Future Strategic Directions: Medicines Pricing and Financing

1. Future Strategic Directions: Medicines Pricing and Financing Dr. Dele Abegunde Medicines Access and Rational Use

2. Background: The future is in the present. • Access to pharmaceuticals essential to healthcare 25 -70% of health spending in the developing countries, 10-18% in OECD countries • Production is technically efficient. Relatively low marginal cost of unit production not translating to consumer surplus • Marginal cost of consumption at point of need for most consumers in the developing countries is way greater than zero. Less that 3% of population in low-income countries have some forms of insurance cover

3. Background Total pharmaceutical expenditure: 0.2 – 3.8% of GDP TPE share of Total Health expenditure vary up to between 25 – 36% OECD countries. Likely higher in LIMC countries? Share of TPE from external sources increase from 12% in 2000 to 17% in 2006 in LMIC, 22% in the 49 least developed countries. 80% global TPE spent on 18% of population: May suggest regressive global financing scenario Medicines financing remain regressive in LMIC: Medicines are largely financed through OOP – only about 3% have access to some forms of insurance mechanism Market failures justify public intervention and global economic recession threatening to dry up traditional funding sources

4. WHO response • WHO has partnered with HAI for about a decade • Medicines pricing surveys: up to 70 so far • Development of policy guidance • Global activities: WHO Regions: EMRO, WPRO, PAHO countries and NGOs such as the OBIG/PPRI, OECD, MeTA etc.

5. Global response • Innovative medicines financing schemes and tools Pooled procurement, Patent pooling, Bilateral AIDS and donations, Air ticket tax Sin tax – tobacco and soda, etc • Players- financial intermediation is growing GF, UNITAID, PEPFAR, GDF, GAVI, Bilateral, MDG Task force for Innovative financing . . . . . . . . . . . 450 and counting • Estimating real impact? Market impact analysis? Structural impact?

6. What is happening in countries? Increased funding, more investment to improve access to medicines Access to medicines improving in some disease areas? Impact on health systems and unfavoured diseases areas Pharmaceutical work force challenges Uneven development of the procurement, supply and systems Demand for medicines is increasing in scale and scope Is optimal and equitable access to medicines being achieved?

7. Government health expenditure (as source) is Increasing

8. Official Development Assistance (ODA) and Health ODA Official Development Assistance (ODA) for Health, Bilateral and Multilateral flows [in constant 2006 US$ billions] 10 100 9 90 8 80 7 70 6 60 "Health" ODA US$ billions Total ODA US$ billions 5 50 4 40 3 30 2 20 1 10 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 ODA for Health Total ODA Source: OECD

9. Tanzania: Funding by Supply Type(2006-2007 Data) ESSENTIAL MEDICINES ARVs MALARIA TB OI ARVs Ped REAGENT Blood safety (+ HIV test) VACCINES CONDOMS CONTRACEPTIVES MEDICAL SUPPLIES GOVERNMENT BILATERAL DONOR MULTILATERAL DONOR NGO/PRIVATE C S S C O M S S I D A N O R A D C I D A UN I TA I D H A V A R D P E P F A R GLOBAL FUND CL I NTON A X I O S P F I Z E R J ICA C D C C O L U M B I A G A V I C U A M M U N I C E F U S A I D W B GOVERNMENT A B B O T T Source Of Funds Source: Supply management, WHO/EMP/MAR

10. Source: Helen Tata, WHO

11. Zambia: Funding by Supply type ESSENTIAL MEDICINES ARVs MALARIA TB OI ARVs Ped REAGENT Blood safety (+ test HIV) VACCINES CONDOMS Contraceptives MEDICAL Supplies ITN Category of Products Color GOVERNMENT BILATERAL DONOR MULTILATERAL DONOR NGO/PRIVATE UN I TA I D GLOBAL FUND C H A I WORLD B A N K P E P F A R U S A I D C D C D F I D W H O WORLD VISION Z A B A R T C H A Z B G A T E S U N I C E F U N F P A A XIOS M O H J ICA G L A S E R Source Of Funds Source: Supply management, WHO/EMP/MAR

12. Supply management in the developing countries: a case of too many cooks while the gourmet remains un-served!

13. Challenges • Distorted view of total medicines financing with inputs to specific disease programs by donors • Reduced government contributions to health and medicines • Constrained technical capacity in countries • Political will • Global economic (financial) crisis • Human resources • Healthcare systems

14. Re crafting WHO response • Response so far resonates more with the supply side of pharmaceutical market • Expanding response to the determinants of demand; • opportunity to advance development of response to inaccessibility and low affordability of medicines • synergize with work so-far • Empowers consumers to increase access to essential medicines • Enhance positive consumer behaviour towards use of essential medicines

15. Stepping into the Future: WHO Strategy • Goal: To ensure that medicines are available and affordable for all populations • Purpose: Encourage and support the development, strengthening and implementation of global, regional and national actions aimed at greater availability and improved affordability of medicines

16. OBJ 1 • Stimulate the commitment of governments, international organizations and others to address the issues surrounding medicine financing, pricing and availability Increase global awareness of the main issues surrounding financial management of pharmaceuticals, including prices, availability and affordability. Intensify advocacy for equity in access to essential medicines Promoting medicines financing schemes that targets empowering the poor Advocate for high-level government support for country-level action Promote and facilitate measures to manage and contain medicine prices Collaborate with professional associations, scientific institutions, governmental and NGOs.

