october 2015

Medicine PricecoMPonents in Uganda

Ministry of HealtH

World HealtH organisation

HePs Uganda Hai afriCaHealtH action international

sUrVey teaM

ConsultantPatrick Mubangizi

data collectorstibasiimwa richard Bobcaroline aruho

data entry and analysisBestason aliyo

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table of Contents

Abbreviations and Acronyms .................................................................................................... IIExecutive Summary ................................................................................................................... III

1. BAckground ........................................................................................................... 1 1.1 Introduction ......................................................................................................... 1 1.2 Overview of the health sector ............................................................................. 2 1.2.1 Medicines procurement ......................................................................... 2 1.2.2 Prices of medicines ................................................................................ 2 1.2.3 Availability of Medicines ....................................................................... 2 1.3 Rationale for the study ........................................................................................ 3 1.4 Objectives of the study ....................................................................................... 3

2. MEthodology ....................................................................................................... 5 2.1 Sampling procedures ........................................................................................... 5 2.1.1 Selection of districts .............................................................................. 5 2.1.2 Selection of manufacturers, wholesalers, private clinics, drug shops and medicine retail outlets ..................................................................... 5 2.1.3 Selection of medicines .......................................................................... 5 2.1.4 Selection of sectors ................................................................................ 6 2.2 Data collection, entry and analysis ..................................................................... 6 2.3 Data entry and analysis method .......................................................................... 7 2.4 Quality assurance ................................................................................................ 7 2.5 Ethical Considerations ........................................................................................ 7

3. FIndIngS ..................................................................................................................... 9 3.1 Nationallevelpoliciesthataffectpricesofmedicines....................................... 9 3.2 Overviewofpricecomponents........................................................................... 9 3.2.1 Publicsector........................................................................................... 9 3.2.2 Missionsector........................................................................................ 9 3.2.3 Private sector ......................................................................................... 10

4. concluSIonS And rEcoMMEndAtIonS ................................................... 17 4.1 Conclusions ......................................................................................................... 17 4.2 Recommendations ............................................................................................... 17

abbreviations and acronyms

ACTs Artemesinin-based Combination Treatments

AMfMAffordableMedicinesforMalaria

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-forprofit(sector/facilities)

PPDA PublicProcurementandDisposalAct/Authority

PPP Public Private Partnership

PSU Pharmaceutical Society of Uganda

UHMG Uganda Health Marketing Group

WHO World Health Organisation

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executive summary

BackgroundAffordabilityofmedicinesiscriticaltoaccess,particularlybecausecountrieswithlowhealthinsurancesuch 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 day2.

Differenteffortshavebeenputinplacetomakeessentialmedicinesaffordable,butthecountrycontinuestofacechallengesinthisarea.Thisstudyattemptstounderstandhowthefinalpricesaredetermined,theirincremental 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:

Whatconstitutesthepricesofkeytracermedicinesandsuppliesatdifferentlevelsofthesupply(1) chain in the public, private and mission sectors in Uganda.DifferentpricesforkeymedicinesintheurbanandruralpartsofUgandaintheprivateandmission(2) sectors.The policies that regulate the supply chain medicines components(3) ThevariationofpricesandmarkupsindifferentsectorsandregionsofUganda(4)

MethodologyWe surveyed two regions and data was collected from Kampala and wakiso districts in central Uganda andfromMbararaandBushenyidistrictsintheWest.Fivewholesalers,fivehealthcareclinicsandfivedrugshopsandfiveretailpharmacieswere investigated..One localmanufacturerand two importerswere interviewed. Twelve medicines that treat the highest burden of disease in Uganda were surveyed inpublic,privateandprivate-not-for-profit(PNFP)outletsweresurveyed.

FindingsThekeypoliciesandlawsthataffectpricesofmedicinesincludetheEssentialMedicinesandHealthSupplies list, consisting of 604 medicines; the National DrugAuthority and Policy Act of 1993;theNationalMedical StoresAct 1993; and the Public Procurement andDisposalAct (PPDA).ThePharmaceutical Society of Uganda (PSU) is the professional body established by the Pharmacy and DrugsAct1970togovernthepracticeofpharmacyinUganda.

