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Economic tools for Introduction

ensuring access to The greatest challenges posed by

medicines for public policies in Latin America
medicines in Latin are not related to their availability, and not
even to their quality, but to the population’s
American countries 1
access to them. This means the possibility of
satisfying a demand, which expresses a
Federico Tobar2 and Evangelina Martich3 concrete need for care and can be solved
adequately through the “supply” of
Summary: pharmaceutical products available in a
The greatest challenges for country (28). In Latin America population’s
pharmaceutical policies in Latin American access to medicines depends more on the
countries are related to the objective of functioning of the market than in other
promoting access for their populations. regions where the social security system and
Around two thirds of the spending on the State take a more active role in providing
medicine in the region is financed by and financing drugs. Progress in access to
household incomes, with a strong regressive medicines could be directly related to
effect on their financing. For these reasons, improvements in the population’s buying
the economic regulation tools for controlling power (when people acquire medicines
spending and prices of medicines take on through the market) or to institutional
singular importance. schemes for health protection (when the
The present article examines a set of medicine is provided by the health systems).
measures implemented by the countries in In Latin America the greatest part of the
the region for the economic regulation of financing of medicines (around two-thirds)
medicines centred on ensuring access to comes from household incomes. This
them, emphasizing those intended to control introduces a strong regressive effect, as the
the prices of the pharmaceutical products lower-income sectors dedicate more than
and those oriented to moderating the 70% of their health expenses to acquiring
spending on medicines in the health medicines (5). This explains why the
systems. regulation of medicine prices can affect
access to medicines in a greater proportion
Keywords: Public Policies, Latin America, than in other regions.
Access, Medicines, Medicine Prices Within the functions roles states can
assume in respect to medicines, the
regulatory role includes three aspects:
surveillance, technical regulation and
1 Published as: TOBAR, F& MARTICH,E (2014). “Economic economic regulation. This last aspect is only
tools for security access to pharmaceuticals in Latin-
implemented when a government assumes
American countries”. Pharmaceuticals Policy and Law 16
(2014) 207–224 that there is not sufficient harmony between
United Nation Population Fund- Regional Reproductive the supply and the demand, in which case
Health Commodity Security Advisor for Latin America and the optimal assignation of goods and
the Caribbean . ftobar@unfpa.org resources requires norms and incentives to
Unasur. South American Institute of Government in
correct the miss functioning of this market.
The countries have not followed a single or medicine market, both to contain the prices
homogenous route in the implementation of of the products and to limit spending on
economic regulation policies for promoting medicines by the health systems. Both
access to medicines. After two decades of consist on different purposes that do not
deregulation of markets, which has not always go hand-in-hand.
excluded the pharmaceutical market, a
crusade began in Latin America to rationalize Models for regulating medicine prices
the selling prices of the products. Several
countries have advanced along this route, Upon reviewing international experiences,
among which two major alternative routes one finds that when the goal is to promote
have been identified (24). The first one access, the most effective strategies of the
consists of an imposing intervention in economic regulation of medicines are those
which, although prices appear not to be that seek to promote greater competition in
regulated, in practice the governments set prices without compromising technical
the prices of the products unidirectionally. elements like quality, safety and possibilities
They often do so without enunciating of products being substituted (17, 18).
transparent processes for it, and every time However, on some occasions pro-
a pharmaceutical company increases the competition solutions are not sufficient to
prices of its products it is convened by some reduce prices because a significant
authority to explain the increase, and in percentage of the products is monopolized
some cases is forced to reverse that (patented) and accounts for an even greater
indexation. But the decision is not based on percentage of pharmaceutical spending.
matrixes or procedures with explicit Thus, where there are no competitive
calculations. Venezuela and Argentina – the products it is impossible to achieve increased
latter only partially – are representative of access through strategies to foster
this route, while Ecuador is beginning to competition. That only is possible through
abandon it, seeking to incorporate more subterfuges that are not very sustainable in
transparent measures for defining its time – as, for example, parallel importations
regulatory regimes for medicine prices. or compulsory patent licensing.
The second route involves a systematic
effort to promote competition through Table1 shows the major options in the
prices, increasing the number of suppliers design of economic regulation policies for
and reducing the asymmetries of medicines. The measures were separated
information whenever possible. This kind of into two large groups: the first centred on
strategies requires incentives and supply and the second on the demand in this
permanent monitoring of the market, rather market. Each of these groups will be
than the setting of prices. Various countries analysed below.
in Europe, as well as Canada and Australia
have followed this route, and in Latin
America there are some incipient steps in
this direction.
