Options for Financing and Optimizing Medicines in Resource-poor Countries. Discussion Paper Number 7 - 2010
(2010; 66 pages)

Globally, there are significant inequalities in access to medicines, particularly in resource-poor countries. The available literature suggests that these inequalities are mainly due to inadequate public spending, a lack of or adequate health insurance coverage, poor availability of essential medicines, poor affordability and high household out-of-pocket expenditure. Ranked among the top two items in household health care budgets, medicines account for a significant proportion of personal or household income as much of the financing of medicines in the developing world is characterized by household out-of-pocket payments. As health insurance and savings are only available to a small proportion of developing world populations, there is a high likelihood of households entering the debt and poverty cycle. Additional financial burden on the households is imposed by price inflators and fragmented and ineffective procurement systems. Medicines in the private sector are significantly higher priced and more dominated with originator brand drugs.

Although prepayment and risk pooling could protect poor households from facing catastrophic spending in health, many resource-poor countries lack appropriate mechanisms to pool financial risks, even with rising income. However, successful models, many of them at the sub-national or sub-sector level, do exist in some countries, which could be scaled up or replicated. This paper discusses various options for resource-poor countries to enhance access to, and minimize household out-of-pocket spending, on medicines. Specific options discussed in this paper are:

  • Taxation
  • Social health insurance
  • Private health insurance
  • Community financing
  • Drug sales and revolving funds
  • Medical savings accounts

Some positive medicine financing experiences have come from East Caribbean states, India, the Russian Federation, Sudan, and Viet Nam. On the other hand, less successful experiences are reported from Lao PDR, Nigeria, and Uganda. Mixed results have emerged from Bangladesh and Jordan. Of course, many options practiced in different countries are not strictly comparable because their objectives and targets and, therefore, their achievements are quite different. However, some options may be relevant to particular settings in resource-poor countries and lessons can be learnt from them so as to develop appropriate medicine financing strategies.

Drawing lessons from various experiences, one could argue that successful financing of medicines is contingent upon a number of factors, as outlined below:

  • Political commitment
  • Effective design and administrative capacity
  • Clear implementation strategies
  • Financial sustainability
  • Rational selection and rational drug use
  • Affordable prices
  • Reliable medicine supply systems and low taxes

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