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5 Challenge: High Pricing and Poor Financing Opportunities to Address High Pricing and Poor Financing as Identified by Individual Participants ⢠Evidence-based policies to impact pricing and financing of medicines. ⢠Increase in evidence-based prioritization of funds for mental, neurological, and substance use (MNS) disorders by gov- ernments, not-for-profit, and for-profit partners. ⢠Increased competition and lower barriers for entry into the market, leading to an increased number of stakeholders and affordable medicine options. ⢠Implementation of simpler and clearer regulations, requirements, and procedures. ⢠Streamlined procurement of medicines at efficient prices and passing along of low procurement prices to patients, leading to a decrease in the overall unit cost of medicines. NOTE: The items in this list were addressed by individual participants and were identified and summarized for this report by the rapporteurs. This list is not meant to reflect a con- sensus among workshop participants. For additional attribution information, please refer to the table at the end of this chapter. 69
70 ESSENTIAL MEDICINES FOR MNS DISORDERS IN SSA THE COST OF ACQUIRING ESSENTIAL MEDICINES Although the methodology exists to measure availability, prices, and affordability of medicines, there are very little data specifically about medicines to treat MNS disorders, said Margaret Ewen, a pharmacist in the global office of Health Action International (HAI). Between 2007 and 2013, nine surveys were completed in SSA using WHO/HAI methodology, some of which included medicines for epilepsy and depression (WHO/HAI, 2008, 2013). The greatest amount of data in SSA were found for the following medicines: carbamazepine, an antiepileptic; amitriptyline, a tricyclic antidepressant; and diazepam, used to treat anxiety disorders, alcohol withdrawal symptoms, or muscle spasms. The surveys found that availability of these medicines was generally poor across all sectorsâpublic, private, and nongovernmental organizations. Ewen noted that analysis of WHO/HAI survey data suggests that the availability of medicines for chronic diseases in developing countries is lower than that for acute conditions (Cameron et al., 2011b). Prices for amitriptyline, carbamazepine, and diazepam were compared across countries in SSA using the Management Sciences for Health (MSH) International Drug Price Indicator Guide1 as a benchmark. MSH is a nonprofit organization that strives to improve health outcomes in poor and vulnerable populations by closing the gap between knowledge and action in public health (MSH, 2014a). The purpose of the guide is to make price information for medicines more widely available to facilitate procurement of quality-assured medicines at the lowest price (MSH, 2014b). Ewen said that government procurement prices for generic medicines were reasonable, with mean procurement prices often below the MSH international reference price; however, prices in some countries were much higher (Cameron et al., 2012). Patient prices, however, can be high even for the lowest priced generics. In many SSA countries, medicines are available at no cost in the public sector. However, in cases Ewen surveyed where purchase price data were available for the public sector, patients paid just over twice the international reference price for amitriptyline. Low procurement prices are generally not passed on to patients, Ewen said, and there are examples of patients paying 80 to 330 percent more than the procurement price (Cameron et al., 2009). Ewen noted that the NGO 1 See http://erc.msh.org/mainpage.cfm?file=1.0.htm&module=dmp&language=english.
CHALLENGE: HIGH PRICING AND POOR FINANCING 71 sector, as expected, had pricing similar to the public sector. During the discussion a participant noted that even in cases where medicines are provided at no cost to the patient, access is limited or unavailable due to supply chain interruptions. Affordability of medicines becomes a challenge when availability in the public sector is low and patients can only purchase their medicines in the private sector. The median price paid by patients for the lowest priced generic equivalent for carbamazepine was up to 10 times the MSH international reference price. Similar to the public sector, prices were generally higher for originator brands in the private sector. In the study by Cameron and colleagues (2012), affordability was measured as the number of days the lowest paid, unskilled government worker has to work to be able to buy 30 days of standard treatment for a chronic condition. In Tanzania, for example, this person would have to work 0.4 days to be able to buy 1 monthâs supply of the lowest priced generic carbamazepine in the public sector, but at 38 percent availability, patients would likely buy this medication via the private sector, where the cost is equivalent to 1.6 daysâ wages (Cameron et al., 2012). Improving Access to MNS Medicines by Reducing Pricing Multiple factors determine the final price of a medicine, including whether the medicine is purchased in the public or private sector, branded or generic, imported or locally manufactured, and subject to mark-ups and taxes. Given the challenges associated with data collection, Ewen noted that little data are available about these price components for medicines to treat MNS disorders in SSA. Mark-ups tend to be fixed percentages along the supply chain that are often unregulated and can more than double the manufacturerâs selling price. Taxes (e.g., value- added tax [VAT]; regional and local taxes) are often applied to medicines throughout the supply chain. Ewen explained that taxes on medicines can be highly regressive,2 which can result in reduced purchasing by low-income patients. In addition to mark-ups and taxes, import duties on raw ingredients and finished products may also increase the final price. Ewen said there are currently few incentives for stocking and dispensing lower priced medicines given the greater profit dispensaries can make selling higher priced medicines. 2 Low-income populations pay a larger amount of taxes.
