In LMICs where access to medicines is essential to guarantee the health systems’ capacity to address people’s health needs, the inefficient fragmentation of supply chains is one of the main factors that increase the costs of medicines. Introducing a pre-wholesaler could help improve this inefficiency and reduce costs
Msc. Health Systems and Public Policy at the University of Edinburgh
Medicines Supply Chains in Low and Middle Income Countries: Time to Reconsider Them
In addition to the burden of ill-health caused by communicable and infectious diseases, populations from low and middle income countries –LMICs– have also started to face the increasing burden of poor health caused by non-communicable diseases –NCDs– (Yadav and Smith, 2014). This is especially concerning considering that by 2012 the NCDs mortality rate in low and middle income countries was higher compared to that in high income countries, 625 per 100000 population and 397 per 100000 population respectively (WHO, 2014).
Under such reality, the availability, affordability and quality of medicines should be considered prioritised aspects of national health systems. However, the reality is bleak and, paradoxically, access to medicines in low and middle income countries is mostly mediated by people’s willingness and ability to pay (Yadav and Smith, 2014). Furthermore, the cost of medicines in LMICs is considerably higher due to the modus operandi of pharmaceutical distribution networks (Yadav, 2015).
Cameron et al (2009) emphasise the organisation of a country’s pharmaceutical industry as an important aspect that determines medicines availability and affordability. Yet, this is a major challenge in LMICs where drug supply chains are excessively fragmented (Yadav and Smith, 2014). In LMICs there exist too many intermediaries between the manufacturer and the patient, none of which possess a reliable nationwide distribution network (Yadav and Smith, 2014). High mark-ups between different wholesalers increase the cost of medicines, preventing larger proportions of the population from accessing them (Yadav and Smith, 2014). In Mozambique, for example, the segmentation of the pharmaceutical market coupled with the diversification of wholesalers/suppliers enabled importers and retailers to increase the costs of medicines and make abnormal profits in spite of existing price regulations (Russo & McPake, 2009).
Yadav and Smith (2014) propose creating a pre-wholesaler as a solution to increase the availability of medicines and reduce their costs. A pre-wholesaler would be act as the contact point between different manufacturers and all national wholesalers. Although highly fragmented supply chains usually lead to higher medicines costs, creating a pre-wholesaler operation could help organise and aggregate a fragmented supply chain because pre-wholesalers improve the supply chain efficiency by reducing the sales between wholesalers (Yadav and Smith, 2014). Moreover, pre-wholesalers allow manufacturers to distribute their product to multiple wholesalers and achieve market penetration without adding any extra costs (Yadav and Smith, 2014). Preferably, any pre-wholesaler should be publicly managed to prevent the private sector from profiting excessively due to monopoly power.
Although Yadav (2015) also proposes to reduce the number of tiers in the supply-chain as an alternative to a pre-wholesaler, it is important to consider that many LMICs, unlike developed countries, lack nationwide distribution networks (Yadav and Smith, 2014). Therefore, reducing the number of tiers might be counter-productive in the sense of coverage across geographies unless there is a strong nationwide distribution chain.
To conclude, in LMICs where access to medicines is essential to guarantee the health systems’ capacity to address people’s health needs (Yadav, 2015), the inefficient fragmentation of supply chains is one of the main factors that increase the costs of medicines (Yadav and Smith, 2014). Introducing a pre-wholesaler could help improve this inefficiency and reduce costs (Yadav and Smith, 2014).
Cameron, A., Ewen, M., Ross-Degnan, D., Ball, D. and Laing, R. (2009). Medicine prices, availability, and affordability in 36 developing and middle-income countries: a secondary analysis. The Lancet, 373(9659), pp.240-249. http://www.sciencedirect.com/science/article/pii/S0140673608617626
Russo G, & MCPake B. (2009). Medicine prices in urban Mozambique: a public health and economic study of pharmaceutical markets and price determinants in low-income settings. Health Policy and Planning. 25, 70-84. http://heapol.oxfordjournals.org/content/early/2009/10/20/heapol.czp042.full.pdf
WORLD HEALTH ORGANIZATION. (2014). Global Status Report on Non-Communicable Diseases 2014. http://apps.who.int/iris/bitstream/10665/148114/1/9789241564854_eng.pdf
Yadav, P. (2015). Health Product Supply Chains in Developing Countries: Diagnosis of the Root Causes of Underperformance and an Agenda for Reform. Health Systems & Reform, 1(2), pp.142-154. http://www.tandfonline.com/doi/full/10.4161/23288604.2014.968005
Yadav, P. and Smith, L. (2014). Pharmaceutical Company Strategies and Distribution Systems in Emerging Markets. Encyclopaedia of Health Economics, pp.1-8. http://www.sciencedirect.com/science/article/pii/B9780123756787012189