The present article examines a set of
measures implemented by Latin American
countries for the economic regulation of the
Table 1. Options for the economic the ministry of health or its medicines
regulation of medicines national regulatory authority, but rather
consumer defence and competition defence
Purpose Objective of the Possible Tools entities which generally are dependencies of
the economic and/or commerce
Guarantee of 1. Control of anti- departments. Within Latin America, Chile is
competitiveness competitive
I. Control of
in the market practices the case in which the State has strengthened
the prices the most its capacity to detect and punish
2. Promoting of
the supply of collusive practices. In April 2008 the National
generic products
Guarantee of 3. Setting of
Economic Prosecutor’s Office (FNE)
affordable prices prices and summoned the three main pharmaceutical
margins of chains to explain why, after a price war
among them, the chains agreed to gradual
4. Price increases in the prices of their products.
negotiation During the investigation the Attorney’s
Containing public 5. Promotion of
spending on the demand for
Office detected a price increase in 222
II.Containme medicines that especially affected chronic
medicines generic products
nt of
6. Changes in the pathologies (with increases of up to 3,000%
modes of
contracting and
compared to the public acquisitions through
medicines the public supply agency -Cenabast-). The
7. Setting prices investigation led to a court trial. The
maximum fine established by law was
8. Co-payments requested for each of the chains involved,
Ensuring the 9. Selective and the door was left open to later lawsuits
efficiency of financing
in case other infractions or involved actors
should appear.
Source: (22) 2. Promoting the supply of generic products
The countries that advanced in the
implementation of pro-competitive
I. Control of the prices of medicines regulatory strategies opted for promoting
the use of generic medicines, and did so by
Control of sales prices can involve a broad different means. Adopting generic medicine
variety of measures ranging from policies can involve a large set of actions that
surveillance to ensure that there are no generally have been oriented to creating a
abuses of asymmetries of power in the framework of competition through prices in
setting of prices within the production and the medicine market (23). To do so, some
commercialization chain, to setting fixed countries simplified the procedures for the
prices for pharmacy sales. entry of these products into the market,
either through the elimination of restrictions
related to expired patents or delays in
1 Control of anti-competitive practices
The control of anti-competitive practices In order to advance in the elimination of
comprises the use of a set of economic barriers to competition, national registration
control actions that normally do not involve
systems should be adapted. Sanitary (Ministerial Agreement 029/2009). However,
registration constitutes a first barrier to the these are weak (little persuasive) incentives
entry of medicines into the market. It is the when compared, for example, to the
basis for authorizing the production, obligatory nature of substitution as the most
distribution and marketing of medicines, economical alternative, as established in
subject to prior authorization by the Spain (15, 6).
sectorial regulatory agency, based on the Another tool that can contribute to
evaluation of effectiveness, safety and reducing the barriers to the entry of new
product quality. These regulations vary medicines consists of facilitating imports.
among countries. From a perspective of This measure can be implemented by
price and expenditure control, this is a first presidential decree, and the registration
instance of selection, and therefore a key could be approved automatically in minimal
element in terms of efficiency. time with the applicants’ meeting of the
In Latin America this barrier has not been minimum set of requisites proposed by the
significant in terms of the tariffs that must World Health Organization Working Group
be paid, as the costs of the registration are on Medicines Registration. In Brazil, Decree
lower than in developed countries. However, 3675 of 2000 approved the provisional
it does involve opportunity costs, due to the registration of imported generic medicines
delay in obtaining a product’s registration. In that were registered in the United States,
some cases it may take longer than two Canada or some European countries. In
years. Argentina, the direct importation of generic
The implementation of fast-track medicines was enabled in 2002 through the
mechanisms is intended to stimulate and homologation of the registration of the
facilitate the registration and subsequent country of origin, although not for its general
circulation of products in the market. An commercialization but exclusively for the
example of this is Brazil, where the times for Remediar Programme, for public
obtaining a sanitary registration for a generic distribution.
pharmaceutical product can be reduced by One regulatory tool of greater impact on
as much as half the time required for the access consists of controlling the prices at
registration of innovative products (8, 21). the moment of registration. The European
Because in Latin America medicines countries and Brazil have advanced in this
marketing chain is financed through the direction. In Brazil the generic medicines
incorporation of margins in each phase of must be 35% cheaper than referential
the production-commercialization cycle, medicines (Law No. 9787 of 1999). However,
there generally is a lack of incentives to it should be mentioned that this type of
promote the commercialization of generic measures does not reduce the barriers to
medicines. Some countries have the entry of medicines, but instead seeks
implemented different measures to reverse direct control of the prices, leaving its
this. In Nicaragua margins are fixed for promotion of competitiveness open to
commercialization with differential doubt.
