Medicine Price. in Uganda. october Ministry of. World Health organisation. Health Action International

Transcription

1 Medicine Price Components in Uganda october 2015 Ministry of Health World Health organisation HEPS Uganda HAI AFRICA Health Action International

2 SURVEY TEAM Consultant Patrick Mubangizi Data collectors Tibasiimwa Richard Bob Caroline Aruho Data entry and analysis Bestason Aliyo

3 I Table of Contents Abbreviations and Acronyms... Executive Summary... II III 1. Background Introduction Overview of the health sector Medicines procurement Prices of medicines Availability of Medicines Rationale for the study Objectives of the study Methodology Sampling procedures Selection of districts Selection of manufacturers, wholesalers, private clinics, drug shops and medicine retail outlets Selection of medicines Selection of sectors Data collection, entry and analysis Data entry and analysis method Quality assurance Ethical Considerations Findings National level policies that affect prices of medicines Overview of price components Public sector Mission sector Private sector Conclusions and recommendations Conclusions Recommendations... 17

4 II Abbreviations and Acronyms ACTs Artemesinin-based Combination Treatments AMfM Affordable Medicines for Malaria DDP Delivery Duty Paid EAC East Africa Community EMHS Essential Medicines and Health Supplies EML Essential Medicines List FDA Food and Drug Authority FOB Free on Board (price) HAI Health Action International HEPS Coalition for Health Promotion and Social Development JMS Joint Medical Store LTR Local technical representative MAUL Medical Access Uganda Limited MeTA Medicines Transparency Alliance MOH Ministry of Health NDA National Drug Authority NGO Non-governmental organisation NHIS National health insurance scheme NMS National Medical Stores NPSSP National Pharmaceutical Sector Strategic Plan PNFP Private-not-for profit (sector/facilities) PPDA Public Procurement and Disposal Act/Authority PPP Public Private Partnership PSU Pharmaceutical Society of Uganda UHMG Uganda Health Marketing Group WHO World Health Organisation

5 III Executive Summary Background Affordability of medicines is critical to access, particularly because countries with low health insurance such as Uganda, expenditure on healthcare is largely through out-of-pocket. Yet, while Ministry of Health (MOH) surveys and monitoring reports indicate an increased availability of key medicines in the public sector from 33% to 75% 1, other studies indicate that medicine prices are out of reach for a majority of the population that live under $1 a day 2. Different efforts have been put in place to make essential medicines affordable, but the country continues to face challenges in this area. This study attempts to understand how the final prices are determined, their incremental components through the supply chain, and the price changes that have occurred since the previous price studies were carried out. Objectives of the study The purpose of the study was to document: (1) What constitutes the prices of key tracer medicines and supplies at different levels of the supply chain in the public, private and mission sectors in Uganda. (2) Different prices for key medicines in the urban and rural parts of Uganda in the private and mission sectors. (3) The policies that regulate the supply chain medicines components (4) The variation of prices and mark ups in different sectors and regions of Uganda Methodology We surveyed two regions and data was collected from Kampala and wakiso districts in central Uganda and from Mbarara and Bushenyi districts in the West. Five wholesalers, five health care clinics and five drug shops and five retail pharmacies were investigated.. One local manufacturer and two importers were interviewed. Twelve medicines that treat the highest burden of disease in Uganda were surveyed in public, private and private-not-for-profit (PNFP) outlets were surveyed. Findings The key policies and laws that affect prices of medicines include the Essential Medicines and Health Supplies list, consisting of 604 medicines; the National Drug Authority and Policy Act of 1993; the National Medical Stores Act 1993; and the Public Procurement and Disposal Act (PPDA). The Pharmaceutical Society of Uganda (PSU) is the professional body established by the Pharmacy and Drugs Act 1970 to govern the practice of pharmacy in Uganda. Imported products attract bank charges (letters of credit), insurance and freight. At the NDA, the importer pays a verification fee which constitutes 2% of the Free on Board (FOB) price. There are no import tariffs on medicines. Imported products pay insurance and freight average 8% by sea and 20% by air. Clearing fees are between 2%-5%. In the public sector, National Medical Stores (NMS) pays the cost price of medicines, Delivery Duty Paid (DDP) and a verification fee of 2%. A uniform mark-up of 8% is added on all products to cater for administration and delivery to the public health facilities. Medicines are free for consumers in the public sector facilities. 1 WHO/HEPS/MOH medicines price monitor vol 8 2 UBOS (2010) Uganda national household survey

