By: Dr. Kwame Sarpong Asiedu
Democracy & Development Fellow, CDD-Ghana
Over the final month, the Ghana Cedi has seen important depreciation towards most main
currencies. As this has occurred, the price of items and providers has risen in line with the
depreciation and related inflationary pressures. As I write this, the full affect of this on the price of healthcare is unknown. However, one can anticipate that the price of medicines will go up
considerably, and this enhance is prone to be important for a number of causes.
Ghana’s pharmaceutical market dimension was roughly US$616 million in 2020 and was forecasted to develop at a fee of 5.3% yearly over the subsequent ten years. Of this market dimension, 70% was made of imported merchandise, with the remaining 30% being produced domestically. It should be said that 83% of all supplies for native manufacturing are additionally imported, making the sector closely delicate to overseas change fee fluctuations.
An extra breakdown of the market means that 60% of bought merchandise are generic medicines
(merchandise containing the identical chemical substance as one which was initially protected by
chemical patents). These typically are cheaper to purchase and may drive down the price of healthcare for
the finish person. Another 31% are over-the-counter (OTC) merchandise that residents buy both on
their very own or following the recommendation of a pharmacist with the remaining 9% being medicines below
patent (the costliest class).
Ordinarily, one would have anticipated that with generic medicines being the highest proportion of
medicines used domestically, competitors would drive costs down. Unfortunately, this isn’t the case. It
isn’t as a result of Ghana has no structured pricing insurance policies in the pharmaceutical distribution provide
chain thus the foremost drivers of pricing are provide chain mark-ups and foreign exchange fluctuations.
The complete value build-up of a generic medication might be summarized as follows, producer’s promoting
value, freight, taxes and tariffs and markups. Mark-ups are further prices and costs which can be
utilized to defray bills incurred by group pharmacy retailers while bringing the product
to their sufferers. Data means that in Ghana, taxes and tariffs contribute between 30% to 40% of
the end-user price, with markups representing wherever between 50% and 200%. This means the
manufacturing price for many generics is lower than 10% of the precise value a affected person pays at the
pharmacy counter.
One could ask, what drives this skewed pricing mannequin? This brings in the elephant in the room i.e.,
foreign exchange fluctuations. Any pharmaceutical product bought from the producer, be it uncooked
materials or completed, has its value quoted in or listed to the {dollars} or different related reserve forex.
As the purchaser is changing Cedis to buy this, they’re certain to at all times issue in not simply the
change fee at the time of forex conversion however the projected change fee after they
require future provides. In this present local weather, the projection is prone to be a guestimate, and lots of
importers will err on the aspect of bigger fee fluctuation.
When the merchandise arrive at the port of entry, taxes and tariffs are calculated on the greenback
estimation of the imported pharmaceutical and transformed into Cedis at an change fee that’s reviewed weekly. This additional will increase the product value at entry. Having factored all these in, the importer fixes the native wholesale value to make sure he makes a revenue while preserving his capital.
Again, he retains an eye on foreign exchange exercise and provides on any inflationary pressures affecting his
enterprise.
The retail pharmacy that purchases these merchandise goes via the same value build-up and provides
on their earnings {and professional} charges. Therefore, the value a affected person pays at the pharmacy counter
may very well be as excessive as 200% of the medication’s preliminary manufacturing value.
With Ghana’s Health expenditure per capita knowledge suggesting that 52% of all well being prices are
privately funded, many would probably obtain shocks in the coming weeks and months after they
stroll to the pharmacy counter to refill prescriptions for his or her persistent illness medicine. As if that’s
not dangerous sufficient, well being services and group pharmacy retailers could quickly discover out that the
reimbursement they obtain from the National Health Insurance Authority (NHIA) for providers
supplied to National Health Insurance Scheme (NHIS) sufferers doesn’t cowl the price of restocking provided medicines.
To keep away from this, the NHIA should velocity up the turnaround time for well being supplier reimbursement
and might also have to change the frequency of reviewing its medicines formulary costs. Neither of these choices is straightforward to realize. With lower than 5% of NHIS sufferers paying a premium, the NHIA is
reliant on the Ministry of Finance for funds collected on their behalf to be launched. Historically, these releases have been irregular, resulting in the NHIA being indebted to its service suppliers. Therefore, it’s unlikely that in this present interval of austerity, the exchequer could have the liquidity to expedite the fund launch course of.
Should the NHIA comply with a frequent evaluation of medication costs in their formulary, the scheme could
turn out to be cash-strapped. This is as a result of the tariffs that fund the scheme have already been fastened
(2.5% levy on items and providers, 2.5 share factors of Social Security and National Insurance
Trust (SSNIT) contributions per thirty days, return on National Health Insurance Fund (NHIF) investments and premium paid by casual sector subscribers). None of these funding streams is greenback listed and, in actual phrases, are depreciating towards the price of medicines as a result of the depreciating Cedi and inflationary pressures.
Thus, ought to the NHIA succumb to stress from suppliers to evaluation upwards medicines tariff costs, their medicines invoice will enhance considerably at a time when their funding inflows are stagnant and depreciating in greenback phrases. This might result in the scheme’s lack of ability to pay suppliers, which in flip could power these suppliers to minimise provides they make to NHIS card holders in desire for out-of-pocket medicines purchases. A scenario that can drive up additional personal contribution to Ghana’s well being expenditure per capita and, by default, the price of healthcare to the finish person. I estimate that if nothing is finished, the common price of medicines might be up by between 34% and 49% on December 2021 values.
Based on the above, my view is that the time has come for the nation to work on a pricing coverage
for pharmaceutical merchandise that considers all the transferring variables. This coverage would solely work if
the authorities can guarantee the safety of overseas change to the pharmaceutical sector at a
decrease than market value in the same method because it has managed with the petroleum trade. If that
is finished, then stakeholders can agree on a greenback listed External reference pricing mannequin
(method the place costs are set in keeping with the benchmark costs for the identical or related
medicines in comparable nations) for Ghana. Any stakeholder engagement will even need to
talk about the choices for bettering funding to the NHIA to make sure the longevity of the NHIS scheme
and to enhance its protection.
If these don’t occur, I’m involved that escalating costs of medicines, particularly for persistent illness administration, might have an effect on affected person prognosis as a result of non-compliance and result in many avoidable deaths. We have it in our present to forestall this from taking place and will act now.
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