percentages for generics. Thus, the margin Also, the measures governments take to
for the pharmacy is 30% of the public sale stimulate the manufacture and sale of
price when the product is classified as a generic medicines are considered incentives
brand, and 32% if it is a generic product for the supply of generics; among the most
frequently used measures are dispositions or product registration before the expiration
for industrial promotion like, for example, of its patent. In reality, this measure
reducing or even eliminating the taxes on accelerates the authorization of possible
generic products and the tariffs on the suppliers to produce and commercialize
importation of active ingredients or various generic versions of products still protected
other ingredients.Brazil has advanced in by a patent. Some countries like the United
industrial promotion to improve the supply States, Japan, Australia and Canada have
of generic medicines. The Federal used this tool to strengthen their supply of
Government, through the National generic medicines (23).
Development Bank (Portuguese acronym The measure contemplated in the Trade-
BNDES), prepared a Support Programme for Related Aspects of Intellectual Property
the Development of the Pharmaceutical Rights (TRIPS) that most strongly stimulates
Productive Chain (PROFARMA) aimed at the the local supply of generics, is the
development of active ingredients and implementation of obligatory licenses. This
vegetable extracts, pharmochemicals and means that, even without the consent of the
medicines for human use, as well as other patent owner, a government may authorize
activities related to the pharmaceutical the production of a determined medicine for
chain. PROFARMA’s objectives have been: an various reasons, such as the lack of local
increase in the production of medicines and production or a national sanitary emergency.
their ingredients; improved medicine quality, An extreme modality for guaranteeing the
meeting the requirements of the national availability of generic medicines consists of
regulatory body (ANVISA); reduced not acquiring them through the market, but
commercial deficit of the productive chain; through governmental production. Although
stimulation of Research and Development this is not a measure to promote
activities; creation of conditions for competition, but an interventionist
obtaining new molecules; and strengthened response, at any rate it can be a powerful
economic, financial, commercial and way to facilitate the population’s access to
technological positioning for national medicines.
companies (7). The policies on governmental production of
Another tool has been the restriction of the generic medicines in Mexico, Chile and Brazil
validity of patents. In the final declaration of have a considerable impact in population’s
the Round of Doha, Qatar, in 2001, the access to medicines. It is also possible to
World Trade Organization (WTO) approved identify four alternative combinations of
the permission for some member countries production and circulation of generic
to relax certain aspects related to the medicines: a)governmental production for
recognition of patents. In its Paragraph 7, it exclusive use in public services, for example,
establishes that the less developed countries when the hospitals manufacture some
that have not already done so, have an product for use within the same
extension until 2016 to establish the establishment without requiring registration
protection of the intellectual property of or commercial authorization;
pharmaceutical products and practices (23). b)governmental production with
An additional alternative consists of making alternatives for its commercialization; for
use of the so-called “Bolar Clause” which example products manufactured in official
allows the initiation of the necessary studies laboratories are sold to patients through
popular pharmacies (for example, the a) Pharmacological analysis for evaluating
Farmaguinhos factory in Rio de Janeiro is the the therapeutic advantages of the
largest public laboratory, playing a strategic medicine.
role in Brazilian pharmaceutical policy); c)
private production for exclusive circulation Brazil is the most advanced case in this
in public services; the best example of this is alternative. Procedures for economic
the Remediar programme in Argentina, regulation of medicines in Brazil include,
which has been acquiring and distributing among other instruments, the adoption of
generic medicines to more than 6,000 health differential pricing schemes favouring
service centres throughout the entire innovative products with therapeutic
country since 2001; and also Paraguay’s advantages over those that offer no
Basic Health Care Programme, which advantages (or, “me too”), as well as generic
operated between 2005 and 2009. Through products (22). Brazil has an organization in
an international bidding process, both charge of this function – the Pharmaceutical
programmes purchase generic medicines Market Regulation Council (CMED), based on
that are boxed in differentiated packages Law No. 10.742 of 2003, which establishes
with no commercial name, stating on the the norms governing the pharmaceutical
label that they are for the exclusive use of sector, in order to promote mechanisms to
the public health services, being their sale or stimulate the supply of medicines and the
use in private services penalized; and d) the competitiveness of the sector.