72 ESSENTIAL MEDICINES FOR MNS DISORDERS IN SSA Ewen noted that there are several opportunities to improve pricing and affordability, including controlling the manufacturerâs selling price; reducing mark-ups, taxes, and duties; and adjusting reimbursement amounts. Another method, Ewen explained, might be to consider policies that specifically reduce pricing and increase affordability of medicines to patients, including policies directed at generic substitutions, prescribing, and reference pricing. For example, eliminating patient consent before a health care provider prescribes a generic rather than a branded medicine may help to reduce cost to the patient. Prescribing policies that limit which medicines are dispensed could help alleviate the risk of patients receiving low-quality medicines. Lastly, Ewen noted that reference pricing policies might increase the affordability of medicines by setting maximum median local price ratios to that of MSH. Ewen observed that countries sometimes introduce pricing policies without careful consideration of the various options and the potential impact of each option relative to their national situation. In addition, Ewen noted that many countries do not monitor the impact of policies once implemented and stressed that some policies are simply not feasible. Given the array of challenges associated with supplying affordable medicines to patients in SSA countries, Ewen suggested that countries take a multifaceted approach to address this issue. One participant highlighted that affordability needs to be addressed across the entire system of care. For example, even when medications are off-patent and affordable, patients often cannot afford the associated routine diagnostic tests. Lithium, for example, is available and free to patients in Ethiopia; however, it might not be prescribed because thyroid tests are not reliably available to assess if thyroid dysfunction, a common side effect, occurs with treatment. A few pharmaceutical company participants described tiered or differential pricing approaches for supplying medicines to the least developed countries during discussions. These individual participants noted that there are challenges to differential pricing and outcomes are not always as expected; differential pricing might not necessarily increase demand. A participant also mentioned there is a limit below which prices cannot go without impacting quality. A participant noted that this might be where other financing schemes, such as subsidies, can be beneficial.
CHALLENGE: HIGH PRICING AND POOR FINANCING 73 Financing the Costs of Essential Medicines As discussed by Hogerzeil, WHO conceptualized universal health coverage in three dimensions: what services are covered, who is covered, and the proportion of the cost covered (WHO, 2010b). Applying this concept to essential medicines, Daniel Chisholm, health economist in the Department of Mental Health and Substance Abuse at WHO, said the dimensions could be as follows: what is the range of medicines on the essential medicines list or which conditions are prioritized; the proportion of people who actually have access to those medicines; and who is paying for the medicines (e.g., public versus private, out-of- pocket, health insurance). Chisholm noted that this third dimension, who is paying, is a critical component in the financing of essential medicines in many SSA countries. An analysis of health care usage and expenditure in several representative SSA countries found that medicine was the largest element of out-of-pocket spending (Saksena et al., 2012). Out-of-pocket health expenditures are a significant concern at the household level in SSA, Chisholm explained. Many families, even those at the highest income levels, resort to selling assets or borrowing to finance payments (Leive and Xu, 2008). Essential medicines for target conditions are intrinsically in- expensive, and should account for only a small proportion of the total cost of treatment, Chisholm said. In many SSA countries, however, prices are high and unaffordable to many. This is due to a mixture of factors, including inefficient procurement; inadequate regulation; excessive mark-ups and taxes; and waste and corruption, he summarized. Efforts to lower prices and improve affordability could benefit from a systems approach, Chisholm concluded, starting with better governance, regulation, and policy, but also extending to more efficient procurement and distribution, as well as the establishment of financial protection measures for the poor and vulnerable. Taking a health systemâs perspective, Chisholm explored some of the critical challenges precipitating and associated with pricing and financing issues, as well as some suggested solutions (see Table 5-1).
