Location

The Kingdom of Nepal with an area of 147 181 sq. km. is a land-locked country situated on the southern slopes of the Himalayan Mountains.

Health status

Total population is 20 million. Life expectancy at birth for both males and females has increased between 1985 and 1991 from 47.5 to 55.2 years for men and 45.0 to 52.6 years for women. The infant mortality rate is estimated to be 101 per 1 000 live births, about half of the infant deaths occur in the neonatal period and are partly attributed to low birth weights. 83.5% of children aged 6 months to 5 years have some degree of malnutrition with 8.6% suffering from severe malnutrition. Maternal mortality rate is estimated to be 85 per 100 000 live births, i.e. about 6 000 women die in childbirth each year.

National health system

The health system at the national level consists of the MOH, Department of Health Services with its various divisions and units. The preventive, curative, and promotive health services have been provided through 74 hospitals, 17 health centres, 79 primary health centres, 765 health posts and 2 588 sub-health posts, and 47 950 community level health workers.

Health policy strategy

Even though Nepal has already benefited greatly by all seven of its development plans, the health status of the people has not improved well enough, as indicated in the health statistics above. To create a socioeconomic environment that will enable Nepalese citizens to lead healthy lives, in keeping with the saying 'Health is Life,' the Government is committed to providing preventive and curative health services to the people, with the rural population as top priority. Services are rapidly expanding to the grass-roots level. It is expected that each village development committee will have at least one health post by the end of the Eighth Plan period (1992-1997).

Public and private sectors in health care

Nepal remains largely a rural society with 91% of the population living in rural areas. The Government remains the only source of health care in rural areas. Private-for-profit services have a limited role and nongovernmental organizations (NGOs) are limited to highly selective and focused projects. There are 55 nursing homes registered in Nepal; 32 are located in Kathmandu and Lalitpur, the remaining 23 are also in major cities i.e. Biratnagar, Dharan, Janakpur and Pokhara. The majority of the rural population has very limited access to such centres and cannot afford health care at full cost. On the other hand, it is estimated that there are 400 000 to 800 000 traditional healers, such as faith healers and Ayurvedic practitioners, who are examples of private sector participation in rural health care, even if the quality of such care remains unassessed. Moreover, growing numbers of private pharmacies (5 629) in the country indicate increasing private sector involvement in health care.

Health care financing and macroeconomic indicators

Health care in Nepal is mainly financed by the public sector through the MOH. However, the total health expenditure includes NGO and private sector funding as well. NGO funding is channelled through the Social Welfare Council and private sector expenditure is paid out-of-pocket by individuals or households for drugs and other health services. Based on the household budget survey conducted by Nepal Rastra Bank in 1984-1985, it is estimated that the public sector contributed not more than 31% of the total health care expenditure.

The trend in the health budget's share of GDP from the fiscal year 1984-1985 to 1992-1993 was within 1.64% (1988-1989) and came down to 0.96% (1990-1991) at constant price. The share of health budget to national budget was 4.45% and 4.79% in the fiscal years 1991-1992 and 1992-1993 respectively. This share of health budget to national budget came down to 4.11% in 1993-1994 with a slightly increasing trend of 5.16% in 1994-1995, 4.91% in 1995-1996, and 6.01% in 1996-1997.

Nepal is one of the poorest countries in the world, with a per capita income of US$160. The per capita health expenditure for the year 1984-1985 was Rs. 33 and increased to Rs. 72 in 1988-1989 and reduced to Rs. 61 in 1989-1990. The per capita expenditure for the year 1992-1993 was Rs. 85.

Cost-sharing

Given the budgetary constraints, shortage of drugs in health institutions has always been a problem in serving the poor, underprivileged rural population. Studies have shown that the annual consignment of drugs supplied to the health institutions is not sufficient to meet the demand for more than three to five months. Moreover, on account of the resource constraints, re-ordering drugs is impossible until the next year.

