The price of drugs to consumers will depend on the cost of drugs to the procurement system, the cost of distribution, and the system of financing consumption.

The cost of procuring drugs may depend on the distribution system. A system whose profit margin is a fixed percentage of the base cost of a drug encourages distributors to purchase and distribute expensive drugs. Regulations may require that someone other than distributors choose the drugs to be distributed.

The price paid by consumers for drugs may depend on collective systems of payment sponsored by the government or by health insurance schemes. In many countries, consumers pay a considerable share of drug costs and this share is increasing with “cost recovery” schemes, so that economic access very directly depends on the cost of distribution.

The real cost to the distributor of distributing each drug is difficult to define. It depends on the rules of accountancy used to analyse the total cost of distributing each drug. It is more relevant to calculate the real cost of distributing the overall set of drugs. This can be calculated as a percentage of the final cost of the drugs. In comparing the percentages for different systems of distribution, the purchase price of the drugs must be taken into account. If the purchase price is low, the relative cost of distribution is often higher than if the purchase price is high. Table 11 compares distribution costs in different systems.

Table 11. Costs of three types of drug distribution systems (example)

¹ Value of drugs at the dispensing stage minus value of drugs at distribution stage
² Distribution cost divided by value of drugs at the dispensing stage
³ Index of 100 selected for reference purposes

Geographical access and the continuous presence of stock have a cost. This added cost may increase prices and reduce economic access, but there is no point in a low price if there are long periods without stock. In order to achieve a balance among these forms of access, one must establish minimum objectives for geographical and physical access. For example, continuous (or nearly continuous) stock may be required for vital and for essential drugs, at the possible cost of slightly higher prices. At a second stage, economic access may be increased by reducing prices to consumers while maintaining geographical access and nearly continuous physical access. Better management may reduce distribution costs; or the share of the cost paid by consumers for priority drugs may be reduced.