74 ESSENTIAL MEDICINES FOR MNS DISORDERS IN SSA TABLE 5-1 Critical Challenges Impacting Pricing and Financing, and Potential Solutions Challenge Potential solution(s) Unclear policy, planning, and ⢠Employ rational selection and budgeting prioritization procedures ⢠Promote and enhance task-shifting approach to treatment ⢠Build on or integrate with existing programs ⢠Forecast future medicine and human resources needs and costs Inadequate regulation ⢠Carry out regular quality control and assurance ⢠Assess and react to key cost drivers Inefficient procurement, ⢠Monitor product availability supply, and distribution ⢠Establish drug facility High prices ⢠Promote and prioritize low-cost generics ⢠Reduce or remove tariffs, taxes, and mark-ups ⢠Establish reference prices for reimbursement High out-of-pocket ⢠Include essential MNS medicines in payments/Inadequate reimbursement/insurance schemes and financial protection international financing mechanisms ⢠Reduce charges or co-payments; with a focus on generics SOURCE: Chisholm presentation, January 13, 2014. LESSONS LEARNED FOR ADDRESSING HIGH PRICING AND POOR FINANCING As previously mentioned, five example programs addressing access to medicines were presented during the workshop to facilitate exploration of best practices and lessons learned from other programs. The examples were selected by planning committee members and included two country- level programs, an infectious disease project, and two noncommunicable
CHALLENGE: HIGH PRICING AND POOR FINANCING 75 disease programs. Highlights from the presentations of the lessons learned for addressing high pricing and poor financing are provided in Box 5-2. A full description of the examples as presented can be found in Appendix A. BOX 5-2 Highlights of Lessons Learned from Example Programs: High Pricing and Poor Financing Country Programs National Health Insurance Scheme (NHIS), Ghana ⢠The NHIS increased the affordability and usage of medicines and health care services for patients by providing access and financial coverage to basic health care for residents in Ghana through district-level and private health insurance schemes (NHIA, 2012). ⢠Revenue from a variety of sources, including taxes, premiums, investment income, and contributions from the national pension scheme, helps fund the NHIS. ⢠Potential cost containment efforts to improve the financial stability of the NHIS include o performing clinical audits to ensure compliance with standard treatment guidelines; o piloting capitation, which is the use of a set fee to health care providers for each NHIS-enrolled patient regardless of the services provided; o establishing a claims processing center to consolidate and streamline payments; o creating a uniform and serialized prescription form to reduce errors, abuses, and fraud; o linking diagnosis to treatment and e-claims according to codes for easier processing; and o negotiating prices for NHIS medicines to reduce cost to patients. The Accredited Drug Dispensing Outlets (ADDO) Program, Tanzania ⢠The availability of wholesalers closer to ADDOs can reduce distribution costs and medicine prices due to reduced travel distances and easier procurement. ⢠There are benefits to reviewing lessons learned from other successful programs that have shown that subsidies for
76 ESSENTIAL MEDICINES FOR MNS DISORDERS IN SSA essential commodities provided in the private sector are feasible (e.g., malaria). ⢠Linking ADDOs with health insurance schemes has reduced the out-of-pocket payments for individuals. ⢠Microfinancing loans to ADDOs may improve availability of medicines. Infectious Disease Program Multidrug-resistant Tuberculosis (MDR-TB) ⢠A structured financing and pricing system might ensure payments for medicines are forthcoming, resulting in increased confidence by suppliers in market strength and creation of a market that is transparent with low prices. Noncommunicable Disease Programs Diabetes ⢠Price components such as mark-ups and taxes may increase the price of medicines in both the public and private sectors. ⢠Reducing stock-outs within the public sector may help to decrease the number of patients who purchase higher priced medicines from the private sector. ⢠Developing a system or scheme for financing health care and medicines may help to reduce out-of-pocket costs for patients. ⢠Partnerships among manufacturer and regional patient associations can help to monitor patient prices in the public and private sectors; in addition, these partnerships can detect if medicines are diverted from the public sector into the private sector. Schizophrenia ⢠Affordability of medicines might be improved using a tiered- pricing policy, including providing generics to patients below the poverty line at low costs. ⢠Addressing pricing and financing through both public and private channels can be more effective than a single focus. ⢠Controlling profit margins throughout the supply chain can help to ensure the affordability of medicines. SOURCES: Presentations by Akpalu, Liana, Zintl, Ilondo, and Bompart. See Appendix A for full discussion and references.