6 IV In the PNFP sector, Joint Medical Store procures most of its medicines locally through the local technical representatives (LTRs) and adds up a mark of 9-13% on the products for sale to the facilities in the mission and occasionally private health facilities. In the private sector, LTRs operate in different ways. Some are free to add a mark-up and pay their own administrative costs, while others have mark-ups set by the manufacturers they represent. All LTRs are responsible for follow up and registration of new products by the NDA. Overall, they charge a mark-up of 10%-20% on imported products. First stage wholesalers source their stock from the LTR and sometimes import for themselves. They impose a mark-up of 20%-60%. Second stage wholesalers purchase medicines from forst stage wholesalers and sell to retailers, clinics and hospitals at the district and rural levels. For locally manufactured products, these constitute agents of manufacturers. This is the most highly competitive stage of the medicines supply chain and they add a mark-up in the range of 5-10%. Retailers are pharmacies, hospitals, clinics, drug shops and other outlets that sell medicines to the final consumer. These facilities tend to directly pass all overheads to the consumer through higher prices. They impose a mark-up of 50%-60% depending on the products and their package sizes. Conclusions There were no policies, regulations/limitations for any private sector player to have different service points at all levels of the supply chain Retail mark ups in the mission sector were high and had a wide range depending on the product and location of the facility despite the competitive wholesale prices by JMS. Medical centres and clinics had the highest markups at retail level compared to pharmacies and mission facilities. The urban facilities had markedly higher retail mark ups compared to rural facilities Retail mark ups were highest in the mission and private sectors with slow moving products such as medicines for diabetes and hypertension attracting higher mark ups. The public sector had the lowest mark ups and paid most competitive prices at international level. Originator medicines had lower retail mark ups and high prices at wholesale level. Recommendations Stakeholders should consider multiple interventions in the supply chain to reduce the cost of medicines for non-communicable diseases in the supply chain. Further research on the causes/ drivers of higher mark ups at retail level should be considered. NDA, MOH and private sector stakeholders should consider streamlining the supply chain to reduce incidences of importers and LTR from operating in other levels of the supply chain. NDA and MOH should consider engaging all sector players to agree on a policy of recommended retail price especially for products that are expensive such as ceftriaxone. A few selected products could be piloted and published to test viability of the proposal. Review of the policy of clinics and medical centers stocking emergency medicines should be carried out in order to explore mechanisms of enforcement. MeTA should consider setting up and independent database that can continuously update the sector on the markups and other related of selected medicines. Wholesalers of generics should consider pragmatic engagement of retailers to incentivize them and agree on retail prices for a select list of drugs and move progressively to cover the whole product range. JMS and NMS should deliberate options of selling to the private sector medicines that are critical and highly priced.

7 1 1. Background 1.1 Introduction This report analyses the prices of medicines at the different stages of the supply chain up to the dispensing stage in the public, private and private-not-for-profit (PNFP) facilities. Medicines make up a significant proportion of the budget of any given health care system and, in most developing countries, it is the first or second highest expenditure to human resources. Countries with low health insurance coverage such as Uganda (with less than 3%), expenditure on health care through out-ofpocket is high especially in the poorer sections of the population. At the policy level, governments are under increased pressure to make medicines affordable for the population. The WHO essential medicines concept, which guides developing countries public procurement of medicines, considers, among other things, the price and affordability of a medicine as essential requirements of medicines inclusion onto the essential medicines list. In Uganda, the current public per capita expenditure on health ranges between $7 and $11 which falls below the estimated cost of $28. The per capita expenditure on medicines increased from $0.5 in 2010/11 to $0.9 in 2012/13 1 compared to the estimated requirement of $2.4 per capita excluding the expensive interventions (ACTs, ARVs, ITN and pentavalent vaccines). The public health care system continues to experience occasional stock outs which affect the level of utilization of services in the sector. Recent increments in public expenditure on medicines and interventions by development partners have contributed to the reduction of stock outs and an increased role of the PNFP sector 2. However, a significant proportion of the population still purchases medicines from private sector outlets. In Uganda, Ministry of Health (MOH) surveys and monitoring reports have indicated an increased availability of key medicines in the public sector from 33% to 75% 3. However, while availability has improved, affordability remains a challenge. The WHO and Health Action International (HAI) pricing project has undertaken several surveys have documented the unaffordability of medicines, especially for the poor who are often not covered by insurance and consequently incur high out-of-pocket expenses. Other studies indicate that medicine prices are out of reach for a majority of the population that live under $1 a day 4. 1 MOH (2012)Health Sector Strategic Investment Plan Mid Term Review Report on Medicines Management 2 MOH (2012)Health Sector Strategic Investment Plan Mid Term Review Report on Medicines Management 3 WHO/HEPS/MOH medicines price monitor vol 8 4 UBOS (2010) Uganda national household survey

