⁴ Ghana Pharmaceutical Pricing Study; Policy Analysis and Recommendations July 2003

Like many other countries in sub-Saharan Africa in the 1980s, Ghana adopted economic structural adjustment policies, including the introduction of selected cost recovery initiatives in the social sectors. In the health sector, Hospital Fees Legislation was introduced in 1985, and, in 1992, the cash and- carry (C&C) system for pharmaceutical supply to outpatients throughout the MOH system was introduced (Asenso-Okyere et al. 1998).

The C&C system was inspired by structural adjustment programs and the "Bamako Initiative," spearheaded by UNICEF and implemented in many developing countries, especially Africa. The initiative was based on the theory that charging for drugs would help finance and, therefore, improve the delivery of primary health care services. The scarcity of pharmaceuticals in Ghana's public sector had led to the organic development of pharmaceutical fee schemes within many MOH facilities, and the idea of improving pharmaceutical supply throughout the system with financing from user fees was easily accepted.

Within the C&C system, each MOH facility was expected to have a self-financing revolving drug fund (RDF) by repurchasing the products with the revenues from the sale of pharmaceuticals. There are a series of RDFs cascading down each institutional level within the MOH. There is a large RDF at the Central Medical Stores (CMSs) level, 10 smaller RDFs in each of the Regional Medical Stores (RMS), and RDFs in every hospital and service delivery point (SDP). At each level of the system, the facility usually marks up the basic purchase price paid for a product. As originally envisioned, these mark-ups were intended to cover the cost of repurchasing the products, including allowances for losses, inflation, duties (at the CMS level), and costs directly related to products, such as insurance and casual labor for handling. Fixed percentages for mark-ups at each level were established by the MOH. However, actual practice has often deviated from these official MOH mark-ups, and the official policies have changed over time.

The Ghana MOH currently has in place a number of vertical public sector supply chains based on the type of health commodity. While integration is currently taking place to look at a more rationale way to combine the essential drug, contraceptive, and non-drug consumable supply chains, policy changes necessary to support this have not yet evolved.

Currently, drugs are purchased by the CMS through international competitive bidding (ICB) and through local private suppliers. The RMS and teaching hospitals are meant to procure drugs through the CMS and from the local private sector. All the regional hospitals and SDPs are, in turn, expected to procure from the RMS in their respective regions. While it is MOH policy for facilities to procure through the public system, except in cases of unavailability, it has been observed that there are significant private sector purchases at all levels. Although integration is taking place, there are still a number of district medical stores who procure from both the RMS and the local private sector. The teaching and regional hospitals and several SDPs are supplied by an RMS, District Medical Stores (DMS), and, in many cases, procure drugs through the local private sector.

The transportation system for essential drugs is undergoing a policy review within the MOH. Currently, lower level facilities are required to either provide their own transportation or pay for the transport of drug procurements. The CMS is now considering providing no-charge transportation to the RMS. Whether those savings will cascade to the SDPs remains unclear. The private sector, however, provides free transportation to facilities that engage in private sector procurement. This, naturally, was a key consideration in decisions by facilities to choose private over public sector suppliers