(2001; 96 pages) [French] [Spanish]
6.2 Drug financing options
Financial sustainability requires a balance between demand, the cost of meeting this demand, and available resources. For example, demand can be changed through improved use of drugs, education, barriers to care and user charges. The cost of meeting the demand can be reduced through improved efficiency and rational use of drugs. Available resources can be increased from patient (co)payments, prepayment (insurance) schemes, government funding from general tax revenue, development loans, endowment funds or donations. Balancing this complex equation is vital for the sustainability of a national drug policy.
Before studying options and choosing strategies, it is helpful to develop a clear picture of the situation and to review some basic information. The government’s stand on key policies related to trade, economy and health should be examined. It is also necessary to know how much is currently spent on health and drugs, and whether this is likely to change. What are the relative shares of the private and public sectors? An assessment of the extent to which people have access to essential drugs and a clear description of problems relating to equity and known market failures can be helpful in setting priorities for action.
Improving efficiency and reducing waste
Various measures can be taken to increase value for money and to contain costs at each stage. Rational selection has been discussed in Section 4 and increased affordability in Section 5. Efficient tendering, bulk procurement and improving storage and distribution are discussed in Section 7. Proof that available resources are used wisely and efficiently is a strong argument to justify requests for increased funding.
Increasing government funding
Many countries maintain a commitment to public financing of health services, including essential drugs. Justification for government financing for essential drugs may be strengthened by demonstrating the health impact of drugs, recognizing their social and political importance, showing improved drug management and reduced waste, and presenting solid data to support the drug quantities and budget needed.
In the case of limited public resources for health it is important to carefully (re)define government policy (for example, reconfirming a policy of solidarity) and select priorities for public funding on that basis. Suggested priority areas would be: childhood vaccination services; the prevention and treatment of certain infectious diseases with a high public health impact, such as cholera and tuberculosis; mother and child health services, including safe motherhood; and basic health services for the poor and disadvantaged. Careful analysis of the cost-effectiveness of the various interventions may be needed to guide government decisions on where to spend limited public funds.
The same arguments and identified priorities may be used to justify an increase in government funding. After all, public funding of health care is equivalent to a health insurance system with the largest possible risk pool.
Prepayment schemes and health insurance
Prepayment schemes and health insurance share the risk of health costs between those participating in the scheme. These schemes include compulsory social health insurance, social security, private insurance, managed care (which links health care providers to insurers) and small-scale community health insurance.
The advantages of this approach are that the healthy part of the population also contributes. In this way the total amount of funds available is increased; the health risks are pooled so that care becomes affordable and accessible to more people; and equity shifts are possible (when the rich pay higher premiums than the poor).35
In general, a larger pool of participants leads to more robust schemes. In view of the advantages mentioned above, it is recommended that governments back the establishment or expansion of health insurance schemes through supportive legislation and subsidies. WHO provides useful guidance on the design of social insurance schemes.36, 37
Introducing or increasing user charges
User charges are increasingly being applied by governments and local communities to supplement general government revenues and to help control use of drugs. Often, however, user charge schemes have not been adapted in the light of experience and are not well managed. As a result, the poor and needy are often excluded, revenue replaces rather than supplements government funding, and drugs are often overprescribed.
It is not easy to make these schemes work well. Critical factors in their success have been: local control of revenue; effective and accountable management; constant or increasing levels of government funding; adequate protection or exemption mechanisms to ensure equitable access; reliable supplies of low-cost essential drugs of recognized quality; locally appropriate fee schedules; and phased implementation, beginning in larger hospitals or in some districts.
As user charges charge only the sick and do not generate any revenue from the healthy population, they usually fail to generate enough income for the health system as a whole. User charges are also known to have an anti-equity effect, as the poor are either excluded or pay a disproportionate part of their income for services. For this reason user charges alone cannot be recommended as a sustainable solution.
Development loans can contribute to the development of the human and physical infrastructure for the health care system. However, obligatory counterpart contributions to donor-driven projects should not divert scarce public funding away from identified national priorities. Therefore, such investments should be made only when they clearly fit within the national drug policy and within the identified national priorities. It should be cautiously reviewed to finance recurrent costs, which would normally include drug supplies, through development loans.
Foreign aid can be given to finance the development and implementation of a national drug policy, or to finance the implementation of some parts of the master plan. Donations may also be used to pay for high-priority commodities, such as vaccines or essential drugs for the neediest groups, or for treating diseases with a large public health impact.
Drug donations can save lives and reduce suffering, but only as a temporary measure. Donations do not create a sustainable financing system, and some may actually prevent or delay it. Guidelines for drug donations are discussed in Section 4.2.