Health Spending 6: Health/GDP Ratio 2010

In my blog post the other day, On Inequality and Inclusive Business in HC, I wrote:

On government health spending, I think the ADB, WHO, UN, etc. data on PH public health spending is understated and wrong. They usually count only DOH + PhilHealth spending. They do not include some or all of other govt spending such as:

1. LGUs, with provincial and city health centers and hospitals. Manila City alone has six city-owned hospitals.
2. Philippine General Hospital (PGH), budget about P2 billion a year, part of the UP annual budget; hence, it is not counted as health spending but education spending…. 

This table is from the World Health Organization (WHO)  which I copied today. It says that the Philippines’ health spending / GDP ratio as of 2010 was only 3.6 percent.

Table 1. Philippines Basic Health Stats, from WHO 

  
source: http://www.who.int/countries/phl/en/

I posted the above observation (in italics) in the email loop among members of the Medicines Transparency Alliance (MeTA) Philippines, where an official of the WHO West Pacific Regional Office (WHO-WPRO), Ms. Klara Tisocki, is among the members.

Klara was kind enough to reply. She said, 

Regarding your comments  please note that WHO collects health expenditure related data in countries via the  national health accounts (NHA).  NHA constitute a systematic, comprehensive and consistent monitoring of resource flows in a country’s health system for a given period. NHAs use classification schemes, which are designed to be compatible with those practiced internationally; most importantly, the System of national accounts (SNA), to make cross-national comparisons possible.  

The International Classification for Health Accounts (ICHA) is a comprehensive system which classifies NHA into four dimensions: Financing sources (FS)-contributions by different actors; Financing agents (HF)-entities who manage health expenditures; Providers (HP)-entities that provide health care services and goods; and Functions (HC)-types of health care activities. You can read more about NHA at WHO webpage: http://www.who.int/nha/what/en/index.html  

More specifically  regarding the Philippines health expenditures these are collected via the Philippines National Health Account  (PNHA)  (which in turn reports to WHO for inclusion of Philippines data in WHO databases).   

The methodology and current statistics of PNHA are available on the website of  Philippines National Statistical Coordination Board  http://www.nscb.gov.ph/stats/pnha/.  

I would also like to refer you to the technical notes,  http://www.nscb.gov.ph/stats/pnha/technotes.asp on sources of data for the Philippines health financing, with regard to  your assumption that WHO, ADB, UN etc. count only DOH and Philhealth spending.  In these notes you will find the detailed description of Data Sources and Estimation Procedures as approved by NSCB Resolution No. 8 Series of 2011, that shows  what data  from which sources  are included under the different sectors and you can see the wide range of data sources considered.  

I thanked Klara for her reply as it provided useful links. From the NSCB link, here are the numbers:

Table 2. Philippines Health Expenditures by Sources of Funds

source:  http://www.nscb.gov.ph/stats/pnha/.

Drug price control 11: Costs, ads and taxes

Below are four charts and tables I got from four different sources, related to the various players that affect drug pricing, and the role of advertising and marketing in drug costing.

The first chart, I got from a presentation by a friend at the Coalition for Health Advocacy and Transparency (CHAT), Vanni Villafuerte, during one of CHAT's planning workshop. Vanni gave me permission to use his papers.

These are the players and stakeholders involved in medicines (especially pricing and availability): (1) Pharma industry, (2) doctors/ physicians, (3) government (DOH, FDA, PhilHealth), (4) patients, and (5) civil society, especially CHAT (and MeTA).

I think Vanni forgot to include two other players. These are the (6) drugstores, pharmacies and their pharmacists, and (7) toll manufacturers and wholesalers.

Take note also that government is much BIGGER than projected here. Government in the health sector is not limited to the Department of Health (DOH), Food and Drugs Administration (FDA) and PhilHealth. There are also the Dept. of Finance (DOF) and Bureau of Internal Revenue (BIR) involved in taxation of medicines; the Intellectual Property Office (IPO) and the courts, for patent and other IPR cases; and the local governments (provinces, cities, municipalities) which have their own medicines procurement and distribution programs, have their own hospitals and rural health clinics.

With plenty of players at both the supply and demand sides, there are many factors therefore, that can influence drug pricing and availability.

I got this chart from Dr. Delen dela Paz's presentation in February 2010 at the UP College of Law. According to Doc Delen, the drug manufacturing and distribution network is characterized by heavy oligopoly. For instance, toll manufacturing is 80 percent dominated or controlled by Interphil Laboratories, while in drug retailing, 80 percent is controlled by Mercury Drugstore,

This table, I got from Dr. Guia Crisostomo Tan's presentation sometime in September 2010. No currency was specified, this should be in US $ billion. The numbers in red rectangle compare the "cost of products sold" and "selling, marketing and administrative costs".

I think the "administrative" expense would include the various taxes and fees that a corporation would have to pay to the government (VAT, income tax, import tax, local government tax, etc.) each year. Cutting the expenses on marketing may look tough as drugs are not similar to hamburger or pizza that even ordinary consumer can analyze without the need for expert advice. Drugs, especially newly-discovered, are highly technical products that would need to be introduced to physicians and patients/guardians by specially trained staff.

Another chart from Vanni, which he got somewhere else. The drugs being purchased by the poor (left pie) here refer to off-patent and generic drugs, not the patented drugs by the innovator companies. While the "newness" or "revolutionary-ness" of the innovator drugs determine their higher price, the extent of advertising and marketing that the generic pharma companies use, determine not only the price but also the patronage by the public of their products.

To summarize, if drug prices have to be controlled by the government, the above charts are saying that this is an unwise move.

First chart with my addition of 2 other factors is saying that it is not only the pharma industry that determines drug prices. There are other players like the drugstores, physicians, the DOH, etc. If drug prices have to be controlled, then taxes on drugs, profit margin by retailers and hospitals, etc. should also be controlled. Doing these nationwide will create a logistical nightmare for the DOH and other implementing agencies.

Second chart is saying that a significant factor that causes high drug prices is the lack of competition, the degree of oligopoly, in the drug distribution chain.

The third chart is saying that in the case of innovator pharma companies, while the cost of selling, marketing and administration is big, there are two other equally important factors that contribute to high drug prices: the cost of R&D, and the cost of products/drugs sold.

It will be simplistic and parochial to blame just one or two of the various players involved in drug manufacturing to wholesaling and retailing, for high drug prices.

It will also be hypocritical for the government not to own up to certain factors or policies why drug prices are high. And these are the taxes slapped on medicines and vaccines.
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See also:
1. Part 9,
2.