8 2 1.2 Overview of the health sector Medicines procurement In the public sector, medicines are free to users but are procured using government and donor money by National Medical Stores (NMS) which adds a mark-up to cater for transport, distribution and administrative expenses. A dedicated medicine budgetary expenditure vote (Vote 116) in 2010 has consolidated medicine budget under NMS, which procures medicines for the entire public sector, including referral hospitals. This has centralized the financing of medicines and consequently improved procurement planning but also stretched its infrastructure and human resources. This pressure coupled with a complex legislative framework for public procurement and other operational challenges have partly contributed to stock outs, expiries and low availability of some key medicines. Joint Medical Stores (JMS), Medical Access Uganda Limited (MAUL) and Uganda Health Marketing Group procure, store and distribute essential medicines and health supplies (EMHS) to public health, faith based and some private health facilities5. The mark-ups added along the supply chain are dependent on the nature of the institution, source of medicines and the development partner supporting the program. Most private health facilities purchase medicines from wholesalers and distributors of local and imported medicines which are mostly concentrated in Kampala district Prices of medicines A substantial percentage of medicines on the market are imported from neighbouring Kenya and Tanzania as well as from China, India and other Asian countries. To support local production, local manufacturers have been allocated 15% of the public sector procurement, which they however, sometimes fail to fulfil due to operational challenges of the industry. The pharmaceutical sector is highly dependent on generics; only a small percentage of innovator products are available in the upscale private hospitals and pharmacies in Kampala. The NMS and JMS procure medicines at competitive international prices of less than 1.5 times the international reference price due to their economies of scale6. However, prices to consumers at retail level have been documented to range between times the international reference prices7. Even subsidisation programmes have had only limited success. Notably, the Affordable Medicines for Malaria (AMfM) subsidised Artemesinin-based Combination Treatments (ACTs), whose target retail price was $1 in the private sector, was unable to achieve that goal. Retail prices for the subsidised ACTs were $1.96 in Uganda compared to $0.58 in Kenya, 0.94 in Tanzania mainland and $1.17 in Zanzibar Availability of Medicines The public sector remains the first choice of healthcare and medicines for most consumers especially in the rural areas because health services are free9. However, medicines are sometimes not readily available due to challenges in the public sector and consumers have to resort to the private sector. Studies have shown that availability of key medicines has not exceeded 80% in the public and mission sectors10. The medicines surveyed have included those for malaria, pneumonia, HIV/AIDS, diabetes, reproductive health, and hypertension, among other conditions. 5 MSH (2010) Policy options analysis for Uganda Pharmaceutical Supply system 6 MOH (2002) WHO/HAI pricing survey 7 MOH (2002) WHO/HAI pricing survey 8 The Global Fund (2012) Independent Evaluation of the Affordable Medicines Facility - malaria (AMFm) Phase 9 MOH (2008) Pharmaceutical situation assessment report 10 MoH/WHO, HAI (HEPS,) Medicine price Monitor Vol.8

