Health Financing and Access to Medicines

By Sakthivel Selvaraj 

Public Health Foundation of IndiaNew Delhi

Key Barriers to  Access to Medicines 

Unfair health financing mechanisms; Unreliable supply systems; Unaffordable pricing; Irrational use of medicines; Inadequate funding for research in neglected diseases; Stringent product patent regime. 

Trends in OOP Payments 

Source: Respective rounds of NSSO. 

Share of Households’

OOP Expenditure  by Quintile Groups, 2009‐10

Sector Poorest 2nd Poorest Middle 2nd Richest Richest All

OOP Exp. (As Percentage of Household Expenditure) 

3.74 4.57 5.11 5.84 7.23 5.73

Inpatient

Exp.

(As Percentage of OOP Expenditure) 

26.41 30.69 32.25 34.35 33.81 32.74

Outpatient

Exp.

(As Percentage of OOP Expenditure)

73.59 69.31 67.75 65.65 66.19 67.26

Drug Exp. (As Percentage of OOP Expenditure)

75.42 72.34 70.11 66.81 65.90 68.28

Source: Unit Level Records of NSSO. 

Percentage of Households Facing  Catastrophic Expenditure on Health, 

2009‐10 (>10% of HH Spend)

Quintile 

Groups

OOP 

Expenditure

Inpatient 

Expenditure

Outpatient 

Expenditure

Drug 

Expenditure 

Poorest 7.656 1.082 6.329 4.523

2nd Poorest9.875 1.980 7.394 6.012

Middle 12.237 2.770 8.848 7.392

2nd Richest16.197 4.496 10.979 9.591

Richest22.456 7.954 16.207 14.852

All 13.684 3.656 9.951 8.474Source: Unit Level Records of NSSO. 

Trends in State‐wise Government Drug Expenditure in India

DistrictDistrict Drug Exp/Per capitaDrug Exp/Per capita Drug Exp Per Illness episode Drug Exp Per Illness episode (OPD visit)(OPD visit)

JamuiJamui 4.614.61 780.35780.35

KatiharKatihar 84.5384.53 661.08661.08

NawadaNawada 5.305.30 623.11623.11

SamastipurSamastipur 3.843.84 561.85561.85

Banka Banka 7.147.14 110.33110.33

ArariaAraria 6.686.68 89.4189.41

SaranSaran 5.295.29 84.0884.08

State TotalState Total 7.167.16 59.9359.93

Aurangabad Aurangabad 6.766.76 15.0415.04

MadhepurMadhepur 3.163.16 14.7014.70

Gaya Gaya 2.662.66 14.1314.13

KhagariaKhagaria 6.336.33 13.6513.65

VaishaliVaishali 2.972.97 12.8712.87

MuzzafarpurMuzzafarpur 1.891.89 11.2911.29

BuxarBuxar 1.511.51 7.627.62

District‐wise Share of  Drug Expenditure in Bihar

20082008--09 Estimates09 Estimates

StatesStates Total Drug Total Drug Expenditure Expenditure

(Millions)(Millions)

Tertiary Care Tertiary Care Drug Exp Drug Exp

(As % Total (As % Total Drug Exp.)Drug Exp.)

Primary & Primary & secondary secondary

Drug Exp (As Drug Exp (As % Total Drug % Total Drug

Exp.)Exp.)

Urban Services Urban Services Drug Exp Drug Exp

(As % Total (As % Total Drug Exp.)Drug Exp.)

Rural services Rural services Drug Exp Drug Exp

(As % Total (As % Total Drug Exp.)Drug Exp.)

West Bengal West Bengal 13641364 73.0873.08 26.9226.92 74.274.2 25.825.8

OrissaOrissa 153.7153.7 95.4195.41 4.594.59 95.8295.82 4.184.18

Uttar PradeshUttar Pradesh 2079.82079.8 54.554.5 45.545.5 55.2555.25 44.7544.75

Madhya Madhya PradeshPradesh

646.3646.3 62.7162.71 37.2937.29 68.2868.28 31.7231.72

Gujarat Gujarat 479.1479.1 84.1784.17 15.8315.83 94.9194.91 5.095.09

ChattisgarhChattisgarh 206.3206.3 24.3424.34 75.6675.66 87.3587.35 12.6512.65

Tamil Nadu*Tamil Nadu* 14931493 40.0440.04 59.9659.96 45.2345.23 54.7754.77

Bihar*Bihar* 664.4664.4 56.8656.86 43.1443.14 57.2557.25 42.7542.75

Karnataka*Karnataka* 1204.31204.3 46.0746.07 53.9353.93 46.6846.68 53.3253.32

JharkhandJharkhand 151.5151.5 43.5643.56 56.4456.44 44.1644.16 55.8455.84

Rajasthan*Rajasthan* 1066.31066.3 96.496.4 3.63.6 96.6696.66 3.343.34

Punjab*Punjab* 110.1110.1 71.2571.25 28.7528.75 77.8477.84 22.1622.16

Kerala*Kerala* 1214.91214.9 66.5166.51 33.4933.49 72.4972.49 27.5127.51

Drug Expenditure by Levels of Care

* Figures for 2007-08 estimates

State‐wise Availability of Free/Partly Free Medicines at Government Facilities during 2004

