For over 20 years now health system policy makers in developing countries around the world have had to endure a relentless sales pitch from advocates of market-style reforms.
Their menu of routine suggestions will be grimly familiar. These are not the painful measures which are clearly intended to contain spending (cash limits, centralisation of services, rationing and exclusions, “essential packages of care”, and of course user fees – which cut demand for services while seldom raising any significant resources).
The menu of market-style reforms can sound relatively harmless: the purchaser-provider split and “internal markets”; provider payment reforms (maybe even “payment by results”); provider autonomy; competition; outsourcing or privatisation of services; “partnership” with the private sector – even “Public-Private Partnerships”. But the same policies in the UK, have all cost more, not less.
And while it may seem that some of these proposals are to meet specific problems or to rescue failing public health care systems, beware: these are not tailored solutions, but off the peg “one size fits all” policies – which in practice are equally inappropriate everywhere.
They are the rote learning of academics in wealthy northern countries, who have swallowed whole the illusion that health care can somehow be delivered efficiently, equitably, or economically through a competitive market.
Look at Britain, one of the few wealthy countries to adopt most of these ideas – despite the lack of any evidence that they could deliver improvements or efficiencies. Since 1991, the National Health Service, which for decades had management overhead costs of 5%, has been increasingly subject to a “purchaser-provider split”, initially in the “internal market” created by Margaret Thatcher, then, under Tony Blair, a market involving high cost private providers.
The additional costs of this market split in England have increased overheads to over 14% of NHS spending – an extra £10 billion per year . Yet still there is no evidence that all the extra cost and bureaucracy have improved the quality of health care.
Tony Blair’s government also introduced highly complex provider payment reforms, the “payment by results” system – nothing to do with results, since it simply imposes a national tariff (cost per case). This makes it possible to drain money out of the NHS budget to pay private providers.
Are private providers cheaper or better value? No, and no.
In England Independent Sector Treatment Centres set up by Labour to create a new private sector provider network, charge an average 11.2% above the standard NHS cost. But they cherry-picked only the easiest cases – leaving the rest to the NHS. And they were given generous 5-year contracts, which paid them for a fixed number of operations, regardless of how few patients chose to use the service. Millions were wasted on this, taking resources from NHS hospitals.
England has experimented with provider autonomy in the form of Foundation Trusts – providers which run outside the main managerial structures of the NHS and are responsible not to the government but an independent regulator.
The first Foundations were set up from the wealthiest, most successful hospitals, and have accumulated surpluses of £2 billion – while NHS hospitals which are not foundations face mounting financial problems. Now ministers want to let them make unlimited money from private medicine, while funding for NHS patients is being sharply reduced.
Competition, outsourcing and privatisation are best assessed by looking at the damage done to hospital cleaning standards by Margaret Thatcher’s government putting cleaning and other support services out to tender in the 1980s, forcing health bosses to accept the cheapest bid. Two decades later hospitals are still struggling with the rising tide of infections and hygiene problems caused.
And as for partnerships with the private sector – the English experience again shows that it’s like sharing a house with a lion. Your ‘partner’ sees you as his lunch.
100 hospitals have been built since 1997 using the “private finance initiative” – in which the private sector has scooped up massive guaranteed long-term profits paid from the public purse. £11 billion worth of new hospitals are set to cost £65 billion – far more than just borrowing the capital. Some early PFI hospitals have already paid back double the cost of the hospitals, but still have 15-20 years to pay. Many PFI hospitals are closing beds and wards in the new hospitals and sacking staff to cut costs: some need rescuing by government.
Now services in the English NHS could be opened up by the new government to competitive bids by “any qualified provider”. But the private sector will only bid for services where it is certain of a profit. So if NHS and non-profit providers are all expected to behave like businesses in a market, who will bid for services which can’t be profitable – like emergency care, mental health or care of the elderly?
The policies only sound tempting until you investigate their consequences. Markets are OK for fruit and vegetables, but they don’t deliver equity – and are not good for health care, where those with the greatest needs have the least ability to pay – and the least political power.
Don’t copy the costly mistakes made in England.
John Lister is a freelance journalist with over 27 years’ experience in analysing health policy for pressure group London Health Emergency, and now senior lecturer in Health Journalism at Coventry University. His PhD is in global health policy, and his books include Health Policy Reform, Driving the Wrong Way? (2005) and The NHS After 60, for patients or profits? (2008).