incorporation of a generic medicines market Pharmaceutical products are submitted for
through private production and marketing – technical approval to the ANVISA, which
which is the most frequent alternative. after evaluation submits its decision to the
CMED, which, in turn, after analysing its
3. Setting of prices and margins of clinical effectiveness and using international
commercialization. reference prices establishes the price of the
product. Once the CMED makes its
Among the measures adopted by the pronouncement, the products may be
countries for setting the prices of medicines, commercialized in the private market. For
it is possible to distinguish four major types their incorporation into the public system,
of instruments: they also must pass through another
a) Pharmacological analysis for regulatory body, the National Commission
evaluating the therapeutic advantages of for the Incorporation of Technologies
the medicine. (CONITEC), which evaluates sanitary
b) Pharmaco-economic evaluation technologies to be incorporated in the
comparing the cost of the treatment Unified Health System (SUS)
with other alternative products
c) Reference price (international and/or b) Pharmaco-economic evaluation
internal market)
d) Control of wholesalers and retailers Another alternative is the use of
profit margins. pharmaco-economic evaluation procedures
to contribute to the rationality, efficiency
and sustainability of the financing of
pharmaceutical spending within the health
system. This calls for pharmaco-economic one. For example, in Europe international
evaluation studies to aid in the selection of comparison has been used extensively as a
the innovative medicines to be incorporated procedure for setting reference prices.
into essential list of medicines that are Reference prices need to be set for
covered and financed by the government, homogeneous lists of medicines, (by
and eventually into the social security therapeutic classes and/or by active
system. In case the evaluation results ingredient). Brazil was the first country in
suggest the incorporation of a medicine into Latin America to incorporate international
the list, the use of pharmaco-economic price comparisons for controlling the
instruments may also be used to calculate monopolistic products, and simultaneously,
the price that the health system should pay promote generic competition for the other
for these medicines. products. In Colombia the National Drug
However, incorporating pharmaco- Pricing Commission, established by Law 100
economic instruments for regulation of 1994, incorporated three regulation
requires the creation of evaluation agencies systems: under surveillance freedom,
for sanitary technologies, as well as, a regulated freedom and direct control. The
certain level of institutional development, differentiation among the systems is an
technical capacity and political will to adopt advantage because it would make it possible
and sustain the agency’s recommendations. to stimulate competition where there are
In recent years important progress has been diverse suppliers and at the same time avoid
made in this regard in Latin America. In Brazil abuses in the monopolistic and oligopolistic
it was the creation of the National segments. Nonetheless, Colombia did not
Commission for the Incorporation of incorporate international reference prices
Technologies (CONITEC)in the Unified Health until 2011, when Circular NO. 1 incorporated
System (SUS); in Mexico, the National Centre two differentiated procedures for
for Health Technology Excellence(CENETEC); monitoring prices: national reference prices
and more recently the Institute for Clinical (for the products with three or more
Effectiveness and Health Policy (IECS) in suppliers) and international reference prices
Colombia, established by Law No. 1.428 of (for products with fewer than three
2011. suppliers).
A relevant methodological definition is
c) International and internal reference how to construct the reference price. This
prices involves two major questions: 1) Which
prices to compare? That is, which segment
Setting a reference price is determining the of the medicine production and marketing
amount the health system (public or social chain should the measurement be made
security) is willing to pay for a medicine. This on(4)?And 2) How to calculate the Reference
may be independent of the sale price in the Price? In other words, what mathematical
market (giving the user freedom to decide procedure should be used?
whether he or she wishes to pay an In both cases, Colombia’s recent policy is
additional amount above the reference innovative (2). In first place, the new
value). As mentioned, the pharmaco- proposal eliminates the system of regulated
economic evaluation is a mechanism for freedom, leaving only two systems: direct
setting reference prices, but is not the only control and under surveillance freedom.