Imported products attract bank charges (letters of credit), insurance and freight. At the NDA, the importer paysaverificationfeewhichconstitutes2%oftheFreeonBoard(FOB)price.Therearenoimporttariffsonmedicines.Importedproductspayinsuranceandfreightaverage8%byseaand20%byair.Clearing fees are between 2%-5%.

In the public sector, National Medical Stores (NMS) pays the cost price of medicines, Delivery Duty Paid(DDP)andaverificationfeeof2%.Auniformmark-upof8%isaddedonallproductstocaterforadministration 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 82 UBos (2010) Uganda national household survey

In the PNFP sector, Joint Medical Store procures most of its medicines locally through the local technical representatives(LTRs)andaddsupamarkof9-13%on theproducts forsale to thefacilities in themission and occasionally private health facilities.

Intheprivatesector,LTRsoperateindifferentways.Somearefreetoaddamark-upandpaytheirownadministrative 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%.

Retailersarepharmacies,hospitals,clinics,drugshopsandotheroutletsthatsellmedicinestothefinalconsumer. 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.

ConclusionsTherewerenopolicies,regulations/limitationsforanyprivatesectorplayertohavedifferent•service points at all levels of the supply chainRetail 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.Furtherresearchonthecauses/driversofhighermarkupsatretaillevelshouldbeconsidered.•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.

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1. Background

1.1 Introduction

THIS reportanalysesthepricesofmedicinesat thedifferentstagesofthesupplychainuptothedispensingstageinthepublic,privateandprivate-not-for-profit(PNFP)facilities.Medicinesmake

up a significant proportion of the budget of any given health care system and, inmost developingcountries,itisthefirstorsecondhighestexpendituretohumanresources.Countrieswithlowhealthinsurance coverage such as Uganda (with less than 3%), expenditure on health care through out-of-pocket is high especially in the poorer sections of the population. At the policy level, governments are underincreasedpressuretomakemedicinesaffordableforthepopulation.TheWHOessentialmedicinesconcept, which guides developing countries’ public procurement of medicines, considers, among other things,thepriceandaffordabilityofamedicineasessentialrequirementsofmedicines’inclusionontothe 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 in2010/11to$0.9in2012/131comparedtotheestimatedrequirementof$2.4percapitaexcludingtheexpensive interventions (ACTs, ARVs, ITN and pentavalent vaccines). The public health care system continues to experienceoccasional stockoutswhichaffect the levelofutilizationof services in thesector. 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 sector2. However, a significantproportionofthepopulationstillpurchasesmedicinesfromprivatesectoroutlets.

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,affordabilityremainsachallenge.TheWHOandHealthActionInternational(HAI)pricingprojecthasundertakenseveralsurveyshavedocumentedtheunaffordabilityofmedicines,especiallyforthepoorwhoareoftennotcoveredbyinsuranceandconsequentlyincurhighout-of-pocketexpenses.Other studies indicate that medicine prices are out of reach for a majority of the population that live under $1 a day4.

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 Management3 WHo/HePs/MoH medicines price monitor vol 84 UBos (2010) Uganda national household survey

1.2 Overview of the health sector

1.2.1 Medicines procurementIn 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, includingreferralhospitals.Thishascentralizedthefinancingofmedicinesandconsequentlyimprovedprocurement 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.

1.2.2 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 fulfilduetooperationalchallengesoftheindustry.Thepharmaceuticalsectorishighlydependentongenerics; 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 levelhavebeendocumentedtorangebetween2.8-5.2timestheinternationalreferenceprices7.Evensubsidisationprogrammeshavehadonlylimitedsuccess.Notably,theAffordableMedicinesforMalaria(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 $1.96inUgandacomparedto$0.58inKenya,0.94inTanzaniamainlandand$1.17inZanzibar8.