Jayati Ghosh is Professor of Economics at Jawaharlal Nehru University in New Delhi, India, and delivered the Lancet Lecture 2011 at University College London on the subject of “Economic growth and women’s health outcomes: A deepening divide?” Here Ghosh gives some highlights of her lecture for Global Health Check, with a focus on the deepening divide between economic growth and women’s health in India:
Even though economic growth and human development do not always move together, GDP growth is still expected to be associated with better health conditions, for various reasons. Rising per capita incomes typically involve an improvement in food and nutrition standards among the poor, which is obviously an essential precondition for better health. Deterioration in nutrition due to poor eating habits is more likely to occur after incomes cross a certain level. Increasing national income also puts more absolute resources in the hands of governments to spend on essential public health. Even if the proportion of public health spending to GDP remains unchanged, rising per capita GDP means rising per capita public spending on health. And governments may get greater fiscal space to even increase their health expenditure as a share of GDP. Either way, this can mean greater spread and better quality of basic public health services such as clinics, hospitals, doctors, nurses and subsidised medicines. It can also allow governments to spend on infrastructure that has a direct bearing on health, such as better housing, transport and communications that reach health facilities to poor or remote areas, safe drinking water and sanitation.
So how has recent growth in one of the most dynamic parts of the global economy – India – impacted on health? In particular, how has India fared relative to other countries that are at similar levels of per capita income or are even poorer? Consider India in relation to Sri Lanka, Vietnam and Bangladesh. Of these, Sri Lanka has the highest per capita income (in US $ terms) but India has had the fastest rate of growth in the past two decades.
Despite this, India’s health indicators are either worse than or show slower improvement, than these other countries. It is useful to consider health outcome indicators for women and girls in particular, since these may be taken as the “floor” conditions of health in the society. Since gender discrimination continues to operate to reduce the access of women and girls to health services of various kinds, female health indicators are the most effective way of assessing the general progress of health conditions. Consider two basic indicators: the female infant mortality rate (IMR – number of female deaths below the age of 1 year per thousand live births of females) and the maternal mortality rate (MMR – number of women dying because of childbirth-related complications per 100,000 live births).
The female IMR In India is more than double that in Vietnam, at 51 per thousand, and it declined by only 40 per cent over the two decades – one of the slowest rates of improvement in the region. The MMR at 230 per hundred thousand in 2008 was nearly 5 times that in Vietnam and nearly 6 times that in Sri Lanka. What is even more shocking is the slow improvement – even Bangladesh has outperformed India in terms of decline in IMR, though it is a poorer country with slower GDP growth.
By contrast, Vietnam and Sri Lanka have both achieved indicators that are close to those of developed countries (female IMRs of 11 and 10 respectively in 2009 and MMRs of 39 and 48 in 2008). So obviously it is possible to get better women’s health outcomes even without reaching higher per capita income levels.
What explains the paradox of high growth and relatively poor health outcomes in India in particular? Of course India is also very regionally diverse, with some states like Kerala showing excellent health outcomes for women, similar to those in Vietnam. And three states have also shown much improved health indicators in the past two decades: Tamil Nadu, West Bengal and Maharashtra. But in the bulk of the country, female IMR and MMR are still very high and have declined very slowly.
One important reason for this is under-nutrition, which has actually worsened in recent times according to indicators like calorie consumption. Rising prices of food are making this problem worse as women and girls in poor households take the brunt of food scarcity. The declines in per capita food grain availability in the country as a whole, already show the problem, but they do not reveal the disproportionate impact on poor and more vulnerable groups.
Related to this is the distributional issue: income growth has been concentrated among the top ten per cent of the population, whose health indicators were already more like those in rich countries, and there is little improvement of consumption patterns in the bottom half. Another reason is poor sanitation, reflecting low governmental priority to critical concerns like clean drinking water and toilets. A third cause is lack of good and affordable health services for women especially in the reproductive age group. Nearly three quarters of all health spending is by households out of their own pockets, which contributes to many families falling into indebtedness and poverty.
All of these factors are crucially determined by government policy. Despite much publicly expressed concern on all these issues, the Government of India has simply not put its money where its mouth is. Public spending as a share of GDP has not increased, and per capita spending on some essential activities like immunisation and primary health centres has actually gone down.
Instead, the government has sought to provide essential health services on the cheap, using the underpaid labour of local women working for much less than the minimum wage, and not properly trained regular public employees with adequate facilities.
So the apparently growing divide between economic growth and women’s health outcomes in India is really the result of the wrong orientation of public policy. This is not inevitable: the experience of other Asian countries shows that a more positive synergy can be created. This requires a shift in economic approach, since it can be argued that it is not just that health spending has been neglected by the government. Rather, it is an outcome of an economic strategy based on corporate profitability as the main driver of growth, which in turn is associated with reduced government spending. This is because the focus on incentivising private investment reduces the capacity to tax and therefore spend public revenues, with consequent fiscal constraints; and also because the state then stays away from or even moves out of activities that may generate private profits, including medical services.
The point is that with sufficient political will, this can be changed. Health spending needs to be valued not just for its own sake, but as an essential element in an overall macroeconomic and growth framework oriented to better conditions of human life (rather than just GDP expansion). This would be part of a wage- and employment-led strategy of ecologically sustainable growth, with a focus on improving human development.
