Distinguished Participants, Dear Colleagues, Ladies and Gentlemen,

I am pleased to welcome all of you to this second meeting of the WHO/SEARO Working Group on Drug Financing. I wish to thank the MOH, Republic of Indonesia, for hosting this important meeting; the Directorate of Drug Control, and the Centre for Clinical Pharmacology and Drug Policy Studies of the Gadjah Mada University for making excellent arrangements.

In my book entitled Partnerships: a new health vision, I have expounded on the need for building partnerships for health. This is a belief I have held for a long time, based on my intimate knowledge of the health concerns of the people in the South-East Asia Region. We need to look beyond the traditional roles of the health care agencies and promote the cause of health with all those whose decisions and actions make direct impacts on people's health. It is important to proactively seek partnerships to make health care a shared concern between sectors, between organizations, between groups, and between people.

Partners that the MOH will need are the Ministries of Planning, Finance, Education, and Science and Technology, as well as regulatory bodies, professional groups, consumer groups, research institutes, the private sector, the mass media and international agencies.

Health issues should bring together various sectors and organizations to find practical solutions through innovative approaches and new strategies. One of the major challenges is privatization of health care, which is rapidly expanding in some countries. This is resulting in the private sector absorbing a major share of the public sector health services because of the latter's inability to cover the ever-growing population. Coupled with this is the limited capacity of the public sector to utilize trained human resources and give them comparable remuneration.

Privatization of health care has led to the increased influence of market forces on health. The many technologies making their debut in the health care market, such as genetic engineering, micro-surgery, medical imaging and custom-designed drugs, are expensive methods of treatment. These are, therefore, out of reach for the majority of our people.

There are some crucial elements which must be taken into account while developing policies and guidelines for an ideal public-private mix in health. These are: (1) policies must aim at a judicious mix of public and private services, (this can be determined on the basis of local situations and needs); (2) establishment of regulatory mechanisms, standard-setting and a balanced mix of human resources are urgent requirements; and (3) uncontrolled use of market-driven policies can have a negative impact on ensuring equity.

Some of the outcomes expected from an ideal public-private mix are development and production of low-cost, high-volume output of drugs, appropriate technologies for their manufacture, and development and application of a regulatory mechanism that will ensure the viability of both the public and private sectors in a complementary way.

WHO/SEARO has published an information kit on "Privatization of Health Care" which is in conformity with the increasing interest about the subject amongst policy-makers, health planners, senior health administrators and others in the countries of the South-East Asia Region.

Many see the process of privatization as a remedy for the problems inherent in the public sector financing of drugs, and a way to strengthen their policies and strategies, leading to an improvement in the national drug supply situation. It is considered that private endeavours are free from political constraints normally associated with the public sector run by bureaucracy, and that privatization will lead to improved resource management, thereby resulting in efficient and effective delivery of services. There is also the belief that privatization could free scarce government resources which could be utilized to improve provision of drugs to the poor.

On the other hand, it is also pointed out, in opposition to privatization, that imperfect market conditions developing in the health sector will lead to outcomes such as over-supply of services and excessive investigations, leading to cost escalation and unnecessary cost to patients. Concern is also expressed that privatization will lead to wide disparity in people's ability to access quality health care.

The changing pattern of financing of drugs, from a system where the public sector has predominated for a long time, to a system where the private sector becomes increasingly important, poses new challenges. The question as to what constitutes an appropriate mix of public and private sectors in the provision and financing of drugs in a health care system is for the policy-makers, programme managers and other interested parties to take into consideration in the formulation of their health programmes.

As you are aware, the first meeting of the WHO/SEARO Working Group on Drug Financing was held at Nakhorn Ratchasima, Thailand, in November 1996. One of the outcomes of this meeting was the identification of key issues relating to country priorities in drug financing.

Four countries, namely Indonesia, Myanmar, Nepal and Thailand, have prioritized issues that are important in financing of drugs. These are: having an adequate budget for drugs; equity of health services for the poor; improvement of government subsidies; proper policies and guidelines for cost-sharing schemes; sound financial management; purchase of quality drugs at competitive prices and improvement of rational use of drugs through financial mechanisms and control of drug prices.

Regular access to drugs can result from a satisfactory relationship between three basic factors: the need for drugs; cost of meeting this need, and availability of financial resources to meet this cost. As the health sector budget in general, and its drug budget in particular, are usually inadequate to meet the requirement for drugs, it is important, first of all, to make the most efficient use of the available resources. This must be complemented by improving efficiency in drug selection, procurement, distribution and use. Other options such as increased funding from government sources, introduction or strengthening of cost-sharing, health insurance covering reimbursement for drugs, and donor support either from international agencies or nongovernmental organizations, may complement the basic requirement of improved efficiency in financial as well as drug management.

As the basic issues which are relevant to the Member States in drug financing were identified in the first working group meeting, it is now opportune to review the progress made in the prioritized areas and identify steps that can be taken to improve the situation.

Among the seven priority areas identified by the first meeting, I wish to touch upon three areas which are high on the priority list.

First is the issue of public financing and drug financing indicators. Financing of drugs by national and local government budgets has been seen in a number of instances to be inadequate to meet national drug requirements. Several approaches to increase public financing of drugs have been employed for enhancing the drug budgets. Some of these approaches relate to political benefits accruing from a visible impact of having no shortage of life-saving and essential drugs; a comparison of per capita drug budgets with other countries at similar stages of socioeconomic development and disease burden; and a demonstration of efficiency in drug management both at central and peripheral levels. National drug finance indicators such as per capita drug consumption, comparative disadvantage of the drug budget in the overall national health budget, disproportionate use of funds for essential drugs versus more costly preparations are useful indicators to support the case for increasing public financing of drugs.

The second very highly prioritized issue is respective roles of the public and private in the pharmaceutical sector in the context of health care reforms and global change. Most countries in the Region have experienced increased private sector involvement, which is mostly due to tax benefits given on import of essential drugs, as well as absence of an appropriate policy on privatization. However, a variety of policies have been introduced by various countries. These include tax relief to encourage private health insurance, provision of private health care facilities in public institutions, allowance of private practice in the public sector, and promotion of preventive care in the private sector. More common approaches are implementation of health insurance and user charges as alternative sources of drug financing in health care, contracting transport services for distribution of drugs, and increasing the role of the private-for-profit and private-not-for-profit organizations in promoting the availability of essential drugs. Another area that requires a better focus is the regulation of drug costs or prices, and the quality, quantity and distribution of drugs to various health services.

The third area which has been given very high priority is drug pricing policies and mechanisms, including control of drug manufacturers' prices. Governments can use different options for reducing the cost of drugs to the consumer. Some of these options are: (1) a direct price control can be imposed; (2) free competition can be allowed so that open-market economic forces reduce the cost of drugs; (3) the costs of basic and essential drugs can be subsidized; reimbursement mechanisms can also be introduced through health insurance schemes; (4) the use of generic drugs can be promoted; and (5) economical prescribing can be instituted and measures applied to minimize costly prescriptions.

The above-mentioned cost-containment approaches have been introduced in some developed countries where drug costs in national health services had been increasing. These methods, singly or in combination, could be applied to any national situation to bring down the costs.

Finally, I wish you all success in your efforts to find solutions to the problems most of our countries face with regard to drug financing. I also wish you all a fruitful meeting and a pleasant stay in Yogyakarta.