1.2.3 Availability of MedicinesThepublicsectorremainsthefirstchoiceofhealthcareandmedicinesformostconsumersespeciallyin the rural areas because health services are free9.However,medicines are sometimes not readilyavailable due to challenges in the public sector and consumers have to resort to the private sector. Studieshaveshownthatavailabilityof28-40keymedicineshasnotexceeded80%inthepublicandmissionsectors10.Themedicinessurveyedhaveincludedthoseformalaria,pneumonia,HIV/AIDS,diabetes, reproductive health, and hypertension, among other conditions.

5 MsH (2010) Policy options analysis for Uganda Pharmaceutical supply system6 MoH (2002) WHo/Hai pricing survey7 MoH (2002) WHo/Hai pricing survey8 TheGlobalFund(2012)IndependentEvaluationoftheAffordableMedicinesFacility-malaria(AMFm)Phase9 MoH (2008) Pharmaceutical situation assessment report10 MoH/WHo, Hai (HePs,) Medicine price Monitor Vol.8

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1.3 Rationale for the study

MOH with support from development partners developed the National Pharmaceutical Sector Strategic Plan 2015-20 (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 thepriceschargedforessentialmedicinesreflecttherealisticcostsinthemarketsothatthepopulationis 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 dependentonmedicineprices.Differentstudieshaveshownthatpharmacybenefitsmanagementisanessential 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 developmentpartners,policymakersareexploringoptionsforsustainablemedicinefinancing.OneoftheoptionsunderdiscussionistheestablishmentofanHIV/AIDSfund,alevywhichhastobeinformedbyup-to-dateevidenceonhowmedicinesarecostedandpricedat thedifferent levelsof thesupplychain.

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.

Asseen in this and thepreceding sections,different effortshavebeenundertaken tomakeessentialmedicinesaffordable,butthecountrycontinuestofacechallengesinthisarea.Thisstudyattemptstounderstandhowthefinalpricesaredetermined,theirincrementalcomponentsthroughthesupplychain,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 changesintheaffordabilityofmedicines.

1.4 Objectives of the study

The purpose of the study was to document:

Whatconstitutesthepricesofkeytracermedicinesandsuppliesatdifferentlevelsofthesupply(1) chain in the public, private and mission sectors in Uganda.DifferentpricesforkeymedicinesintheurbanandruralpartsofUgandaintheprivateandmission(2) sectors.The policies that regulate the supply chain medicines components(3) ThevariationofpricesandmarkupsindifferentsectorsandregionsofUganda(4)

11 Kaiser family foundation (2005) cost containment strategies For Prescription drugs: assessing the evidence in the Literature

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2. Methodology

ThemethodologywasadoptedfromWHO/HAIMedicinePrice,Availability,AffordabilityandPriceComponentsManual2ndEdition2008.Thepricecomponentsdatacollectionmethodologyhas twoparts: a pharmaceutical policy investigation at the central level, and research into actual price components along the medicine distribution chain.

2.1 Sampling procedures

2.1.1 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.

2.1.2 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 MedicalPractitionersBoardandtheUgandaAlliedPractitionersCouncil.Asampleoffivewholesalers,fivehealthcareclinicsandfivedrugshopsandfiveretailpharmacieswereinvestigatedinKampalaandWakiso 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.

2.1.3 Selection of medicines

Twelve medicines were selected for pricing data to be collected. The chosen medicines represented medicine categories that reflect burden of disease inUganda. Innovators and lowest priced genericequivalentsweresurveyedtoenableacomparisonofmarkupsalongthesupplychainwhile locallymanufactured and imported were also compared for a few products (The medicines list is attached as Annex 1)

2.1.4 Selection of sectors

ThreeSectors;Public,privateandprivatenotforprofit,wereselectedbasedonthepreviousstudiesonmedicines prices for easy comparison on the trends.

Public sectorPublic health facility patient prices and NMS procurement prices. Since medicines are free 1)in the public sector at consumer level, the prices paid by the health facilities to NMS were considered as consumer prices.