CHALLENGE: HIGH PRICING AND POOR FINANCING 77 CHALLENGES AND OPPORTUNITITES FOR ADDRESSING HIGH PRICING AND POOR FINANCING In preparation for the focused discussion on pricing and financing, Chisholm summarized key challenges that were discussed in the presen- tations and example programs. Pricing and financing are important fac- tors that influence whether a patient has access to essential medicines to treat MNS disorders. Particularly for low-income countries, the afforda- bility of accessing medicines can be a barrier to seeking care. Several participants noted the value of real-time data collection and monitoring on the availability and price of medicines for MNS disorders. Given frequent stock-outs in the public sector, patients many times will purchase medicines in the private sector at higher costs or do without their medications. A few participants suggested that regulatory cost con- tainment measures and negotiated prices around profit margins and dif- ferential pricing might increase the accessibility and affordability of medicines to patients. Due to the small market size and lack of incen- tives, a few participants noted that some manufacturers do not want to invest in SSA country markets. Many participants discussed how price components, such as mark-ups and taxes, can significantly increase the price of medicines to patients. The discussion on financing focused on models for achieving a greater degree of protection against high costs of medicines and related care. Sustainability of financing was stressed by several participants, especially in the face of changing priorities and personnel. Innovative sources of funding were also discussed, such as mobile phone taxes, road taxes, or âsin taxesâ on tobacco and alcohol. Following the focused discussion, Chisholm reported that four priority constraints and/or barriers were identified by various participants relative to pricing and financing of MNS medicines: (1) lack of market analysis and data collection for making evidence-based decisions; (2) lack of or low public and private investment in MNS disorders; (3) a weak pharmaceutical market, including a lack of price competition and government regulation; and (4) poor access to affordable medicines for the insured and uninsured. All constraints and/or barriers and potential opportunities noted by participants are included in Table 5-2. During the discussions many participants stressed the importance of conducting a full market analysis, including analysis of need, usage, prices, personnel, availability, quality, and supply chain elements.
78 ESSENTIAL MEDICINES FOR MNS DISORDERS IN SSA Chisholm noted that this might enhance transparency and increase evidence-based decision making on policies impacting pricing and financing of medicines for MNS disorders. A few participants noted a need for an increase in priority given to MNS disorders for resource allocation, and highlighted roles for governments as well as NGOs, the pharmaceutical industry, professional organizations, and patient groups. Several participants suggested that pharmaceutical markets for MNS treatments in SSA might be improved by increasing competition for different products, lowering barriers to entry into the market, and strengthening governance and regulation. In theory, Chisholm explained, more competition among different suppliers would lead to lower prices. He went on to note that improved regulation could help to eliminate non- quality assured products in the market, and control price mark-ups along the supply chain. The lack of or low public and private investment in MNS disorders is a significant challenge for improving pricing and financing. To address this challenge, several participants stressed the importance of prioritizing the focus on these disorders by governments, nonprofits, and for-profit partners. One potential option would be to partially base health budget allocations on disease prevalence and burden to allow for a balanced approach relative to other communicable and non- communicable diseases. Finally, Chisholm described the discussions for the challenge of poor access to affordable medicines for both the insured and uninsured. Many participants suggested that promotion of MNS medicines for inclusion on country-specific essential medicines list and health insurance schemes might increase coverage for these medicines. A second opportunity, highlighted by several participants, could be streamlined government procurement practices. Chisholm noted that these same participants stressed that this could only be effective if low procurement prices are passed along to patients, resulting in costs that are closer to international reference prices.
TABLE 5-2 Opportunities to Address High Pricing/Poor Financing of Essential Medicines as Identified by Individual Workshop Participants 1 Constraint Potential Relevant Potential Metric(s) Suggested Secondary and/or Barrier Opportunity Outcome(s) of Success Partnership(s) Consideration(s) Lack of market Enhance Evidence-based Availability, WHO; HAI; Resources (e.g., analysis and data transparency decision making publication, and use Ministry of financial, human) collection for through the on policies of market analysis. Health; for analysis may making evidence- conduction of impacting pricing Regular and regulatory vary by country.c,d based decisions. market analysis, and financing of continuing analysis bodies; health c,d,e including analysis medicines for and data updates.c,d insurers; of need, usage, MNS associated prices, personnel, disorders.c,d,e national health availability, researchers.a,b,c,d,e quality, manufacturers, distributors, and supply chain elements.a,b,c,d,e 1 This table presents challenges and opportunities discussed by one or more workshop participants. During the workshop, individual participants engaged in active discussions. In some cases, participants expressed unique ideas and/or differing opinions. However, because this is a summary of workshop comments and does not provide consensus recommendations, workshop rapporteurs endeavored to include 79 all workshop participant comments. This table and its content should be attributed to the rapporteurs of this summary as informed by the workshop.
