Guide to Tracking Pharmaceutical Expenditures in a Health System

The high cost of medicines, economic instability, population growth, and a heavy burden of disease strain country health systems, resulting in reduced availability of medicines and rising pharmaceutical expenditures. In many LMICs, spending on medicines is the largest driver of out-of-pocket payments, with less than one-third of pharmaceutical expenditures publicly funded. The large role of private expenditures and donor financing in overall pharmaceutical expenditures in LMICs raises concerns about equity and future sustainability. However, a major limitation in understanding these expenditures is the lack of a widely used or accepted methodology for tracking and estimating pharmaceutical financial flows. This guide aims to provide a foundation for addressing this gap and establishing a process for systematically and comprehensively tracking pharmaceutical expenditures. The System of Health Accounts (SHA) is a widely used health accounting approach developed by the Organization for Economic Cooperation and Development (OECD). It explicitly incorporates core management functions associated with pharmaceutical management, including procurement, distribution, and dispensing. The SHA model provides a framework for tracking pharmaceutical expenditures from initial sources to end-users, including financing/procurement agents, point of warehousing, and providers. The guide outlines a step-by-step approach for tracking pharmaceutical expenditures, including mapping the flow of pharmaceutical expenditures from initial sources to end-users and key pharmaceutical management functions. It also highlights the need for data collection and the development of indicators for decision-making. The guide emphasizes the importance of establishing a process for systematically and comprehensively tracking pharmaceutical expenditures to inform decisions about allocations, equity, and financial sustainability. The guide provides a working definition of pharmaceutical expenditures based on the SHA model, which includes products and services such as medicines, vaccines, and medical devices. It also highlights the need for countries, donors, and other partners to better understand where funding for pharmaceuticals is coming from and who spends on what. The guide aims to provide a foundation for taking action to address the gap in understanding pharmaceutical expenditures and establishing a process for systematically and comprehensively tracking these expenditures. The guide was prepared by Manjiri Bhawalkar and Abeba Taddese, with contributions from Marilyn Heymann and Marty Makinen. It was reviewed by Sameh Saleeb, Niranjan Konduri, Kwesi Eghan, David Lee Chin, and Rima Shretta from the Systems for Improved Access to Pharmaceuticals and Services (SIAPS) Program. The guide is intended to provide a foundation for taking action to address the gap in understanding pharmaceutical expenditures and establishing a process for systematically and comprehensively tracking these expenditures. The guide highlights the importance of tracking pharmaceutical expenditures to inform decisions about allocations, equity, and financial sustainability. It emphasizes the need for countries, donors, and other partners to better understand where funding for pharmaceuticals is coming from and who spends on what. The guide provides a working definition of pharmaceutical expenditures based on the SHA model and outlines a step-by-step approach for tracking these expenditures. The guide also highlights the need for data collection and the development of indicators for decision-making. It emphasizes the importance of establishing a process for systematically and comprehensively tracking pharmaceutical expenditures to inform decisions about allocations, equity, and financial sustainability. The guide aims to provide a foundation for taking action to address the gap in understanding pharmaceutical expenditures and establishing a process for systematically and comprehensively tracking these expenditures. The guide provides a framework for tracking pharmaceutical expenditures, including mapping the flow of pharmaceutical expenditures from initial sources to end-users and key pharmaceutical management functions. It also highlights the need for countries, donors, and other partners to better understand where funding for pharmaceuticals is coming from and who spends on what. The guide aims to provide a foundation for taking action to address the gap in understanding pharmaceutical expenditures and establishing a process for systematically and comprehensively tracking these expenditures.