Secondly, the new proposal admits the use vanguard of drug regulatory policies (24).
of prices taken at different points of the This is a policy that probably will be followed
production and marketing chain, instead of by the rest of the region, since Ecuador is
considering only the comparison of prices for proposing to incorporate similar systems
market sale. This change expands the through its Decree 777/2011, and El
possibilities of comparison because, at times, Salvador has just done so in the regulation
the monopolistic products are not sold its Law on Medicines (19).
directly to the public through the A special mention for El Salvador, where
commercial channel, but are provided the recently created National Directorate of
directly by the financing institutions. To Medicines (20) determines the Maximum
make this consideration of alternative prices Sale Price to the Public for each medicine,
viable, the proposal incorporates based on the principle that it must not be
Adjustment Factors (Article 11) that would higher than the average price paid in Central
permit the comparison of prices taken at America and Panamá, and that will take the
different points in the chain. International Reference Price as a basis. This
Third, the new Colombian policy replaces is interesting because in order to implement
the calculation of the Reference Price with the price setting policy, the National
the median prices of the same product Directorate of Medicines must have a broad
measured by sales. The international database of international prices, and define
antecedents are divided on this matter. For homogeneous groups of products with the
example, while in some cases like Mexico same active ingredients, concentration and
the weighted average of sales is used, in pharmaceutical form. On the other hand, in
others the median is used because of lack of order to implement the setting of prices,
information on the quantities of each making it possible to feed its international
product that are sold (16). It has been price database, the margins of
indicated that a fragility of the price commercialization in the different countries
regulation systems in Latin America lies in were revealed. This last measure is being
the fact that the information used for this considered now in Colombia, through the
regulation tends to depend too much on the mentioned proposal to the CNPMDM.
same suppliers which are being regulated
(12, 3). d) Control of wholesalers and retailers profit
In conclusion, after 2011 and the passage margins.
of Law 1.438, Colombia gathered sufficient This concerns the establishing of a control
political will to begin to modify its health on the formulation of the public sale price of
reform, and as was to be expected, drug medicines, establishing profit margins
prices cannot be left out of this revision. A (“ceilings” on the profit margins of
National Pharmaceutical Policy was pharmacies and drugstores). Some countries
developed and submitted for discussion and in Latin America have advanced in this
approval by the National Economic and regard: Brazil was one of them, and did so by
Social Policy Council (CONPES). The establishing differentiated systems and a
reformulation of the National Commission calculated ceiling on prices based on a price
on Prices of Medicines and Medical Devices index, a productivity factor and another
(CNPMDM) and the regulation of the pricing factor for adjusting relative prices within and
mechanisms positioned the country at the among sectors. Ecuador defined a maximum
profit margin of 20% for the manufacturer or use the asymmetries of information in their
exporter, a percentage based on the costs favour when negotiating with the
and expenditures declared by the government. For example, proposing to
companies. In Nicaragua, CIF (Cost, freeze “baskets of medicines” that less
Insurance and Freight) costs are fixed for affect their revenues. When the government
imported medicines, and comparisons are establishes a list of high-consumption,
made for national ones. They also fix the medicines whose price it seeks to freeze, the
margins for retailers and wholesalers, with industry counters with a proposal for low-
differential percentages for generics. In demand pharmaceutical forms or packaging.
Venezuela, the government establishes the Another strategy that has been used
price of medicines though a system of profit frequently by suppliers consists of
margins (22). Paraguay, in turn, defines understocking retail pharmacies with the
differential margins for national and frozen medications, forcing their substitution
imported products (Decree 20.996 of 1998 with commercial alternatives that were not
National Directorate of Sanitary Surveillance included in the agreement.
of the Ministry of Public Health and Social For these reasons, price negotiations
Welfare). Colombia established three have not resulted adequate instruments for
regulatory systems – overseen freedom, promoting the population’s access to the
regulated freedom and direct control. A medicines. However, this continues to be
reference price was implemented, and more one of the most commonly used tools
recently, in 2011, it was established that, at because it represents, for presidents and
least once a year, reference prices for all ministers, the illusion of obtaining an
drugs commercialized in the country would immediate impact on public opinion.
be defined (Law 100 of 1994 and Circular No. In those countries where there is
002 of 2011 of the National Commission on sufficient political will and commitment,
Prices of Medicines and Medical Devices governments have gone about implementing
comprising the Ministry of Commerce, institutional arrangements that lead to the
Industry and Tourism, the Ministry of Social promotion of generic medicines or the
Protection and a personal delegate of the incorporation of more transparent and
President of the Republic). sustainable price setting procedures, analysis
of profitability margins, and technical and
4. Price negotiation pharmaco-economic evaluations.
Joint negotiations between the
government and the pharmaceutical II. Containment of spending on medicines
companies to agree on product prices have
been used frequently, both by developed The measures implemented by the
and developing countries. Generally, they countries to contain spending on drugs
have been concentrated on the definition of include a group of tools centred on
the final consumer price for a limited set of promoting competition in the market and
products for which fixed prices are defined reducing the asymmetries of information.
and kept “frozen” for a determined period of Each of these is explained in the following
time. section:
Price negotiations seldom have had an
impact on affordability. The suppliers can
5. Promotion of the demand for generic estimated that 20% of the laboratories’
products spending goes for publicity (14).