17. OBJ 2 • Develop practical guidance on the implementation of policies and other interventions for managing medicine prices and availability, including pharmaceutical financing and reimbursement systems. Convene international experts to review evidence for policy programmatic options Support the regular publication of medicine price data: transparency, information sharing, and tool for price negotiations and decision-making. Develop tools to guide and assist policy and decision makers to navigate the broad mix of policy options and implementing home-grown interventions. Disseminate information on policies and other interventions.

18. OBJ 3 • Build national capacity for evidence-led development, adoption, implementation and monitoring of policies and interventions for improving the access to and the financing of, essential medicines, and the evaluation their impact. support the collection and management of country information provide technical support for the development, implementation and evaluation of national policies and interventions Facilitate dialogue and information exchange among policy- and decision-makers, Advocate and support processes of pharmacoeconomic evidence-led decision making. Facilitate and support the process of developing, establishing and evaluating medicines finance strategies

19. OBJ 4 • Support operational research in a broad spectrum of relevant areas, including the determination of and refinements of financing norms, measurement of price, availability and affordability, and evaluation of interventions Promote the consistent use of standard methodology for medicine price and availability measurement: WHO/HAI survey protocol Encourage and support periodic surveys and routine monitoring of medicines prices, availability and availability Conduct secondary and subset analyses of medicine price, availability and affordability Data: disease group, treatment, country and region. Support operational research into the effectiveness of various policies and interventions in different contexts.

20. Warm up activities • Financing of medicines • Normative exploration of TPE – collaboration with University of Brunel the UK and experts • Preliminary explorations into adaptation of the developments in Micro financing to improving economic access to essential medicines: Micro insurance, Community health funds, Mutual health organizations, Rural health insurance, Revolving drug fund, Community involvement in user-fees Management • Advocating for and promoting the expansion of existing insurance coverage particularly to include out patient prescription • Promoting developments to improve the incorporation of pharmacoeconomic values into medicines policy

21. Strategies medicine access • Efficiency financing of supply and demand (medicines market) Strengthening the market for medicines • Equitable access to medicines Protection of the vulnerable • Medicines financing planning and forecasting capacity Budgeting function strengthening collaboration with partners and donors. • Mainstreaming medicines with the larger health system

22. Strategies to improve medicine financing in countries • increased investment and • public spending on health; • improved aid effectiveness; • better efficiency and use of prepayment • risks pooling arrangements; • improved payment methods • safety nets for the poor and vulnerable;

23. Public (National) financing Mechanisms • Insurance • Pooled procurements • Global initiatives • UNAIDS • Global Funds • UNITAID – HIV/ • HLTFIF – MDG focused

24. Downstream financing Mechanisms • Insurance Challenges: Formal sector, limited cover to the larger informal sector • Community financing (Micro finance) Community health (medicines) insurance Relatively untapped broad area of opportunities

25. Microfinance: CHI • Generic expression that describes a variety of health financing arrangement: • Micro insurance • Community health funds • Mutual health organizations • Rural health insurance • Revolving drug fund • Community involvement in user-fees management

26. CHI Community finance schemes • This market is evolving in the contest of: • Government failure to organize taxes, public finance, provision of social protection to vulnerable populations and to exercise oversight over the health sector. • Market failure to offer effective exchange between demand and supply • Strength • Social capital • Pre existing community institutions • Interconnectivity between local communities • Limitations to overcome to serve the community well • Lack of insurance and reinsurance mechanisms to spread risk over larger population • Isolation from formal financing and provider networks • Have difficulties in mobilizing enough resources to cover costs of priority health services for the poor • Limited ability to encourage prevention or use of therapies effectively • Rely on management staff with limited professional training.

27. CHI five key policies available to governments to improve the effectiveness and sustainability of existing community financing schemes. • subsidized premiums of low-income populations • insurance to protect against expenditure fluctuations and re-insurance to enlarge the effective size of small risk pools • effective prevention and case management techniques to limit expenditure fluctuations • technical support to strengthen the management capacity of local schemes • establishment and strengthening of links with the formal financing and provider networks.

28. Regional coverage (MFIs, AFIs) Region % of Accounts Africa (sub-Saharan) 4 East Asia and the Pacific 48 Europe and Central Asia 3 Latin America and the Caribbean 2 Middle East and North Africa 7 South Asia 36

29. Innovative financing methods • hypotheticated taxes, e.g. 'sin taxes' for tobacco and alcohol • national and state lotteries dedicated to health • public-private partnerships between governments and the private sector to co-fund health care. • Other mechanisms are internationally focused, such as: • the (recently proposed) International Finance Facility (IFF). This would front-load development assistance by selling government bonds secured by future aids flows • debt for health swaps, in which external government debt is converted into domestic debt, thereby resulting in less pressure to generate foreign exchange for debt service. A debt-for-health swap also represents an opportunity for a foreign donor to increase the local currency equivalent of a donation. • the use of public-private partnerships to develop new products using capital markets.

30. Thank you for listening