Health Reform and Drug Financing. Selected Topics - Health Economics and Drugs Series, No. 006
(1998; 49 pages) [French] [Spanish]
Table of Contents
View the documentAcknowledgements
View the documentExecutive summary
Close this folder1. Introduction
View the document1.1 Reform and models of development
View the document1.2 Health sector reform
View the document1.3 Pharmaceuticals and reform
Open this folder and view contents2. Financing reforms
Open this folder and view contents3. Affordability and efficiency
Open this folder and view contents4. Organizational reforms
View the documentConclusions
View the documentReferences
View the documentBack Cover
 

1.3 Pharmaceuticals and reform

The availability of an affordable supply of quality drugs has a large impact on the credibility and effectiveness of health services. Since a lack of drugs can cripple a health system, health sector reform must address the issue of pharmaceuticals [1].

Pharmaceutical expenditures

Pharmaceutical expenditures, as well as overall health expenditures, are linked to economic development (they tend to increase as GDP increases). However, pharmaceutical consumption as a percentage of GDP shows much less variation among regions than does overall health expenditure (refer to Table 1).

Table 1. Health and pharmaceutical expenditures by region, 1990

Region

Health
expenditures

Health expenditures
by source
(% of total)

Total
pharmaceutical
expenditures

Private as %
of total
pharmaceutical
expenditures


total
per
capita
(US$)

%
GDP

public

private

aid

per
capita
(US$)

% GDP


Sub-Saharan Africa

36

4.9

33.4

37.6

29.5

8

.9

65

Asia

60

4.0

40.9

48.1

11.0

12

.6

81

Middle Eastern Crescent

190

4.3

55.0

42.9

3.6

27

.7

74

Latin America

118

5.3

54.9

37.4

7.6

26

.9

72

Transitional economies

150

4.3

72.7

27.3

0.0

--

--

--

Established market economies

1675

7.7

77.0

23.0

0.0

138

.6

40

Source: data summarized in Ref. [46] (Annexes C.1 and C.2) from Ref. [24] and other sources.

Furthermore, in lower income countries, pharmaceuticals generally account for a more significant share of overall health expenditures than in established market economies (for which this share is about 15%). For example, in countries such as China, Indonesia, and Thailand, this share ranges from 35-45% [46]. In several African countries, it is believed to exceed 50%.

In developing regions, 50 to 90% of the overall pharmaceutical expenditures are privately financed, which is considerably higher than in industrialized countries (median is 34%) [46].

Because drugs account for such a large portion of health expenditures, and because the purchase of these products often requires spending in foreign currency, inefficiencies in drug production, procurement, storage, distribution, and use can be a significant element of waste within the health sector.

Essential drugs concept

To minimize this waste and to promote equity and access, WHO through the Action Programme on Essential Drugs, has advocated, since 1981, the development and implementation of national drug policies based on the essential drugs concept (EDC). Some features of such a national policy are:

• selection of pharmaceutical products as “essential” based on national health priorities and proven therapeutic effectiveness;

• quantification of needs;

• rationalization of supply mechanisms;

• promotion of rational drug use.

These features can be extrapolated beyond pharmaceuticals and can be applied to the health sector in general. For example, the identification and quantification of health needs, and the selection of health priorities are fundamental to successful health sector reform.

Because the essential drugs concept preceded other health sector reform initiatives by several years, lessons learned in implementing the EDC may be of relevance in the formulation and implementation of currently proposed measures. These lessons include, but are not limited to, the following [1]:

1. Although pharmaceuticals and health may be given a low priority in government plans, it is possible, by highlighting political, economic and social implications, to raise the profile of the health sector and establish it as a priority.

2. Successful policy development and implementation requires leadership and coordination from health ministries. Where ministries of health are weakened, this condition for success cannot be met.

3. For reform measures to succeed, it is not sufficient that their content be correct. It is important to involve all interested parties, within and outside of the health sector, and to account for opposition that may exist among certain groups.

4. For reform to be effective, it should involve both the public and private sectors. The precepts underlying the essential drugs concept are not only valid in a larger health context but can be valid in the private sector. For example, drug selection is seen in this sector through the development of formularies for use in private hospitals and health maintenance organizations.

The essential drugs concept, in its objectives, features, and applicability, has been a precursor to many of the current health sector reform proposals. It continues to be a valid tool in developing optimal pharmaceutical and health systems.

 

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