The third step in reducing information
When it has been possible to promote a asymmetries is pharmacy surveillance. Brazil
supply of pharmaceutical products for which regulated the way advertising may be done,
there is pricing competition and ensured and also financed the examination of a
quality, health systems can benefit, sample of 800 publicity items (around 40%
achieving a reduction in their spending on of the 2,000 that were issued). Among its
pharmaceuticals through the promotion of findings, it was detected that 80% of the
the demand for competitive products. advertising presented irregularities with
Among the most commonly used tools for respect to the law. The amount collected
promoting the demand for generic drugs, from fines was equal to the cost of the
the ones that stand out are those that seek surveillance.
to: a) reduce asymmetries of information; b) The most exhaustive way of regulating
stimulate the prescription of generic pharmaceutical publicity is to establish the
medicines; c) stimulate patients’ demand for requirement for authorization of each
generic medicines; and d) encourage advertising item by the regulatory authority
dispensing of generic medicines. (13). In Argentina, a setback was found in
this regard in 2004, since the National
a) Reducing information asymmetry Agency for Medicines, Foods and Medical
To reduce the asymmetries of information, Technology (ANMAT) stopped approving
the first step is to require that all drug labels, publicity with the argument of a lack of
prospectuses and publicity include budget (Resolution No. 20 of 2005, Ministry
International Non-proprietary Names – also of Health of the Nation).
called the generic denomination – of the
medicine. This does not mean that the b) Stimulating the prescription of generic
commercial name must be eliminated, but medicines
that both must appear(fantasy name and the In addition to the mechanisms for
real name of product) (23). guaranteeing the availability (supply) of
The second step is to implement generic medicines, it is fundamental to
mechanisms for controlling publicity for the implement measures to stimulate their
medicines. This includes measures ranging demand, especially those measures focused
from the prohibition of aiming direct on the professionals that prescribe drugs, as
propaganda on prescription drugs at the they are the ones that decide on their
general public, to limiting the distribution of consumption and use. It also is a way of
free samples. This kind of measure, in reducing the information asymmetries and
addition to reducing the asymmetries of fostering the rational use of these drugs.
information (considered one of the most The most extreme way of promoting
important faults of the pharmaceutical prescription by generic name is to make it
market), also limits induced demand, which compulsory by law. This has been done in
generally is neither appropriate nor rational, five countries in Latin America (Argentina,
and unnecessarily increases expenditures. In Ecuador, Panama, Paraguay and Peru). The
Brazil, a report by the Parliamentary problem in these countries is that they do
Investigation Commission on medicines not supervise or control compliance with the
law at the pharmacy level, or punish those In Argentina in 2002, social security
who disobey it (27). Other countries – as in institutions established reference prices. It
the case of Brazil – also have advanced in also was established that health insurance
ordering that the entry of these products agents would recognize and apply discounts
into the market should be at a lower price in favour of the insured patient only when
(35%) than the already available options. the prescriptions issued by outpatient
services were presented with the generic
c)Stimulation of Demand name of the medicine (Resolution 163/2002
In addition to stimulating the prescription of of the Superintendency of Health Services of
generic medicines, it is necessary for the Argentina). However, this measure was
buyer (either individual or institutional) to discontinued a few months after its
decide to acquire these products. When the implementation.
buyers are institutions, one measure that The impact of this kind of measures on the
generates transparency and price reduction of spending on medicines may be
alternatives in the evaluation of bids is the quite strong, but its effectiveness is lower in
incorporation of the International inflationary contexts, unless the reference
Nonproprietary Names in the call for prices are constantly recalculated.
bidders. This procedure has been
widespread in Latin America. Procurement d)Incentives for dispensing and substitution
systems can play an important role in the The main measure for promoting
strategies for promoting generic medicines distribution is to encourage the in-pharmacy
and their adequate use, as long as they substitution of the brand stipulated in the
guarantee the inclusion and availability of prescription for a generic medicine when the
these products in the list of essential active ingredient is identical and the
medicines. presentation is the equivalent.
