E-DRUG: Mark-up percentages for Drug Revolving Funds (2)
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Dear Salisu Hashim M.,
The question you ask about mark-ups for Drug Revolving Funds is an
interesting one. No one can give you the exact percentage that you should
set for a mark-up in order to re-capitalize your fund without more
information about where you are, how large a catchment area you serve (do
you deliver the medicines?), what your financing system is, what costs are
included in the Revolving Fund (eg, staff salaries?) etc. But I think that
there are some generalities that can be listed.
Basically, you need to make a list of all the expenses that you incur when
delivering the medicines in the DRF. This includes:
1) The procurement cost of the medicines, and all the add-on costs for the
medicines -- national and local taxes, local storage and insurance,
distribution costs. For imported medicines, there might also be shipping
fees, an import tariff, customs clearing and port fees, and fees for
foreign currency exchange.
2) In addition, you might have other costs besides the cost of the
medicines that you need to cover -- such as staff salaries, vehicle
maintenance, dispensing bags, telephone calls between offices, electricity
-- basic overhead costs.
3) If you buy in foreign currency, don't forget to add a small percentage
to cover future fluctuations in currency exchange.
4) Finally, add a small percentage to recapitalize your program so that
there is a little extra money around so that you can make an emergency
purchase, add a new product, etc.
Then you should list all your sources of income -- this might include donor
funds, national funds or "user fees" for some or all of the price of the
medicines. Set the final "price" of medicine so that the income is
slight larger than the expenses (see #4 above). However the final price
must also be realistic for your area -- if you find that you are charging
twice what a retail pharmacy is charging, you won't have any customers.
As I said, since I don't know your situation, I can't give you
specifics. But I don't believe that they are that difficult to find --
talk to a pharmacist in a local retail pharmacy. If you are a pharmacist,
perhaps you have a former classmate who can explain to you the costs of
running a retail pharmacy, because many of the costs will be the same.
As to other sources of this information, Health Action International and
the WHO have a project called Medicine Prices that is also looking at the
Price Components of delivering essential medicines to patients. Check
their website at www.haiweb.org/medicineprices for some information on
price components in their survey countries. Finally, a non-profit
organizations that delivers medicines will also understand the pricing
structures. But be attentive when you try to compare your organization to
another -- you might deliver medicines from your warehouse to the clinic,
while another organization might let the clinics pay the fuel costs to
collect the medicines.
I hope that this is helpful. Let the list know more about your situation
if you have more questions.
Kind regards,
Libby Levison,
public health consultant
Boston, MA
libby @ theplateau.com