The sustainability of financial resources of a government agency is a key concern. Having a specific budget assigned to drug regulation is one means of safeguarding funding for drug regulation against the competing needs of other government agencies.

All the countries in this group, with the exception of Cyprus and Tunisia, are assigned a specific budget for drug regulation (Table 5.4). Both the Cypriot and Tunisian drug regulatory authorities, which are organized as executive departments, rely entirely on government funding for their regulatory activities. Although the Malaysian and Venezuelan drug regulatory authorities are allocated a separate budget for drug regulation, they too receive 100% of their financial resources from the Government. This does not mean, however, that the drug regulatory authorities in these countries provide their services free of charge. They do collect fees and charges for the services they provide. But those fees are transferred to the Government central treasury, and the authorities do not have the power to use the revenue they generate. In some of the countries, fees and charges are set arbitrarily, instead of being linked directly to the cost of providing the services. For example, the fees and charges set by the drug regulatory authorities in Cyprus, Malaysia and Uganda for registration of pharmaceutical products containing new active ingredients are lower than those set by the other seven countries (Table 5.5). Furthermore, a number of time-consuming services and items of information are offered free of charge.

Table 5.4 Overview of drug regulatory authorities’ financial resources

• = Yes = No

Table 5.5 Examples of fees and charges levied (US$)

The TGA in Australia, the MEB in the Netherlands and the Medicines Control Agency in Zimbabwe are financed entirely by the fees and charges they collect. Unlike the countries mentioned above, these drug regulatory authorities have full powers to dispose of the revenue they collect. And because their financial viability depends on the revenue they generate, fees and charges reflect the real cost of services.

Australia is an example of a DRA that has transformed itself from a government-financed to a self-financed agency (Figure 5.2). It has been the policy of several successive Commonwealth Governments that the TGA should provide its own funding entirely from fees and charges, and this policy has been phased in over several years. Fees for evaluation of applications were introduced in the late 1980s. At that time, the industry accepted the introduction of fees because “it understood that the TGA was unable, with its existing staff levels and resources, to provide a reasonable service or to remove or reduce the delay in evaluations”(23). The original agreement with the industry was that the TGA would recover 50% of the cost of all its activities (i.e. not only industry-related activities) from fees and charges.

As shown in Figure 5.2, the Government budget accounted for 53% of the Administration’s budget in the fiscal year 1994/95. This was reduced to 22% in 1997/98, and by 1999 the TGA was financed entirely by the fees and charges it levied for its services. Under the present fee system, the fee schedules are reviewed annually in consultation with the industry.

Figure 5.2 Sources of funding of the TGA, Australia, 1994-1999

The Cuban, Estonian and Ugandan drug regulatory authorities have mixed sources of funding: all three rely on government budgets, fees and foreign aid for funding, but in significantly different proportions. In Cuba, the Government budget remains the largest source of finance at 66%, fees account for 27%, and aid for a minimal 1%. In Estonia, fees constitute 88% of the budget of the SAM, while the Government provides 6% and foreign aid 4%. The Ugandan DRA relies heavily on foreign aid at 60% in 1997, down from 100% in 1995. Government budget and fees make up only 20% each.

Because of its heavy reliance on aid for the funding of regulatory activities, the Ugandan DRA is faced with a serious problem of financial sustainability. The financial resources are not only beyond its own control, but also beyond the control of the Government itself. When donors finally withdraw their funding, some of the DRA’s activities may have to cease. However, the NDA has invested in real estate which generates rent and has also placed short-term, fixed deposits with local banks, which may solve the financial problem in the long term. The MCAZ has also made similar investments in order to generate income for its activities. Studies have found financial sustainability problems in the drug regulatory authorities in Malaysia and, to a lesser degree, in Tunisia. These are due mainly to inadequate funding for functions deemed necessary to implement regulation.

Figures 5.3 and 5.4 compare the DRA’s budget as a percentage of national drug expenditure and per capita for the 10 countries.

Figure 5.3 Drug regulatory budget as a percentage of national drug expenditure*

* Data for the Netherlands not available.

The DRA budget as a percentage of national drug expenditure is highest in Uganda (5%), followed by Zimbabwe (2.5%) and Australia (1.36%). This is because Uganda and Zimbabwe have very low national drug expenditure. For Venezuela, the percentage is a mere 0.1%. In Australia, Uganda and Zimbabwe, drug regulation is financed through a fee-based system. The drug regulatory authorities in these three countries have autonomy over their own budget, while their counterparts in other countries do not. In terms of per capita expenditure on drug regulation, the TGA budget is the highest (US$1.43), that of Cyprus and Estonia (US$0.57 and US$0.30 respectively) is also high, indicating that these small countries (in terms both of size of the country and of population) spend comparatively more money on drug regulation.

Figure 5.4 Per capita drug regulation expenditure (average 1994-97)*

* Data for the Netherlands not available.

The above analysis is by no means an attempt to specify or establish some “best” or “optimal” ratios for each pair of parameters. It is intended only to put into perspective the resources made available for drug regulation in relation to the society from which they are drawn.

The amount of resources-human as well as financial-used for drug regulation is affected not only by the type and the extent of regulatory functions performed in each country, but also by many other factors, such as methods used for resource allocation and efficiency of resource management.