Private sectorRetail pharmacies2)Drug shops3) 12

Clinics4)

PrivateNot-forprofitsectorNGO/missionhealthfacilitiesandJointMedicalStoresprocurementprice5)

2.2 Data collection, entry and analysis

Datacollectionbeganat the central levelwheredataonnationalpolicies that affectpharmaceuticalprices was collected. These included:

Dataonimporttariffsonfinishedproducts,includingexemptionsforparticularproductsand•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;

Policiesontaxesleviedonmedicines,bothalongthesupplychainandtothefinalcustomer;•

Policies that control mark-ups in the supply chain;•

Policiesonqualityassurance,assetbytheMinistryofHealth,andassociatedchargesforany•requiredqualitycontroltests;

The entry points of imported medicines into the country as well as the port fees and the costs •for customs clearing that are incurred.

Collectingthisdatainvolvedinterviewingstaffinthevariousministriesandhealthcaredeliverysystemsto 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 thebeginning(manufacturer/importer).Twelvemedicinesweretrackedfromthetimetheyareprocuredfromthemanufactureruntiltheyreachedthepatient.Medicinesselectedreflectedarangeofcategories(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 paediatricmedicines) inwhichdifferentpricestructurescouldbefound.

12Licensed–usingalistoflicensedpremisesorlicensebeingproduced-unlicensedwillbetreatedasaretail

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At the private retail pharmacies and medical centres, the study collected information on the procurement priceandretailprice,andidentifiedthewholesalerorpublicsectorsupplierforeachmedicine.Oncealldispensing points had been visited, the researchers interviewed wholesalers to collect data on the prices, wholesalemarkups,localdistributioncostsandanytaxesthatarecharged.Atthewholesalers/publicsectorsuppliers,theinternationalsupplierorlocalmanufacturerwasidentified.

Thedatacollectedonthecomponentsofmedicinepriceswasanalysedaccordingtofivecommonstagesof 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 surveymanager.TheHAI/WHOworkbookonpricecomponentswasusedtoanalysethedatainthestudy.

2.4 Quality assurance

Thesurveymanagerverifiedthedatawithatleast1facilityineachcategorytovalidatethefindingsinthefourdistricts.Duringstudyenrollment,facilitieswereassignedauniqueidentificationnumber,andafterdatacollectionwascomplete,allidentifiableinformationwaskeptinthefiles.

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.

Participatingfacilitiesandinstitutionswillreceivethefinalreportofthestudyandwillbeengagedindissemination workshop of all the studies in medicines prices conducted by MeTA Uganda. There are potentialbenefitstoUgandanpopulaceaboutthesystematicinformationonmarkupsandhowtheyhavechanged since data collection started in 2004.

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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 levelsofcarethatwaslastupdatedin2012.TheNationalDrugAuthorityandPolicyActof1993istheguidingframeworkforregulationofquality,importationandsaleofmedicines.Thereisaproposaltoexpand the mandate of NDA to include regulation of foods, to create a food and drug authority (FDA) inlinewithotherregulatorsintheregion.Therearediscussionstoharmonizethequalityassessmentsand registration of medicines in the East Africa Community (EAC) in order to allow reciprocity in recognition of medicines on the register of partner states.

MedicinesprocurementinthepublicsectorisguidedbytheNationalMedicalStoresAct1993andthePublic Procurement and Disposal Act (PPDA). Discussions are underway to make changes to the PPDA toenhancetheabilityofNMStorespondtotheuniquenatureofmedicineswhichareunlikeotherpublicprocurements. The Pharmaceutical Society of Uganda (PSU) is the professional body established by the PharmacyandDrugsAct1970togovernthepracticeofpharmacyinUganda.

3.2 Overview of price components

Imported products attract bank charges (letters of credit), insurance and freight. At the NDA, the importer paysaverificationfeewhichconstitutes2%oftheFreeonBoard(FOB)price.Therearenoimporttariffsonmedicines.Importedproductspayinsuranceandfreightaverage8%byseaand20%byair.Clearing fees are between 2%-5%.

3.2.1 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,itpaysaverificationfeeof2%.Auniformmark-upof8%isaddedonallproductstocaterforadministration 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 otherprograms(thirdpartyprocurements)andasimilarmarkupof8%isadded.Medicinesarefreeforconsumers in the public sector facilities.