9 3 1.3 Rationale for the study MOH with support from development partners developed the National Pharmaceutical Sector Strategic Plan (NPSSP) in which the NMS and JMS are mandated to ensure increased availability of medicines in the public and PNFP sectors. Increase in availability is highly dependent on the procurement prices of these institutions. Similarly, MOH is spearheading the Public Private Partnership (PPP) initiative which recognises the role of the private sector in provision of health services. It is crucial that the prices charged for essential medicines reflect the realistic costs in the market so that the population is not overburdened with high medicine prices. At the same time, stakeholders at national level are currently discussing the formulation and implementation of the national health insurance scheme (NHIS). The scheme s sustainability and viability will be highly dependent on medicine prices. Different studies have shown that pharmacy benefits management is an essential area of management of costs to ensure sustainability of the insurance programmes in public and private sectors.11 There are persistent complaints by the insurance sector about the fees charged by the health service providers, particularly the cost of medicines and supplies. Given the uncertainty of support from development partners, policymakers are exploring options for sustainable medicine financing. One of the options under discussion is the establishment of an HIV/AIDS fund, a levy which has to be informed by up-to-date evidence on how medicines are costed and priced at the different levels of the supply chain. The Medicines Transparency Alliance (MeTA), coordinated by WHO and MOH, was constituted in Uganda as a multistakeholder platform to improve information sharing, dialogue and coordination in the pharmaceutical sector. To date, this coordinated framework has undertaken research and shared information that has been used by actors to engage and make decisions, and helped improve private sector involved in policy discourse. As seen in this and the preceding sections, different efforts have been undertaken to make essential medicines affordable, but the country continues to face challenges in this area. This study attempts to understand how the final prices are determined, their incremental components through the supply chain, and the price changes that have occurred since the previous price studies were carried out. This study is intended to contribute to the rich evidence on medicine pricing and to update stakeholders on the changes in the affordability of medicines. 1.4 Objectives of the study The purpose of the study was to document: (1) (2) (3) (4) What constitutes the prices of key tracer medicines and supplies at different levels of the supply chain in the public, private and mission sectors in Uganda. Different prices for key medicines in the urban and rural parts of Uganda in the private and mission sectors. The policies that regulate the supply chain medicines components The variation of prices and mark ups in different sectors and regions of Uganda 11 Kaiser family foundation (2005) Cost Containment Strategies For Prescription Drugs: Assessing the evidence in the Literature

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11 5 2. Methodology The methodology was adopted from WHO/HAI Medicine Price, Availability, Affordability and Price Components Manual 2nd Edition The price components data collection methodology has two parts: a pharmaceutical policy investigation at the central level, and research into actual price components along the medicine distribution chain. 2.1 Sampling procedures Selection of districts Since the distribution channels within the supply chain are fairly similar across the country, the researchers surveyed two regions and data was collected from: Kampala and wakiso districts because of their cosmopolitan nature and concentration of health facilities at all levels care and Mbarara and Bushenyi districts which are both urban and rural areas with facilities that constitute wholesale and retail service points Selection of manufacturers, wholesalers, private clinics, drug shops and medicine retail outlets In order to develop a sampling frame of private sector healthcare clinics and medicine retail outlets, interviewers used lists of facilities from the National Drug Authority (NDA), the Uganda Dental and Medical Practitioners Board and the Uganda Allied Practitioners Council. A sample of five wholesalers, five health care clinics and five drug shops and five retail pharmacies were investigated in Kampala and Wakiso and Mbarara and Bushenyi. One local manufacturer was interviewed at central level and two importers were selected based on their portfolio of products that are imported. Only licensed facilities were studied Selection of medicines Twelve medicines were selected for pricing data to be collected. The chosen medicines represented medicine categories that reflect burden of disease in Uganda. Innovators and lowest priced generic equivalents were surveyed to enable a comparison of mark ups along the supply chain while locally manufactured and imported were also compared for a few products (The medicines list is attached as Annex 1)

12 Selection of sectors Three Sectors; Public, private and private not for profit, were selected based on the previous studies on medicines prices for easy comparison on the trends. Public sector 1) Public health facility patient prices and NMS procurement prices. Since medicines are free in the public sector at consumer level, the prices paid by the health facilities to NMS were considered as consumer prices. Private sector 2) Retail pharmacies 12 3) Drug shops 4) Clinics Private Not-for profit sector 5) NGO/mission health facilities and Joint Medical Stores procurement price 2.2 Data collection, entry and analysis Data collection began at the central level where data on national policies that affect pharmaceutical prices was collected. These included: Data on import tariffs on finished products, including exemptions for particular products and for certain buyers; Financial charges incurred in importing pharmaceuticals, such as charges for letters of credit at the central bank or charges for foreign currency transactions; Policies on taxes levied on medicines, both along the supply chain and to the final customer; Policies that control mark-ups in the supply chain; Policies on quality assurance, as set by the Ministry of Health, and associated charges for any required quality control tests; The entry points of imported medicines into the country as well as the port fees and the costs for customs clearing that are incurred. Collecting this data involved interviewing staff in the various ministries and healthcare delivery systems to identify what mark-ups are incurred and any restrictions that are imposed on them (for example, a maximum mark-up). The study s second part comprised of collecting the actual price components of selected medicines as they move along the supply chain. Since there are many possible distribution routes and intermediaries, the study started at the end of the supply chain (dispensing side) and tracked each medicine backwards to the beginning (manufacturer/importer). Twelve medicines were tracked from the time they are procured from the manufacturer until they reached the patient. Medicines selected reflected a range of categories (e.g. single- and multi-source products imported and locally produced products, medicines on the EML to treat acute and chronic indications, different formulations and adult and paediatric medicines) in which different price structures could be found. 12 Licensed using a list of licensed premises or license being produced - unlicensed will be treated as a retail