Source: Morbidity & Health Survey, NSS, 2004

A Comparative Scenario of  Drug Availability in TN and Bihar 

0.0

33.3

66.7

100.0

Bihar Tamil_Nadu

Drugs Stock Out at Health Facilities (%)-Bihar Vs Tamil Nadu

Dru

gs S

tock

Out

(%)

SakraManigachi

Stock‐Outs at Facilities:  Bihar vs Tamil Nadu (% Stock‐Outs)

Trends in All‐Commodity and  Pharmaceutical Price Index 

Draft Pharmaceutical Price Policy,  2011 

Key Features: All 348 NELM ; Market Based Pricing; Only Formulations; WPI‐linked increase; Medicines below Rs. 3 not covered; Patented Medicines not covered. 

Pharma

market is unique because: 

Market Leader is the Price Leader ‐When competition exists, leading market players are expected to reduce prices substantially & yet obtain normal profits. 

Indian pharma industry behaves abnormally. 

Under a therapeutic category, hundreds of players slug it out in the Indian pharmaceutical sector, but with substantial variation in prices. 

The prices of leading players very often tend to be the highest, because of aggressive promotional campaigns. 

High margins provided by industry to stockiest & retailers encourage them to promote high priced medicines; 

Given information asymmetry that creates supplier‐induced demand, pharmamakers have an upper hand in pushing through medicines that are high priced. 

Implications of DPPP, 2011 

Market Leader Medicines

Active Pharmaceutical Ingredients (API)

TNMSC Prices (Rs.)

Market Leader/Most Expensive/Cheapest Price(Rs.)

Ratio of Market Leader to Lowest Priced Medicines

Average of 3 Highest medicinePrices (Rs.)

Average of Prices of 3 Lowest Medicines (Rs.)

Anti-Bacterial Medicines

Monocef

(1 gm inj)

Ceftrixone 12.39 63 (Aristo);

179 (Merind);

45 (Neon)

1.4 125.3 50.3

Cifran

(50mg;

10 Tabs)

Cifprofloxacin 98.26 98.6 (Ranbaxy);

98.6 (Ranbaxy);

29.7 (Hindustan)

3.3 88.6 34.6

Comparator Prices of Similar Medicines betweenMarket Leader and Cheapest Prices

Market Leader Medicines

Active Pharmaceutical Ingredients (API)

TNMSC Prices (Rs.)

Market Leader/Most Expensive/Cheapest Price(Rs.)

Ratio of Market Leader to Lowest Priced Medicines

Average of 3 Highest medicinePrices (Rs.)

Average of Prices of 3 Lowest Medicines (Rs.)

Anti‐DiabetesAmarly

(1 mg;

10 tabs)

Glimepride 7.54 65 (Aventis)

65 (Aventis)

9.5 (Kopran)

6.84 59.3 10.8

Glycomet

GP (1

mg- 500mg;

10 tabs)

Metformin + Glimepride

Not

Availabl e

36.5 (USV);

66.2 (Aventis);

17 (Blue Cross)

2.14 52.8 25.3

Comparator Prices of Market Leader & Cheapest Prices

Market Leader Medicines

Active Pharmaceutical Ingredients (API)

TNMSC Prices (Rs.)

Market Leader/Most Expensive/Cheapest Price(Rs.)

Ratio of Market Leader to Lowest Priced Medicines

Average of 3 Highest medicinePrices (Rs.)

Average of Prices of 3 Lowest Medicines (Rs.)

Anti‐Ulcer 

Omex

(20 mg;

10 caps)

Omeprazole 21.44 55 (Dr. Reddys);

79.4 (Zydus);

16.5 (Mankind)

3.33 51.6 20

Rantac

(150mg;

10 tabs)

Ranitidine 18.51 5.98 (JB Chemicals);

18.9 (Cipla);

4.82 (Dr. Reddys)

1.25 12.7 4.9

Comparator Prices of Market Leader & Cheapest Prices

Market Leader Medicines

Active Pharmaceutical Ingredients (API)

TNMSC Prices (Rs.)

Market Leader/Most Expensive/Cheapest Price(Rs.)

Ratio of Market Leader to Lowest Priced Medicines

Average of 3 Highest medicinePrices (Rs.)

Average of Prices of 3 Lowest Medicines (Rs.)

