How to establish a successful revolving drug fund: the experience of Khartoum state in the Sudan
Gamal Khalafalla Mohamed Ali a
a. Public Health Institute, Khartoum, the Sudan.
Correspondence to Gamal Khalafalla Mohamed Ali (e-mail: firstname.lastname@example.org).
(Submitted: 16 October 2007 – Revised version received: 01 March 2008 – Accepted: 08 April 2008 – Published online: 06 January 2009.)
Bulletin of the World Health Organization 2009;87:139-142. doi: 10.2471/BLT.07.048561
One of the methods for financing medicines is a Revolving Drug Fund (RDF) in which, after an initial capital investment, drug supplies are replenished with monies collected from the sales of drugs.1 The RDF of the Ministry of Health in Khartoum state, the Sudan, was implemented with the financial support of Save the Children (in the United Kingdom) to improve chronic shortages of medicines in public health centres. The project’s expected outcomes also include establishing an effective self-sustaining medicine supply system and promoting community participation in providing health care. After the first capital investment was made by Save the Children (United Kingdom) in 1989, the RDF used its revenues of pharmaceutical sales to procure more medicines.
There is limited evidence available concerning the effects of RDFs on utilization of public health-care facilities and it is mainly from short-term, small-scale, and often externally funded projects, from the northwest province of Cameroon,2 Ghana,3 Vientiane municipality in the Lao People’s Democratic Republic,4 Nigeria,5 Viet Nam6 and Zimbabwe.7 These studies did not give a comprehensive evaluation of the projects that were assessed. This paper aims to highlight the findings of a recent evaluation study of the RDF in Khartoum state. It also presents several lessons that could be learned from this experience.
Interviews were conducted with 14 senior policy-makers at the Ministry of Health to explore their perceptions about the effects of the RDF on accessibility to medicines and factors that have determined the survival of the RDF. A total of 27 practitioners were also interviewed to gather information about the availability of quality medicines.
The qualitative information was cross-checked with quantitative data collected from 93 patients and 93 households from the catchment areas of selected health facilities. A feasible sample size was set in terms of the available time and resources. In addition, archival records were verified to enable the gathering of data about availability of medicines. Finally, systematic observations were conducted using checklists to check the availability of medicines during visits to health facilities. This information was collected from two sets of health facilities. The RDF facilities comprised one teaching hospital, one rural hospital and three health centres distributed in rural and urban areas. The non-RDF health facilities (control group) included the biggest referral hospital in the Sudan and one rural health centre.
Before starting the data collection, ethical clearance was obtained from the Ministry of Health research ethics committee. Permission was sought from interviewees for their participation.
The interviews with the policy-makers and practitioners revealed that the RDF is responsible for maintaining a regular supply of medicines in its health facilities compared with non-RDF ones. The health facilities survey showed that, from a total of 48 respondents who visited RDF health facilities, almost 85% bought their drugs from the RDF pharmacy. Only 8% failed to fill their prescription using RDF because the medicines were not available. The average availability rate of key items, which were determined before the fieldwork, was greater (97%) in the RDF facilities than in non-RDF facilities (86%).
The RDF has strongly improved geographical equity of access to medicines. It has expanded from a project designed to supply only 60 health centres to an independent foundation responsible for the distribution of pharmaceutical products to almost all Ministry of Health facilities in Khartoum state. Our quantitative findings revealed that most of the sampled households were located > 5 km from the nearest RDF facility. As a result, the RDF has met the recommended goal of treating 5.9 million patients in the past 2 years. The RDF medicines were usually considered affordable by users. The average cost of a prescription (3.01 Sudanese pounds) at the RDF facilities amounted to only 2% of the lowest monthly government salary.
This evaluation identified some areas of weaknesses that still need to be considered to ensure the RDF’s sustainability. This study showed that 6% of prescriptions presented to selected RDF health facilities were not dispensed for financial reasons. The RDF also failed to extend access in geographical terms: 26% of health centres and 200 dispensaries in rural areas in Khartoum state still do not have the RDF. Administrators of RDF health facilities or neighbourhood health committees have no role in the financial management of the RDF at their facilities.
