E-drug: Research paper on hidden drug costs
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Dear E-druggers,
This weekend I had time to review Libby Levison's paper on
procurement costs of essential medicines in developing countries. A
fascinating paper, and required reading for all who are involved in drug
procurement.
It partly answers a question I circulated on E-drug a couple of years
ago, on a Latin American essential drugs programme that aimed at
keeping its markup percentage under 150% (cost of essential drugs at
the health facility level equal or less than 2.5 times the international
market prices). The document shows (Fig 3, p.16) that markups vary
between 48 and 87% in a sample of countries. Drug importers,
wholesalers, retailers, and the very government who procures for its
own public health system are responsible for the biggest markups.
Other services, tariffs and charges add varying smaller markups. What
is clear is that much remains unknown about hidden markups in
countries.
What I find somewhat limited is Table 4 on page 21. There are
certainly more cost control mechanisms for single-source drugs (brand
name drugs) than government price regulation only (often resulting in
withdrawal of products from the market, and thereby actually reducing
access). Some other mechanisms are:
- Bulk purchasing (increasing procurement volumes can even force
down prices of single source products);
- Differential pricing for low-income countries;
- Voluntary licenses for manufacturing specific drugs;
- Voluntary, bilateral price agreements between producers and
buyers;
- Compulsory licenses for manufacturing specific drugs;
- Patent waivers.
Removing barriers to competition and regulating markups are good
ideas for multi-source products (generally the off-patent generic drugs),
but implementing generic policies, bulk purchasing, and competitive
tendering (or developing "active purchasing power"), can also have
considerable impact in prices of essential drugs.
What I would like to understand better is how each of these strategies
relate to the hidden costs Libby is mentioning, and where procurement
programmes should focus their attention. I wonder what procurement
managers in countries know and which information is out there to fill
the blanks in Table 3 of this worthwhile paper.
Regards,
Hilbrand Haak
Consultants for Health and Development
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Sleedoorntuin 7 tel: +31-71-523.2052
2317 MV Leiden fax: +31-71-523.3592
The Netherlands haakh@chd-consultants.nl
Visit CHD's website at www.chd-consultants.nl
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The paper is downloadable from:
WORD 450KB:
http://dcc2.bumc.bu.edu/richardl/IH820/Resource_materials/Web_Resources/Lev
ison-hiddencosts.doc
Zipped Word, 100KB:
http://dcc2.bumc.bu.edu/richardl/IH820/Resource_materials/Web_Resources/Lev
ison-hiddencosts.zip
PDF, 200 KB:
http://dcc2.bumc.bu.edu/richardl/IH820/Resource_materials/Web_Resources/Lev
ison-hiddencosts.pdf
(Long url's -- may need "repair")
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