Constraint Potential Relevant Potential Metric(s) Suggested Secondary 80 and/or Barrier Opportunity Outcome(s) of Success Partnership(s) Consideration(s) Lack of or low Increased priority Increased focus on Increased funding WHO; patient N/A public and private of funds for MNS MNS disorders, and resource advocacy investment in disorders at including allocation for MNS- groups; Ministry MNS disorders, governmental balanced attention related services. of Health; including low levels. Evidence- relative to other Improved patient Ministry of donor interest.c,d,e based diseases. outcomes.b,c,d,e Finance.a,b,c,d,e prioritization.c,d,e Improved transparency of budget allocation for MNS disorders based on disease prevalence and needs of population.c,d,e
Constraint Potential Relevant Potential Metric(s) Suggested Secondary and/or Barrier Opportunity Outcome(s) of Success Partnership(s) Consideration(s) Lack of or low Increased priority Increased focus on Greater availability Pharmaceutical N/A public and private by supra-national MNS disorders, of competitively companies; investment in and including priced medicines. nongovernmental MNS disorders, nongovernmental, balanced attention Increased public agencies; including low not-for-profit, and relative to other awareness and professional donor interest.c,d,e for-profit diseases.b,c,d,e advocacy.b,c,d,e associations; partners.b,c,d,e physician groups.a,b,c,d,e 81
Constraint Potential Relevant Potential Metric(s) Suggested Secondary 82 and/or Barrier Opportunity Outcome(s) of Success Partnership(s) Consideration(s) A weak Increased Increased number Lower prices for Manufacturers; N/A pharmaceutical competition and of stakeholders MNS disorder regulators; trade market for MNS lower barriers to involved in medicines.c,d ministries; disorder entry into the medicines for regional trading medicines, market to include MNS disorders. blocs; tax including a lack of sharing of best More affordable authorities.a,b,c,d,e price competition, practices.a,b,c,d product options poor government for MNS regulation of disorders. a,b,c,d,e pricing, and poorly organized markets.a,b,c,d,e
Constraint Potential Relevant Potential Metric(s) Suggested Secondary and/or Barrier Opportunity Outcome(s) of Success Partnership(s) Consideration(s) A weak Strengthened Full Reduced level and WHO N/A pharmaceutical governance and implementation range of mark-ups. prequalification market for MNS regulations.b,c,e and enforcement Delisting of poorer system and good disorder of simpler and quality products governance for medicines, clearer from medicines medicine including a lack of regulations, lists.d,e principles; price competition, requirements, and regulatory poor government procedures. authorities; regulation of Elimination of groups that can pricing, and approval of non- influence poorly organized quality-assured distribution markets. a,b,c,d,e products.b,c,d,e channels of products (e.g., trade unions); providers; professional associations; civil society; Ministry of Health.b,c,d,e 83
Constraint Potential Relevant Potential Metric(s) Suggested Secondary 84 and/or Barrier Opportunity Outcome(s) of Success Partnership(s) Consideration(s) Poor access to Promotion of Increased needs- Reduced out-of- Ministry of Bundle medicines affordable MNS medicines based coverage pocket payments Health; Ministry with other aspects medicines for both for inclusion on and financial for MNS of Finance; of care (e.g., non- the insured and essential medicine protection.d,e medicines. Ministry of pharmaceutical uninsured, lists and disease Reduction of the Trade; insurers; tools, including management in treatment gap.c,d,e advocacy monitoring).b,c,d,e unaffordable out- health insurance groups; of-pocket schemes.c,d,e consumer expenses, and groups; catastrophic international spending for the partners; publicâ insured.b,c,d,e private partnershipsa,b, c,d,e
Constraint Potential Relevant Potential Metric(s) Suggested Secondary and/or Barrier Opportunity Outcome(s) of Success Partnership(s) Consideration(s) Poor access to Streamlined Decrease in End-payers pay Ministry of N/A affordable government overall unit cost close to Health; Ministry medicines for both procurement of per end-user.c,d international of Finance; the insured and medicines at reference prices for Ministry of uninsured, efficient prices the public sector.c,d,e Trade; insurers; including while passing international unaffordable out- along low partners; publicâ of-pocket procurement private expenses, and prices to patients partnershipsa,b,c, d,e catastrophic and promoting spending for the exemption of insured.b,c,d,e taxes on MNS medicines.c,d,e a Michelle Akande b Francois Bompart c Dan Chisholm 85 d Margaret Ewen e Frances Jensen