3.2.2 Mission sector

JMSprocuresmostofitsmedicineslocallythroughthelocaltechnicalrepresentativesusingaflexibletenderingsystem.Itaddsupamarkof9-13%ontheproductsforsaletothefacilitiesinthemissionandoccasionally private health facilities. JMS is unencumbered by the PPDA and therefore has short lead timesandcaneasilyrespondtoemergencyandotherquickprocurements.Facilitiespicktheirsuppliesfrom the central warehouse in Kampala at their own costs.

3.2.3 Private sector

Importers/local technical representative (LTR)

Thesearerepresentativesofmanufacturersandareresponsibleforqualityissuesoftheproductsonthemarket. 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 aredifferentmodelsinwhichtheLTRoperatesrangingfromflexibilitytoaddmarkupsinresponseto 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 imposeamark-upof20%-60%ondifferentproductsdependingon thespecific characteristics of the products such as turnover rate, the competition, purchasing power ofcustomers 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

ThesearemainlywholesalersbasedinthesuburbsofKampalaandatregionalanddistrictheadquarters.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:theturnoverinsalesofamedicineandthenatureofcompetitionandproductquality.Medicinesthat have a high turnover attract lower mark-ups compared to the slow moving ones while medicines with many generic types attract lower markups.

Retailers

Thesearepharmacies,hospitals,clinics,drugshopsandotheroutlets thatsellmedicines to thefinalconsumer. 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 soldmainly based on the turnover and ability to generate returns quickly. Theyimpose 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 physicalstructuresandfittingsandhumanresourcequality,amongothers.

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Table 1: Summary of supply chain mark ups

Stage in supply chain Add-on Imported Product local Manufactured

Stage I:Manufacturer

Insurance and freight 7-15% N/A

Stage II:Importation

NDAVerificationfeesClearing and ForwardingImporters 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:Retail

Retailer’s mark-up 50-600% 50-600%

Data exampleExchange rate: UShs. 2600 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 Percentcumulative markup

1 MSP 3318

NDAverificationfees 2% 66 3384

Clearing charges 8% 270 3654

Importer markup 9% 346 4000

Wholesale procure price 4000

3 Wholesale markup 37.5% 1500 5500 56.5%

4 Retail markup 81.8% 4500 10000 81.8%

Final cumulative % Mark up and Price 10000 138.3%

Table 3: Amoxicillin 250mg (100 capsule pack), generic, locally manufactured

Stage component charge basis

charge value

total Percentcumulative markup

1 MSP 3800

2 Local transport 2.0% 76 3876 2%

Wholesale procure price 3876

3 Wholesale markup 10%% 387.6 4264 12%

4 Retail markup 134% 5736 10000 134%

Final cumulative % Mark up and Price

10000 148%

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 showninfigurebelowforciprofloxacintablets.Retailmarkupswerehigherinurbanareascomparedtorural 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 retailandwholesalelevelsbetweengoodqualitygenericsandbrandscoupledwiththecheaperpricesfor 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 60-100%.

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.

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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 mortalityratesinbothchildrenandadults.Thesupportincludesinterventionstominimizeinefficienciesin 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 manufacturedlocallyattractedmarkupsrangingfrom8%-12%atwholesaleleveland60-100%atretaillevel.

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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 unaffecteddemographics suchasyoungadultswhoconstitute themajorityof thepopulation.Retailmark 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 atretaillevelwerelowerthanotherproductsinthemissionandprivatesectorsprobablyduetodifferentinterventions.

Antibiotics

Antibiotics are themost frequently usedmedicines in all sectors by the population.The increasingantibiotics resistance which is a concern at national and global level has led to the increased usage offixeddosecombinationproductssuchasAmoxicillin+ClavulanicAcidasopposed to individualproducts.Cephalosporinsarealsodrugsoffirstchoiceformanyupperrespiratoryinfectionsinchildrenand 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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4. Conclusions and recommendations

4.1 Conclusions

Therewerenopolicies,regulations/limitationsforanyprivatesectorplayertohavedifferent•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.

Meta Uganda secretariatPlot 93, Buganda roadnational drug authority annex, Kampala, UgandaTel:+256-752-656380