With increasing demand for health services, the Government is able to provide far less than are needed. The drugs supplied to the health institutions of Nepal are less than 50% of the quantity requested. Health institutions are meant to serve the people but when there is short supply of drugs, they cannot be effective. As both the Government and the people have their own limitations in bearing the entire burden of drug costs, some cost-recovery schemes for health services and drugs are implemented.

Community involvement in cost-sharing

There are a number of cost-sharing programmes with community involvement as summarized in Table 7.

Britain Nepal Medical Trust (BNMT) Cost-Sharing Drug Scheme.

In 1980, the BNMT initiated the “Bhojpur Drug Scheme”, a cost-sharing drug scheme with the objective of ensuring year round supply of essential drugs to the public, at affordable prices through all health institutions. The scheme was first introduced in Bhojpur District through a hospital and nine health posts and has now been extended to three districts; Taplejung, Panchthar and Khotang.

Under the scheme, all patients attending either a hospital or health post are required to pay a prescription fee of Rs 2 originally and now Rs 6 in hospitals and Rs 5 in health posts, for which they are entitled to a full course of treatment, including inpatient treatment in hospital, if needed. The scheme was first initiated in Bhojpur District based on the findings of a survey in 1978, which indicated that people would prefer some sort of fee for prescriptions rather than an insurance scheme. However, the Expanded Programme on Immunization (EPI), the Family Planning Programme (FPP), Kala Azar, CDD, ARI, vitamin A, the Action Programme for the Elimination of Leprosy (LEP), and the Malaria Control Programme (MAL) were excluded from the scheme and services are provided free of charge.

BNMT Hill Drug Scheme (cost recovery drug scheme)

Hill Drug Scheme (HDS) was initiated by BNMT in some of the mountainous districts of the Eastern Region and is now in its twenty-sixth year. The main objective is to increase the local availability of cheap but quality drugs in the hills. Retailers in HDS are local shopkeepers who sell food and dry goods in the village, and who must have studied to at least eighth grade at school. They contract with BNMT Drugs Project to buy selected drugs and to sell them at their shops at fixed prices that allow a 12.5% (originally 10%) profit. The drugs are divided into two types: the “P” list or prescription list, which should only be sold with a prescription from the Department of Drug Administration or HMG prescriber, and the “G” list or general list, which can be sold without a prescription.

BNMT buys drugs from Royal Drugs Limited from the market in Biratnagar, with the benefit of bulk buying. The drug are charged to the retailer at cost plus 10% to cover the cost of administration, transportation and loss due to damage and expiry. The retailer abides by certain regulations including posting the prices of all drug items, limiting their sales to drugs from the approved lists and selling the full course of drugs. Most of the HDS retailers had the retail drug shopkeeper training course offered by His Majesty's Government (HMG). There are altogether 28 shops in several hill districts in the Eastern Region.

Table 7. A summary of drug schemes in Nepal, 1993

Revolving Community Drug Cooperative Supply Scheme (RCDCSS)

In 1986, HMG and WHO jointly initiated this scheme to overcome the shortage of drugs at health post level and also to promote greater community involvement and participation in the management affairs of the health posts. The scheme is geared towards helping the community establish its own drug supply cooperative scheme by providing seed money as a small revolving fund for the community, so it becomes self-reliant in drug supply for its health posts.

The scheme involves the normal Government drugs budget worth Rs. 10 000 annually (now Rs. 50 000) per health post plus a WHO fund to procure additional quantities of essential drugs. An additional amount of Rs. 5 000 is initially provided to each health post for preparatory activities. In addition, Rs. 50 000 is deposited in favour of each health post.

In this scheme, Rs. 2 was levied on each patient as a registration fee (except for tuberculosis, leprosy and malaria cases). Normally, the money from the levy on patients plus the interest from the money deposited in the bank per year (now abandoned in the third phase of the scheme's expansion, after the Government increase in the drugs budget from Rs. 25 000 to Rs. 50 000) exceeds the amount needed to purchase supplementary drugs every year.

