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APHA Scientific Session and Event Listing

20 Years of Revolving Drug Funds: Should the public sector conduct business?

Maggie Huff-Rousselle, MA, MBA, PhD and Abanish Rizal, MPH. Social Sectors Development Strategies, Inc., 1411 Washington Street, No. 6, Boston, MA 02118, 617-421-9644, arizal@ssds.net

Pioneering national-scale revolving drug funds (RDFs) were introduced in the early 1980s, and the Bamako Initiative later spurred a movement establishing variants of RDFs in developing countries into the 1990s. With two decades of experience, we ask: are RDFs effective in the public sector, and, if not, why not? Theoretical underpinnings of the RDF concept remain sound, but practical implementation experience has faltered or failed, from the selection of products that do not “move” to operating cost inefficiencies and pricing policies based on “cost recovery” in inefficient systems, rather than the private-sector's approach to pricing based on competition and market penetration. Awareness that even the very poor are willing to pay for pharmaceuticals and the need to generate revenues in the public sector were both rationales behind the RDF concept, but RDFs were also designed to provide for public health “need” – not popular “demand.” Demand, however, is potentially lucrative. Based on a literature review and solicited implementation experience, this presentation explores weaknesses in RDF implementation experience: 1) inherent need-versus-demand conflict in product selection; 2) the lack of incentives in the public sector for cost containment, prompt service delivery, and capital investment risk aversion; 3) pricing policies that ignore competition and reverse the logic of wholesale and retail margins; 4) the general public's perceptions of public-versus-private products and the companion perception that price signals quality; and, finally, 5) underestimating the relative sophistication of the RDF concept, especially when introduced into an already fragile and over-extended public sector.

Learning Objectives:

Keywords: Drugs, Health Care Reform

Presenting author's disclosure statement:

Any relevant financial relationships? No

Financing and Pharmaceuticals: How Do We Make Cost-Effective Choices?

The 134th Annual Meeting & Exposition (November 4-8, 2006) of APHA