Mendoza, Roger Lee. 2010.

“Price Deflation and the Underground Organ Economy in the

Philippines.” Journal of Public Health 33(1):101-107.

• “The global demand for kidneys is the highest among all human organs. Trafficked kidneys alone
represent as high as 20% of world-wide kidney transplants. The current shortage in legitimate kidney
donors is expected to worsen in the near future…” (Mendoza 2010:101).

• An underground economy refers to profitable exchanges and transactions involving illegal

commodities. Studies show that a combination of high levels of demand for these commodities and stiff
government restrictions on their 'provision' and 'production' encourages the growth of underground
economies or black markets (Laughlin, 1981).

• The current academic and policy debate centers on the legitimacy (or at least permissible extent) of the
profit-motive behind kidney transplantation. Black market kidney trading is illegal because
governments consider it to be repugnant (Roth 2007; Roth & Sonmez 2007). It also leads to negative/
harmful behavior among individuals, such as cash-strapped hospitals (105).

• On the other hand, due to a scarcity of kidneys, a growing number of economists and medical scholars
are supporting the legalization. They advocate for the use of markets to maximize supply, lower prices,
and reduce social pressure regarding organ selling (105).

Despite limited support and compensation for commercial donors or sellers, the Philippines'
underground organ trade thrives. Why?

• The underground kidney (and organ) trade in the Philippines creates and sustains its own socio-
economic puzzle: pricing and transactions involving transplantable kidneys do not generally depend on
the forces of supply and demand, but upon third party brokerage (Mendoza 2010:105).

• The incapability of the kidney vendor and buyer to transact directly, in exchange, gives brokers the
power or advantage. Using the market for a direct trade may be extremely costly. Transaction costs are
expenses that aren't directly related to a commodity's production or transportation (105).

• Even though there were willing sellers and willing buyers, the kidney trade is unlikely to be as effective
as it might be in other, more desirable market conditions (105).

• As a result, kidney brokers, who are neither buyers nor producers, benefit the most financially from
illegal buy-and-sell transactions, often without fear of legal sanction or retaliation (105).

• The global kidney market has long been driven by scarcity.

• But in countries like the Philippines, patients are dealing with signs of relative surplus if they transact
illicitly. This is due to the ease with which healthy organs from live sellers can be found (Mendoza
2010:105).

These conditions suggest why underground organ trading exists and persists in developing
countries like the Philippines.

• Third-party brokerage, as well as wage and price stagnation, deepen market inequities and curtail
changes in the transplantation of kidneys. Findings underscore the importance of governments
interfering in what is otherwise a private transaction between buyers and sellers (105).

What this study adds

• This is the first in-depth study of the illicit kidney trade in the Philippines based on survey data. The
study suggests information asymmetries: encourage brokerage and trading and help sustain lower organ
purchase prices. It also helps vendor compensation-fixing without necessarily creating shortages in
organ supply (105-106).

• The fair market price for a healthy kidney or organ is where supply and demand levels meet. When
brokers set a ceiling to a vendor's compensation or asking price, an incentive arises for brokers to offer
a lower buyer price. A few factors beyond the broker's control, such as the weak purchasing power of
the Philippine currency vis-a-vis most foreign buyers, contribute in keeping compensation ceilings
attractive to poor vendors (106).

“The resilience of price deflation further owes to the low transaction costs and the relative insulation
(from legal sanctions) of commodity brokerage. Low transaction costs facilitate organ commerce by
ensuring ease of information search and exchange…” (Mendoza 2010:106) .

• Underground kidney trade thrives when matching agencies, foundations, hospitals, doctors, law-
enforcers perform roles in one system. Kidney patients pay huge sums for new kidneys, but most go to
brokers for locating and transporting poor donors. Without incentives (e.g. cash rewards) to report
brokers, underground kidney trade will continue to flourish (106).

• Other related aspects of transplantation, such as improved renal care services and promotion of
cadaveric (brain-death and cardiac-death) organ donations, should be addressed in policy debates, not
just legitimacy problems. The health hazards of illicit organ-selling and sources of information
asymmetries should also be addressed (106).

• A well-balanced mix of efficient regulation, law enforcement, and public education could increase the
costs of brokered organ trade while lowering the benefits. It should also promote the exchange of
relevant and balanced knowledge about organ donation and transplantation (107).

Limitations of this study

- Researches into the Philippines' kidney black market will need to look into the degree and efficacy of
legal and regulatory enforcement. Due to a lack of resources, the researchers were unable to thoroughly
investigate the government's numerous policy efforts to tackle the illicit kidney trade (107).