Up to 90% of people in developing countries still buy medicines through out-of-pocket payments. Spending on medicines can be catastrophic. Medicines also constitute a major part of national health budgets (second only to staff costs). For these reasons, ensuring low and affordable medicine prices is crucial for all countries seeking to move towards universal health care, and to reduce economic burdens on households.
Securing adequate supplies of medicines is a shared responsibility. It is dependent upon national governments implementing the right policies, pharmaceutical companies producing affordable and appropriate medicines, and the international community promoting policies to ensure developing countries can obtain quality medicines at affordable prices. This is where recent progress on driving down medicines costs in Burkina Faso offers some interesting insights.
The ‘Burkinabe’ system is based on a rationalised supply structure combined with a policy to promote generic medicines, with prices set each year by ministerial decree. This ensures generic medicines are available throughout the country at a reasonable price. According to the World Health Organisation (WHO), countries could save up to 5% of their health expenditure by reducing unnecessary expenditure on medicines and using medicines more appropriately. Underuse of generic medicines is a key driver of inefficiency. Generics cost between 20% and 90% less than branded medicines and promoting rational use is an effective method to reduce health spending.
In Burkina Faso all medicines supplied to the public health sector come through CAMEG (Office for the Purchase of Essential Generic Drugs), a private not-for-profit organization that exclusively sells generics. An exception is made for hospitals to allow the procurement of brand name medicines from private wholesalers when needed, e.g. when no generic version exists. As well as supplying the public sector CAMEG also caters for private pharmacies, NGOs, and the Global Fund, which use it as an intermediary for the supply of medicines for HIV, tuberculosis and malaria. CAMEG is highly effective and efficient in its procurement strategies. While African governments typically pay 34% above the international reference price, a 2010 study on the prices, availability and affordability of medicines in Burkina Faso shows that the prices offered by CAMEG are similar to international reference prices.
In terms of availability, Burkina Faso scores quite well. The same 2010 study shows that a basket of 50 medicines was available in 73% of the health centres, compared to an average availability of 40% in the African region and less than 60% in all WHO regions. However, while in the lower level facilities availability is very good, hospitals worryingly lack medicines (65% for generics and 1.2% for branded medicines). As a consequence patients who cannot be treated in lower level facilities are forced to buy their medicines from private pharmacies where prices are considerably higher.
Access to medicines to treat chronic non-communicable diseases such as cancer or diabetes and newer HIV/AIDS medicine is also problematic. These medicines are often protected by patent rights in key producing countries such as India, South Africa and Brazil, and so generic equivalents are not available for countries like Burkina Faso. In order to address this challenge Burkina Faso should urgently follow the advice of UNAIDS, WHO and UNDP by fully implementing available TRIPS flexibilities. This should include nullification of any intellectual property rules for pharmaceuticals, since as a least developed country, Burkina Faso is not required to implement TRIPS consistent legislation for medicines until at least 2016. At present, the country, by adhering to the Bangui agreement, is exceeding its obligations under TRIPS. This policy should be reviewed. In the future, when the Government must fully accede to TRIPS, it should make full use of compulsory licensing to ensure its population has access to such medicines.
Burkina Faso has achieved major success in driving down the cost of medicines, at least in the public sector. However, mark-ups along the supply chain often result in final prices at the point of delivery being considerably higher. The system is also still largely based on cost recovery and 37% of medicines costs are financed by the patient. Medicines remain the single largest healthcare cost for households. Given that the majority of the population lives on less than $1.25 a day, the cost of medicines, even at low prices, represents a major challenge.
Affordability of medicines could be improved by addressing the various mark-ups in the system, improving medicines availability in hospitals and in the longer term through investments in local production of medicines either at the national or regional level. In the short term however, Burkina Faso is dependent on imports of generic medicines especially from India. This is another reason why India should not accept European demands to introduce stricter intellectual property protection, which is likely to hinder generic competition and lead to higher overall prices for importing low-income countries.
 TRIPS is the Intellectual Property framework to which all members of the World Trade Organization have to adhere. However, in order to protect public health, some flexibilities and safeguards have been explicitly introduced. These were reconfirmed in the Doha Declaration on TRIPS and public health.
 The Bangui Agreement (1977) governs intellectual property in the 16 member states of the African Intellectual Property Organization (AIPO). This agreement is incorporated as national law. It was revised in 1999 to bring the legislation into line with the TRIPS Agreement.
 Compulsory licensing is when a government allows a third party to produce the patented product or use the patented process without the consent of the patent holder. This is one of the flexibilities provided in the WTO Agreement on TRIPS on patent protection. While under the WTO agreement the compulsory licence would be open to manufacturers all over the world, the Bangui agreement limits its use to manufacturers in the African region. Considering the region’s limited production capacity, this should be reviewed.
Katrien Vervoort was the Essential Services Policy Officer for Oxfam Solidarité, Belgium until December 2011.