E-DRUG: Mark-up percentages for Drug Revolving Funds (6)
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Dear E-Druggers,
Remember that when calculating the final price, the mark up should be
calculated on the **replacement** cost of the product.
If the replacement product in the revolving fund costs 50% more than what it cost when it was originally purchased then this new price should be the basis of the calculations.
If this is not done in an inflationary environment or in which exchange rates are changing the revolving fund will become decapitalized. The implication of this observation is that the manager of the RDF should track replacement costs of their fast moving items.
This can be done by checking IDA, and UNICEF prices regularly and if
these change the price charged for that item should change immediately.
Any RDF which issues a price list for more than a month is asking for
trouble. The updated price list can be sent out with each order so that
the recipients can know what base price to use to calculate their final
price.
Many years ago Richard Blakney of MSH wrote about the RDF cycle of
terrors and in Managing Drug Supply Second edition Page 707 there is a
very good diagram of all of the problems faced in managing a RDF.
Chapter 44 is about Revolving Drug Funds and has an extensive discussion
of the different sort of fees (Page 700) and the impact of exemptions
(Page 702)
The take home message is that running a RDF is very challenging and
requires a substantial level of managerial expertise with up to date
information on prices and costs.
regards
Richard Laing
Richard Laing (Medical Officer)
Policy, Access and Rational Use,
Medicine Policy and Standards,
World Health Organization
CH-1211 Geneva 27, Switzerland
Tel 41 22 791 4533
Fax 41 22791 4167
E-mail laingr@who.int