Several lessons have been learned from the experience in Khartoum state (Table 1). These lessons were distilled from interviews with policy-makers in considering the factors that often cause RDFs to fail to generate sufficient revenues to replenish their stocks and, in effect, to revolve.1
It took 4 years of preparation by Save the Children (United Kingdom) and the Ministry of Health before the RDF was introduced in late 1989. Given the time required to implement the RDF, it is clear that the experience and logistic input of Save the Children (United Kingdom) was of paramount importance. It is therefore essential that the cooperation of international nongovernmental organizations should not be underestimated in the development of RDF programmes.
Substantial investment by Save the Children (United Kingdom) has enabled the RDF to achieve its goals. According to its obligations set out in the agreement with the government, Save the Children (United Kingdom) provided the capital seed stock of medicines that helped the RDF to absorb its first huge loss (46% of the invested capital) that occurred as a result of local currency liberalization in 1992.
Political commitment allowed the RDF to have a separate account so that its managers have a free hand in keeping generated revenues out of public treasury regulation. Therefore one of the important lessons to be learned from the RDF in Khartoum state is that revenues generated from medicine sales should be kept in the RDF and entirely excluded from the Ministry of Finance budget. The RDF also enjoys the benefits of a strong political commitment in terms of tax exemption and import licence exemption.
This study reveals that applying a commercial style of business management, such as on employment contracts, was not only possible and accepted within a public sector setting, but resulted in control over operations and reduction of risk. These measures also resulted in preserving the entity of the RDF. In addition, the RDF needs to recruit staff with expertise in finance, accountancy and private sector experience. This enables the RDF to establish a profit and loss account on a commercial basis.
The Currency Swap Agreement signed between the Government of Sudan and Save the Children (United Kingdom) enabled the RDF to have access to hard currency at official rates. The lesson to be learned is that donors and development organizations wishing to set up effective RDFs may need to be innovative in responding to constraints that might arise. Access to foreign currency is one such constraint. However, by setting up this currency swap mechanism, to which both the government of Sudan and Save the Children (United Kingdom) were committed, the constraint was overcome.
To ensure the RDF’s success, reliable sources of quality medicines must be identified. The drug procurement strategy was based on the annual purchase of a large quantity of drugs and on responding to situations of stock-out and emergencies. All RDF facilities receive their medicines regardless of their ability to make a payment at the time of ordering. This policy ensured that no health facility operated without medicines. In the RDF pharmacies, medicines are dispensed with cash payments only with no exemption allowed.
To make medicines affordable, their cost has to be subsidized through the sale of cheaper drugs on the RDF list. To cover the potential loss, and to generate more funds for the continued supply of the expensive drugs, the cost of the cheaper medicines was always kept as low as possible to maintain their high turnover. The centralized system has enabled the RDF to have a standardized medicine list for each level, bulk purchase for more than 130 health facilities and a uniform price system.
Monitoring, evaluation and reporting on project activities at the RDF facilities have been performed by supervision teams in accordance with a stated list of performance targets. The supervision teams also move medicines that are nearing their expiry date from over-stocked facilities to under-stocked ones. In addition, the supervision teams collect revenue and monitor the financial status of each RDF pharmacy.
The increased use of RDF health centres suggests that people are prepared to go to a local health centre rather than to referral hospitals provided that medicines are available there. The lesson to be learned is that introducing a RDF to enhance the utilization of cost-effective primary health care facilities requires concomitant improvement in the quality of health care provided at these facilities. In addition, community acceptance increases medicine sales and, consequently, the ability of the RDF to replenish used stocks and to meet its operating expenses.
The RDF in Khartoum state has fulfilled its original mandate and could be successfully replicated in other states of the Sudan and in countries with similar contexts. The success factors reported in this evaluation are necessary to secure survival of the RDF. ■
Thank you to Professor Chris Bellamy and Dr Matt Henn.
Competing interests: None declared.
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