Lalitpur Medical Insurance Scheme

The scheme was initiated by the United Missions to Nepal (UMN) initially at six health posts (now five). The health committees are responsible for the management and set the premium, which ranges from Rs. 30 to 125 per year depending on the different health post. The members of insured households are entitled to free services for a specified number of visits during the year. Non-member households receive a free consultation service at health posts, but receive a prescription instead of free drugs. Only drugs and vaccines provided in the health post and mobile maternal and child health (MCH) clinics are free of cost to all, regardless of insurance.

Terhathum Cooperative Drug Scheme

According to the scheme, Rs. 13 000 is initially provided to each health post to procure additional required quantities of essential drugs from The Netherlands Leprosy Relief (NLR) funds, in addition to the normal Government annual drug budget. A fixed bank deposit of Rs. 40 000 is made in favour of each health post from NLR. In addition, a sum of Rs. 5 000 is provided as an initial fund to each health post for preparatory and administrative costs.

Surkhet Drug Scheme

This scheme is based on the HMG/WHO model. The only difference in the two models is in the fixed bank deposit. In the HMG/WHO model, Rs. 50 000 is deposited in a bank account, while in this model, only Rs. 20 000 is deposited. Drugs for treating tuberculosis, leprosy and MCH care are provided free of cost.

Dolakha Drug Scheme

Dolakha Drug Scheme was initiated by Integrated Hill Development Project (IHDP) in 1981. A grant from IHDP was provided, which was decreased by 10% each year over a period of five years with a corresponding increase in the local resources. The prescription charge is Rs. 1 to 2, which is fixed by the local health post committee.

Assessment of cost-sharing programmes

A study team has recently examined the three significant cost-sharing programmes in Nepal: the UMN, BNMT and HMO/WHO cost-sharing programmes. The comparative performance of the three programmes is shown in Table 8.

Table 8. Comparative performance of three drug programmes

Source: Rational pharmaceutical management project, Kathmandu, Nepal Management Sciences for Health/United States Agency for International Development (MSH/USAID)

UMN

In 1994 and 1995, approximately 40.8% and 38.2% respectively, of the households in the Lalitpur target area purchased insurance. In 1995, approximately 17 000 people were covered by the scheme. The scheme provides 27 tracer drugs for the health posts and achieves 84% drug availability with the lowest subsidy. The total value of drugs received per health post was Rs. 68 830.91 in the financial year 1991-1992. When the lower unit costs UMN pays for its drugs are taken into account, the volume of drugs distributed at Lalitpur scheme health posts is 60% greater than an average health post in Nepal.

BNMT

In 1993, the Hill Drug Scheme supplied Rs. 513 594.36 worth of drugs to 35 retail shops. Well over half of these drugs were delivered to two shops, while 10 shops received no drugs at all. The remainder received an average of just over Rs. 9 100 per year. The money collected is deposited in a BNMT account to purchase replacement stock.

HMG/WHO

The first 12 participating health posts received Rs. 50 000 endowment, the 13% interest from which could be used for the purchase of essential drugs. Later, the scheme eliminated the endowment and provided a Rs. 25 000 grant instead. Up to 20% of the money could be used for administrative costs while the remainder is intended for the purchase of essential drugs. The income reported by facilities is Rs 14 904 on average, of which Rs. 5 058 is spent on drugs. Most of the remainder is deposited in bank accounts. The balance in these accounts now averages nearly Rs. 70 000 and has been increasing at an average of Rs. 8 000 per year. The replacement stock can be purchased from any convenient wholesale or retail outlet, which generally do not carry the full range of needed drugs.

The result of the cost-sharing programme at community level has been found to be encouraging and has demonstrated reasonable success. The most positive result of the scheme has been the willingness of poor people to pay for such a scheme irrespective of their financial hardship. As their income increases, people come forward to contribute more for such a scheme.

Conclusion

The cost-sharing initiatives operating in Nepal can be classified into three main types of health financing methods. The first is the full cost recovery scheme (Hill Drug Scheme). The second is the cost-sharing programme initiated by HMG/WHO, a revolving cooperative drug scheme and the third is a pre-payment scheme in the form of compulsory insurance. Although the schemes are not problem free, they provide opportunities for improving drug supply with active participation from the community.