13 7 At the private retail pharmacies and medical centres, the study collected information on the procurement price and retail price, and identified the wholesaler or public sector supplier for each medicine. Once all dispensing points had been visited, the researchers interviewed wholesalers to collect data on the prices, wholesale markups, local distribution costs and any taxes that are charged. At the wholesalers/public sector suppliers, the international supplier or local manufacturer was identified. The data collected on the components of medicine prices was analysed according to five common stages of the supply chain that all medicines traverse as they move from manufacturer to patient: Manufacturer s selling price and insurance and freight (Stage 1); Landed price (Stage 2); Wholesale selling price (private), Joint Medical Stores price (mission) or National Medical Stores price (public) (Stage 3); Retail price (private) or dispensary price (public) (Stage 4); and Dispensed price (Stage 5). 2.3 Data entry and analysis method Data from all facilities and institutions within the supply chain was collected by data collectors using a pre-coded data sheet and entered in the workbook by a data entry clerk, checked and cleaned by the survey manager. The HAI/WHO workbook on price components was used to analyse the data in the study. 2.4 Quality assurance The survey manager verified the data with atleast 1 facility in each category to validate the findings in the four districts. During study enrollment, facilities were assigned a unique identification number, and after data collection was complete, all identifiable information was kept in the files. 2.5 Ethical Considerations Authorisation was sought from the Ministry of Health and letters of introduction were given to data collectors to access facilities at all levels of the supply chain and to access the district authorities. Participating facilities and institutions will receive the final report of the study and will be engaged in dissemination workshop of all the studies in medicines prices conducted by MeTA Uganda. There are potential benefits to Ugandan populace about the systematic information on markups and how they have changed since data collection started in 2004.

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15 9 3. Findings 3.1 National level policies that affect prices of medicines There is an Essential Medicines and Health Supplies list consisting of 604 medicines for use at all levels of care that was last updated in The National Drug Authority and Policy Act of 1993 is the guiding framework for regulation of quality, importation and sale of medicines. There is a proposal to expand the mandate of NDA to include regulation of foods, to create a food and drug authority (FDA) in line with other regulators in the region. There are discussions to harmonize the quality assessments and registration of medicines in the East Africa Community (EAC) in order to allow reciprocity in recognition of medicines on the register of partner states. Medicines procurement in the public sector is guided by the National Medical Stores Act 1993 and the Public Procurement and Disposal Act (PPDA). Discussions are underway to make changes to the PPDA to enhance the ability of NMS to respond to the unique nature of medicines which are unlike other public procurements. The Pharmaceutical Society of Uganda (PSU) is the professional body established by the Pharmacy and Drugs Act 1970 to govern the practice of pharmacy in Uganda. 3.2 Overview of price components Imported products attract bank charges (letters of credit), insurance and freight. At the NDA, the importer pays a verification fee which constitutes 2% of the Free on Board (FOB) price. There are no import tariffs on medicines. Imported products pay insurance and freight average 8% by sea and 20% by air. Clearing fees are between 2%-5% Public sector NMS pays prices of medicines to be delivered at the warehouse; Delivery Duty Paid (DDP) and therefore does not incur any other costs prior to arrival in the country. For a small component of imported products, it pays a verification fee of 2%. A uniform mark-up of 8% is added on all products to cater for administration and delivery to the public health facilities. This mark up is paid at the central level by Ministry of Finance on behalf of the facilities at all levels of care. NMS also manages procurements for other programs (third party procurements) and a similar mark up of 8% is added. Medicines are free for consumers in the public sector facilities Mission sector JMS procures most of its medicines locally through the local technical representatives using a flexible tendering system. It adds up a mark of 9-13% on the products for sale to the facilities in the mission and occasionally private health facilities. JMS is unencumbered by the PPDA and therefore has short lead times and can easily respond to emergency and other quick procurements. Facilities pick their supplies from the central warehouse in Kampala at their own costs.