Another measure that is used is the Just as in prescribing the main actor is the
dissemination of, and sensitizing to, medical doctor (or nurse, in some countries),
information on the advantages of using in dispensing it is the pharmacist. Therefore,
generic medicines, through publicity and in order to achieve his/her commitment
campaigns (focused on patients) and to the implementation of generic medicine
recommendations by governments or health strategies, it is necessary to inform them
insurance agents (focused on the about the alternatives of generic medicines
prescribers). However, in this case the available in themarket. However,
results have not been as decisive as making substitution with a lower-priced alternative
them compulsory for prescribers and may not be sufficient, as the retailer’s profits
pharmacist (9). are proportional to the price of the
Another powerful tool often used is the medicine, and this may induce them to make
establishment of reference prices. This substitutions for more expensive – and not
consists in establishing a maximum price per more economical – ones. Therefore, special
product for governmental or health incentives for retailers must also be
insurance agents’ co-financing or promoted for the distribution of generic
reimbursement. If the patient opts for the medicines.
more expensive commercial alternatives, she To reinforce the incentives for dispensing,
or he must pay the difference out of pocket. remuneration models, not based on a fixed
percentage of the product price, may be However, the set of measures for promoting
established for retailers. For example, paying competition and consolidating the use of
per pharmaceutical action (a fixed amount generic medicines is broader than only using
per prescription or product dispensed) or a International Non-proprietary Names for
monthly quota per patient – although this bids. For example, in cases of medicines for
sort of incentives has not yet been tried in which generic versions are not yet available,
Latin America. two or more branded products can be
included to compete. The incorporation of
6. Changes in the modes of contracting and the so-called “me-too” products can be used
acquisition to expand competition. Another, additional,
measure that is increasingly being used in
Another strategy has been the centralized public procurement is to require
implementation of the centralized purchase non-commercial packaging, instead labelled
or centralized negotiation of prices with the with the names of the ministries and/or
pharmaceutical industry. Centralized providing organizations, but without the
purchasing has made it possible to obtain product’s fantasy name or original brand
significant savings for various countries. (23).
Examples are Chile, through its National
Supply Centre (CENABAST); Peru, through 7. Setting prices for reimbursements
the General Directorate of Medicines, Setting prices for reimbursements is a
Supplies and Drugs (DIGEMID); the powerful measure in the health systems
Dominican Republic, through its Office for where a great majority of the population has
Logistical Support and Programme for the social security coverage; instead of having
Supply of Essential Medicines; and their own pharmacies that directly provide
Argentina, through its Remediar Programme, the medicines, these systems may opt for
which acquires 60 high-consumption reimbursing their insured customers for the
medicines in a centralized way to supply amount paid in commercial pharmacies.
more than 6,000 Primary Health Care In that case the regulatory policy does not
Centres. set the final sale price for the public, instead
In other countries, like Guatemala and determining the amount the social security
Ecuador, decentralized purchasing has been system will reimburse its beneficiaries. This
used, but with a framework agreement on functions as an incentive to the consuming
distribution prices for previously accredited population to opt for generic and/or more
suppliers. For this, there is a need for a solid economical alternatives, seeking to spend as
technical capacity to verify the information little as possible. These measures have been
presented by the manufacturing companies. used in European countries like Spain,
In this way, the State exercises regulation France and Portugal, but have not worked in
through demand, whereby the most Latin America, where the social security
important factors are centralization and systems have less coverage, and generally
taking advantage of scale economies. have opted for the direct distribution to their
In Latin America, the practice of beneficiaries through the system’s own
institutions making their purchases pharmacies.
exclusively through the International Non-
proprietary Names has been generalized.
8. Co-payments pharmacy the rest of the price. A change in
In Latin America there are very few cases the percentage that is co-financed by the
where the public health systems directly beneficiaries is a way of reducing the
provide medicines for out-patient treatment expenditures in medicines for the health
of their populations. Medicines for system, but is unlikely to improve the
hospitalized treatments generally are population’s access to medicines since it
provided without requiring payments by the means transferring this cost to the patients.
patients, but out-patient medicines generally
are provided in a limited form, subject to 9. Selective financing
availability; these often are discontinued, or Turning to selective financing as a tool for
are subject to frequent shortages of stock in containing spending on pharmaceuticals
health services centres. means including only a limited group of
During the decade of the 1990s, the medicines in the country’s essential list of
medicines provided by public health services medicines. In this sense Latin America faces
in Latin America often were not free but greater challenges for selection, because the
subsidized, requiring patients to partially pay number of presentations of registered
for them. From the first decade of the products is quite high. While the average list
Twenty-First Century, several countries like of essential medicines in the Latin American
Ecuador, Paraguay, Argentina, and others countries is 500 items, medicines in the
declared the health goods and services market can be up to four times this number,
provided to the population by public services adding the fact that the number of
to be cost-free. In other cases, like Panama, presentations available in the market may be
patients have to pay for the medicines they twenty times higher.