Anti‐Hypertensive 

Aten

(50mg;

14 tabs)

Atenolol 11.44 38.9 (Zydus);

57.5 (FDC);

12.4 (Blue Cross)

3.14 48.8 13.2

Storvas

(10 mg;

10 tabs)

Atrovastatin 20.90 93.3 (Ranbaxy);

110 (Cadilla);

19 (Skymax)

4.89 103 22

Comparator Prices of Market Leader & Cheapest Prices

MBP legitimizes trend of high prices;Likely to induce players in lower priced segment to drive up prices to closer to highest priced medicines;Exempts essential medicines ‐weighted average price of less than or equal to Rs. 3  ‐would increase in prices of essential medicines (including anti‐histaminics, anti‐asthmatics, some anti‐diabetics, anti‐hypertensive etc.). Prices of APIs which are only manufactured by a limited no. of suppliers in India or internationally should be monitored to ensure that a cartel does not emerge that would drive prices up. WPI‐linked price rise; Price controls & profitability; Negotiation on patented medicine prices;  Unethical to use proprietary data for public policy; 

Implications of DPPP, 2011 

Scale up public spending; Free essential medicines to all; 15% of 2.5‐3.0 %  of GDP (Reduce OOP spending & impoverishment); Centralised Procurement & DecentralisedDistribution; AYUSH medicines List – with adequate funding; 

HLEG Recommendations 

Overall Financial  Implications

Scale Up Public Spending on Drugs (0.4‐0.5% GDP):Current Govt:   Rs.   6,000 (0.1% of GDP) ; Current HH OOP: Rs. 56,000 (0.9% of GDP); Likely Combined: Rs. 25,000 – 30,000 (0.5% of GDP).  Expected Outcomes: 

Reduction in OOP (reverse ratio – OOP:Govt)Cost Savings: Rs. 30,000 (0.5% of OOP) current scenario; Cost Savings: Rs. 20,000 (0.33% of OOP) current + latent demand; 

Time‐Frame:‐

1 year      (Public Procurement & Public Distribution); ‐

2‐5 years (Public Procurement & Private Distribution).

Expected Outcomes 

Scaling up Public Spending 1‐3% Reduce OOP & Reverse Private‐Public spending (70:30 to 30:70); Cost Reductions (Private Vs Public) – Generic, economies of scale;Improve prescription & dispensing practices. 

Reconfigure Institutional  Mechanisms

Strengthen Public Procurement & Distribution System:

Procure EDL medicines (National and state level EDL); AYUSH under EDL or a separate EDL for AYUSH; Prescription and Dispensing through STGs; A two‐bid open transparent tendering process; Supply quality generic drugs and enforce rational use; Centralised Procurement & Decentralised Distribution System; Warehouses at every district level; Time‐Frame: One year 

Drug SecurityConsolidation of pharma industry thro’ mergers & acquisitions need to be checked (teeth to CCI); Revisit FDI rules to bring down share of foreign players to lessthan 49% (74%?);Alternatively, a provision for separation of ‘financial’ ownership from ‘legal’ ownership may be enforced, analogous to the RBI rules, which limit the voting rights of the foreign investor;Move away from automatic route to FIPB route;Revive Drug PSUs by infusing capital with autonomous  status;PSUs will offer opportunity to produce volume drugs & help in 'benchmarking' drug costs;Co‐opt medium & small scale drug industry to produce quality generic medicines for UHS by  helping them to transit to GMP‐complaint status.

Financial Implications: PSU Revival  & GMP for SSIsTime‐Frame:

1‐3 years

Vaccine Security UIP ‐ a minimum percentage of vaccine requirement should be manufactured in GMP complaint PSU; Indian private sector units to be encouraged thro’ long term commitments  & subsidies for quality upgradation to provide quality vaccines at stable prices over a five year period;All vaccines should come under DPCO as far as internal sales within the nation are concerned; Decisions on inclusion of new vaccines should be based on technology assessment protocols and institutional mechanisms which are benchmarked with the best – UK NICE; Local institutions, nearly 23 public funded organizations which are doing relevant research at a minor level, may be aided & these would contribute to evidence base needed by a technology assessment institution. 

Vaccine Security Quality standards needed for transport of vaccines, time distances between storage points & delivery points, training of vaccinators and vaccine handlers, for maintenance of cold chain etc. And these should be monitored internally as well as certified with some degree of externality. Strong surveillance systems must also be put in place for  & there is a need to inspect & respond to every incidence of a vaccine preventable disease; Public financing of R&D in vaccines is a priority. If  indigenous strains are used abroad for developing vaccines or other products, benefit‐sharing provisions under the Biodiversity act must be invoked for benefit of researcher and manufacturer. 

Drug Price Controls A pervasive price control on all essential drugs is called for; Price decontrolled drugs to be monitored continuously; State and Central Cell for price control of drugs;Price of all new patented drugs to be brought under DPCO automatically; Weed out irrational drugs: hazardous, irrational, non‐essential drugs from mkt; 

Drug Quality Control

Strengthen Centres and States Drugs Control Dept., for effective quality control with adequate human resource, technology & institutions; Build a network of drug quality testing laboratories, to be accredited by NABL in each state with periodic renewal; Establish blood banks and quality of blood banks ensured;