16 Private sector Importers/local technical representative (LTR) These are representatives of manufacturers and are responsible for quality issues of the products on the market. They have special arrangements with manufacturers to access better prices compared to other importers of the same products in Uganda. They are also facilitated with credit in form of advance stock to be paid after sale, promotion stock and capital to support marketing of the products. There are different models in which the LTR operates ranging from flexibility to add mark ups in response to market demands and pay for their own administrative costs to wholesale mark ups being set by the manufacturers. In this instance the manufacturers even pay the human resource involved in sale and distribution of its medicines. The LTR are also responsible for follow up and registration of new products by the NDA. They charge a markup of 10%-20% on imported products. Wholesale stage I This category consists of mainly wholesalers who source their stock from the LTR and sometimes import for themselves. They impose a mark-up of 20%-60% on different products depending on the specific characteristics of the products such as turnover rate, the competition, purchasing power of customers and the packages of the product. Despite the known distinct stages of the supply chain, some LTR are Wholesale stage 1 and 2. Wholesale stage 2 These are mainly wholesalers based in the suburbs of Kampala and at regional and district headquarters. They purchase medicines from the Kampala and sell to retailers, clinics and hospitals at the district and rural levels. For locally manufactured products, these constitute agents that are mostly representatives of manufacturers. This is the most highly competitive stage of the medicines supply chain and they add a mark-up in the range of 5-10%. At this level, dealers consider several factors when calculating mark ups: the turnover in sales of a medicine and the nature of competition and product quality. Medicines that have a high turnover attract lower mark-ups compared to the slow moving ones while medicines with many generic types attract lower markups. Retailers These are pharmacies, hospitals, clinics, drug shops and other outlets that sell medicines to the final consumer. Compared to wholesalers and importers, these facilities tend to directly pass all overheads to the consumer through higher prices. Administrative overheads constitute the highest expenditure for the health facilities and for the rural facilities; many are struggling to break even. For the pharmacies and drug shops, the working capital is tied up in medicine stocks. Retailers prioritize medicines to be purchased and sold mainly based on the turnover and ability to generate returns quickly. They impose a mark-up of 50%-60% depending on the products and their package sizes. As far as retailers are concerned, there are many determinants of mark ups which may include the location of facility, types of physical structures and fittings and human resource quality, among others.

17 11 Table 1: Summary of supply chain mark ups Stage in supply chain Add-on Imported Product Local Manufactured Stage I: Manufacturer Stage II: Importation Insurance and freight 7-15% N/A NDA Verification fees Clearing and Forwarding Importers markup 2% 2-5% 7-20% N/A Stage III: Wholesale Wholesale markup (Kampala) Wholesaler markup (Upcountry) 6-25% 25% 15-25% 25% Stage IV: Retailer s mark-up % % Retail Data example Exchange rate: UShs to US $1 (Prices shown in shillings). Private sector Table 2: Amoxicillin 250mg (100 capsule pack), generic, imported Stage Component Charge basis Charge value Total 1 MSP 3318 NDA verification fees 2% Clearing charges 8% Importer markup 9% Wholesale procure price 4000 Percent cumulative markup 3 Wholesale markup 37.5% % 4 Retail markup 81.8% % Final cumulative % Mark up and Price % Table 3: Amoxicillin 250mg (100 capsule pack), generic, locally manufactured Stage Component Charge basis Charge value Total Percent cumulative markup 1 MSP Local transport 2.0% % Wholesale procure price Wholesale markup 10%% % 4 Retail markup 134% % Final cumulative % Mark up and Price %

