar effects. If you regulate against activity in one area, you have to watch for where the thwarted desires of buyers and sellers bulge out instead.

In New Zealand, as well as many other countries including the United Kingdom and Australia, compensation for blood donors is forbidden. The staff who collect the blood can be paid. Companies refining blood into various products can be paid. But donors cannot. And that has consequences.

The World Health Organisation’s 2009 Melbourne Declaration favouring 100% voluntary non-remunerated donation, to which the New Zealand Society of Blood Transfusion signed on, argued that bans on compensation protect blood donors’ welfare and improve access to safe transfusion. The Declaration suggested that voluntary donations would be sufficient.

This week, the Adam Smith Institute [ASI] in the United Kingdom released Professor Peter Jaworski’s Bloody Well Pay Them: The case for Voluntary Remunerated Plasma Collections.

The report shows that, whatever the moral, ethical, or health case for prohibiting the compensation of New Zealand donors, New Zealand’s health system nevertheless relies on plasma provided by compensated plasma donors.

Those donors simply happen to live in the United States, where compensation is allowed.

Despite New Zealand’s prohibition on donor compensation, or perhaps rather because of it, about an eighth of New Zealand’s needs for plasma therapy are filled by imported American supplies that rely on compensated donors. The New Zealand Blood Service’s May 2020 Annual Statement of Performance Expectations considered the annual increase in demand for immunoglobulin (an important plasma product) to be “not considered sustainable”; imports are expected to make up over 15% of New Zealand’s needs by 2022.

Reliance on American blood plasma products is even heavier elsewhere: the report tells us that America now supplies about 70% of global need for plasma product – in part because American companies have expertise unavailable in developing countries for providing safer products, but more fundamentally because donor compensation helps ensure sufficient supply.

Developed countries with no shortage of expertise also rely heavily on American plasma imports. The report tells us that the United Kingdom, which prohibits donor compensation, relies almost entirely on American blood plasma products; imported American plasma product meets over 80% of Canada’s need for plasma therapy – and over half of Australia’s.

In one sense, there may be nothing particularly wrong with this. Some people, particularly medical ethicists, think it is fine to pay phlebotomists to collect blood but that it is wrong to pay the people providing the blood or plasma. Those with such views get to be happy that policy accords with their sense of morality – so long as they don’t look too closely at where we wind up finding plasma products instead. And ability to access American markets where donors are compensated means that we in New Zealand are less likely to fall short despite our country’s ban on donor compensation.

But there are other and worse consequences.

The ASI report argues that bans on donor compensation in places like the UK, Canada, Australia and New Zealand, which are perfectly capable of making their own immunoglobulin products, push up the price of plasma products for poorer countries without those capabilities.

And, seemingly paradoxically, failing to compensate donors can increase the cost of the final product. Why? When plasma donors are not compensated for their time, it is harder and more costly to find and convince people to come in and spend an hour connected to an apheresis machine. New Zealand Blood tells plasma donors to allow 90 minutes in total. The ASI report cites a Health Canada Expert Panel’s conclusion that collecting large amounts of plasma from volunteer donors costs two to four times as much as commercial (compensated) collection.

Further, global reliance on any one country can bring risks – as has been rather obvious in other areas over the past year. If countries like New Zealand, the UK, Australia and Canada shifted from being importers of American immunoglobulin to helping instead to supply the broader world’s needs, global supply would both be more affordable and more secure.

Compensating donors does not just help avoid shortages. It is also the right thing to do. And, in other areas, it is allowed.

Sperm and egg donors are allowed to be somewhat compensated for their costs – but insufficiently, and shortages consequently remain.

In 2016, Parliament unanimously supported legislation allowing the health system to compensate live organ donors for their lost wages during the donation process and during recovery. The legislation was further strengthened late last year.

Prohibiting the compensation of blood plasma donors is increasingly out of step with policy in other areas, and will have mounting cost as domestic shortages rise. Rather than continue to squeeze this balloon, why not let go?