Guide to Tracking Pharmaceutical Expenditures in a Health System. October 2014
(2014; 50 pages)

Bhawalkar, M. and A. Taddese. 2014. Guide to Tracking Pharmaceutical Expenditures in a Health System. Submitted to the US Agency for International Development by the Systems for Improved Access to Pharmaceuticals and Services (SIAPS) Program. Arlington, VA: Management Sciences for Health.


Access to essential medicines is a fundamental component of a health system. It is a cost-effective systemic intervention for reducing mortality and morbidity (MDS-3), and is critical to achieving universal health coverage. However, in many low- and middle-income countries (LMICs), the high cost of medicines, together with economic instability, continued population growth, and a heavy burden of disease, makes it a challenge to ensure adequate financing for a stable and adequate supply of medicines. The emergence of diseases such as HIV/AIDS and drug-resistant strains of malaria and tuberculosis is further straining country health systems, resulting in reduced availability of medicines and rising pharmaceutical expenditures.

Resource-poor countries face numerous challenges in ensuring access to affordable medicines, including sustainable financing and optimal allocation of resources, a lack of efficient and reliable supply and distribution channels, and inequity. A lack of or limited local production of medicines in these countries can add to these challenges. In many LMICs, spending on medicines is the largest driver of out-of-pocket payments—less than one-third of pharmaceutical expenditures are publicly funded (MDS-3). In contrast, among the established economies, private spending on medicines averages about 40% of total pharmaceutical spending; the remaining 60% is paid through public budgets and social insurance.

The large role of private expenditures (mainly households) and donor financing in overall pharmaceutical expenditures in LMICs raises important concerns about equity and future sustainability. However, a major limitation in our understanding of these expenditures and overall pharmaceutical expenditures in general, is that there is no widely used or accepted methodology for fully understanding them that informs decisions about allocations, equity and/or financial sustainability and allow for cross-country comparisons and setting of benchmarks to monitor progress in achieving national goals. This guide is intended to provide a foundation for taking action to address this gap, and establish a process for systematically and comprehensively tracking pharmaceutical expenditures.

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