receive at the Public Health Services, in the Brazil has more than 20,000 registered
form of a co-payment. presentations, closely followed by Mexico
In the case of the social security systems, with approximately in 19,000. At the other
the most widespread provision modality is extreme are Costa Rica and Chile, with only
distribution to active affiliated members and 5,000 presentations. Argentina is in the
beneficiaries in their own pharmacies (for middle with 10,000; Colombia with 8,300;
example, in all the countries where there is a Bolivia with 8,293 legally registered
single health insurance system, and even in presentations; the Dominican Republic has
Colombia and Uruguay, where there are 14,182; Honduras 15,000; Nicaragua 12,000;
multiple social security health institutions). and Peru has 11,241. The median of
In the case of Argentina, dispensation is registered presentations in these countries is
made through commercial pharmacies that 9,632, which is substantially higher than the
have contracts with the social security world median of 2,413 for low-income
systems to provide medicines to the insured countries; 5,000 for middle-income
population (27). In the first case the most countries; and 7,296 for high-income
frequent modality is dispensing at no cost. countries.
However, in some cases the social security Not all medicines registered in the
systems request the insured patient to cover country are used and financed by the health
part of the cost. In this case, the insurance systems. All the ministries of health in the
entity only covers part of the cost of the region’s countries have national lists of
medicine and the beneficiary must pay the essential medicines that account for a little
more than 5% of the products with sanitary products with therapeutic advantages over
registrations. The larger countries have those that offer no advantages (or, “me
permanent commissions to update the list too”); promotion of markets of substitute or
every two or three years. In others, the generic medicines; use of reference prices
review of the list is more sporadic. for national and international comparisons;
The social security and private insurance the control of profit margins in the market
systems tend to operate with the same chain, and the setting of reimbursements
national lists of essential medicines, and co-payment.
although since the decade of the 1990s the The demand-centred economic regulation
social security systems in the region have tools for promoting access to medicines have
advanced in outlining care coverage been less used in the region. Important
packages that define a positive list of goods among them for their potential impact are
and services that are covered for the users. the strategies to promote the use of generic
This is the case of Argentina’s Obligatory or International Non-proprietary Names,
Medical Programme, the Obligatory Health reducing brand fidelity and avoiding
Programme (POS) in Colombia and the oligopolistic pricing.
Comprehensive Health Care Programme In Latin America, the countries that have
(PIAS) in Uruguay. In all these cases, the advanced the most in the economic
social security entities have incorporated a regulation of medicines have at different
positive list of the medicines covered. moments, used supply and demand centred
tools, not only allowing them to achieve
Conclusion better results, but also to sustain the
Latin American countries have used implemented policies over time.
different tools for solving problems of When a pharmaceutical policy
increased spending and prices of simultaneously assumes the objectives of
pharmaceutical products looking to assure promoting access and increasing
population’s access to medicines. In this competitiveness, the use of monitoring and
article these measures have been separated evaluation tools become necessary, as well
into two groups: supply-centred policies and as, institutional arrangements to be used
demand-centred policies. are: a)creation of specific agencies with an
For supply-centred policies, two clear active regulatory role in the pharmaceutical
alternative routes are identified in the sector; b)implementation of institutionalized
region: a first, imposing intervention route in schemes for pricing of pharmaceutical
which the government sets the prices and products; c) promotion of industrial
their indexation unilaterally and following production of generic products; d) reduction
not clear criteria. This contrast with a second of barriers to entry of generic medicines into
route of price regulation that seeks to the market (adapting registration systems);
institutionalize differential regulatory e) offering incentives for the prescription of
systems by incorporating incentives to generic medicines, the most radical way has
suppliers to achieve the accessibility through been the compulsory prescription by
competition. This second regulation route generic name); f) creating incentives for
includes a set of tools, of which the most demand by fixing a maximum
important are: the adoption of differential reimbursement or co-financing amount by
pricing schemes favouring innovative the government or health insurance
systems; and finally, g) incentives for feasibility.Contextsettingpaper. Geneva: WHO;
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