18 12 Comparison between urban and rural facilities: The prices of medicines in the private sector do not vary markedly between the urban and rural areas as shown in figure below for ciprofloxacin tablets. Retail markups were higher in urban areas compared to rural areas. Comparison between generic and innovator Brands: Innovator brands attracted lower mark ups compared to generics because they arrive in the country at already high prices. The market for innovator products is small and most manufacturers dictate markups of their LTR and wholesalers. For some products such as ceftriaxone due to a high disparity in prices at retail and wholesale levels between good quality generics and brands coupled with the cheaper prices for the product in neighboring countries, importers were compelled to reduce their markups. The highly subsidized AL has not been able to reduce the retail mark ups which ranges from %. Comparison of mission, private and public sectors: In the public sector a single markup is applied at wholesale level which caters for transport and handling of medicines up to the facilities. On the contrary the mission sector has competitive prices at wholesale level with a markup of not more than 13% for most products that are locally purchased. The retail facilities operate independently and had mark ups ranging from 40%-300%. The mission facilities in the rural areas had markedly lower prices and markups compared to urban facilities. In the private sector the markups were also highest at retail level with hospitals and clinics exhibiting the highest range of 100%-700% depending on the product source and the sophistication of the facility.

19 13 Specific categories of medicines compared in different sectors Antimalarials Malaria is one of the diseases with multiple support from development partners due to its associated high mortality rates in both children and adults. The support includes interventions to minimize inefficiencies in the supply chain, subsidy of prices at manufacturer and importer levels and purchasing of rapid diagnostic tests which are essential in reducing the cost of management in the private sector. ACTs are readily available in all sectors including substantial stocks at both JMS and NMS. Despite these interventions, the retail markups for generics AL ranged from 30%-100%, while for the innovator brand it ranged from 50%-100%. The Sulfadoxine + Pyrimethamine for pregnant women which is strictly manufactured locally attracted markups ranging from 8%-12% at wholesale level and % at retail level.

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21 15 Medicines for diabetes and hypertension Medicines for non-communicable diseases are much more expensive in the mission and private sector compared to other products. The mark ups are also slightly higher than other products at retail level especially in private hospitals and clinics probably due to the lower turnover compared to other products such as antibiotics. This is a worrying trend given that these diseases are on the rise in previously unaffected demographics such as young adults who constitute the majority of the population. Retail mark ups ranged from 50%-150%. Medicines for reproductive Health Reproductive health products are also readily available and free in the public health facilities. Mark ups at retail level were lower than other products in the mission and private sectors probably due to different interventions. Antibiotics Antibiotics are the most frequently used medicines in all sectors by the population. The increasing antibiotics resistance which is a concern at national and global level has led to the increased usage of fixed dose combination products such as Amoxicillin + Clavulanic Acid as opposed to individual products. Cephalosporins are also drugs of first choice for many upper respiratory infections in children and adults. This practice is common in the private sector where there is weak regulatory oversight and low adherence to the clinical guidelines and essential medicines list. The cephalosporins were more expensive and had several generics on the market with a wide range of markups.

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23 17 4. Conclusions and recommendations 4.1 Conclusions There were no policies, regulations/limitations for any private sector player to have different service points at all levels of the supply chain Retail mark ups in the mission sector were high and had a wide range depending on the product and location of the facility despite the competitive wholesale prices by JMS. Medical centers and clinics had the highest markups at retail level compared to retail prices of pharmacies and mission facilities. The urban facilities had markedly higher retail mark ups compared to rural facilities Retail mark ups were highest in the mission and private sectors with slow moving products such as medicines for diabetes and hypertension attracting higher mark ups. The public sector had the lowest mark ups and had very competitive prices at international level. Originator medicines had lower retail mark ups and high prices at wholesale level. 4.2 Recommendations Stakeholders should consider multiple interventions in the supply chain to reduce the cost of medicines for non-communicable diseases in the supply chain. Further research on the causes and cost drivers of higher mark ups at retail level should be considered. NDA, MOH and private sector stakeholders should consider streamlining the supply chain to reduce incidences of importers and LTR from operating in other levels of the supply chain. Stakeholders including the NDA and MOH should consider engaging all sector players to agree on a policy of recommended retail price especially for products that are expensive such as ceftriaxone. A few selected products could be piloted and published to test viability of the proposal. Review of the policy of clinics and medical centers stocking emergency medicines should be carried out in order to explore mechanisms of enforcement. MeTA should consider setting up and independent database that can continuously update the sector on the markups and other related of selected medicines. Wholesalers of generics should consider pragmatic engagement of retailers to incentivize them and agree on retail prices for a select list of drugs and move progressively to cover the whole product range. JMS and NMS should deliberate options of selling to the private sector medicines that are critical and highly priced.

24 MeTA Uganda Secretariat Plot 93, Buganda Road National Drug Authority Annex, Kampala, Uganda Tel: