To expand health insurance coverage in Africa, we need to manage the rising cost of drugs.
There is no doubt that a growth in NCD incidence rates will lead to a boom in drug sales. IMS Health estimates that by 2020, the pharmaceutical industry in Africa would be worth $45 billion. While this number seems appetising to every investor and pharmaceutical company, we cannot reach this market potential if we don’t have an answer to the most important question: How do patients pay for their medications?
At mPharma, we believe that increasing access to health insurance coverage is a fundamental step towards enabling more patients to afford their medications. However, insurance coverage will not grow if pharmaceutical companies don’t work with health insurers to reduce their drug reimbursement costs, which can account for as much as 30% of reimbursement budgets for insurance companies. High drug prices lead to costly insurance premiums. This makes it impossible for most SME’s to offer health insurance to their employees.
It is for this reason mPharma decided to build Mutti, our pharmacy benefits management (PBM) service for health insurance companies.
In the 1960’s, 96% of prescription drugs in the US were purchased by consumers as out of pocket expenses. By 2008, only 21% of prescription drugs were purchased through out of pocket payments. The shift to managed care fundamentally changed the prescription drug market, from a “direct to consumer” retail business to one where purchasing decisions were moved from the hands of consumers to third party payers (TPPs).
Shifting the cost of medications to insurers came as a relief to consumers but it led TPPs to develop new cost management models. Enter PBMs. PBMs enabled health insurers to outsource the administration of their drug benefits. PBMs started off simply by managing claims before evolving into developing and managing drug formularies for TPPs. As a pharmaceutical manufacturer, it was tough luck for you if your drug was not included in the PBM’s drug formulary.
Why does this matter for Africa?
Although a big portion of healthcare expenditure in Africa still relies on the “Cash and Carry” system, there has been a gradual increase in the establishment of private health insurance schemes. In Ghana and Nigeria, there are 11 and 15 private health insurers, respectively, while the Ivory Coast has the number of community health insurers grow from 9 in 1997 to 47 in 2006.
The priority for most TPPs has been on providing coverage to consumers through their employers. Direct retail insurance is still very limited due to cost containment challenges, as insurers have difficulty monitoring medicine utilisation and costs. Medicine prices vary widely across Africa — drugs can cost “between 9–25 times the international reference for lowest priced generic drugs and more than 20 times the international reference price for originator products.” In our own studies at mPharma, we found private health insurers spend between 25%-40% of their reimbursement budgets on drugs. In addition to drug costs, there is also the issue of getting accurate claims information — a WHO survey found that two-thirds of health insurers reported fraud as a serious problem in managing their medicine benefits.
mPharma believes that controlling high reimbursement costs for drugs is critical to enhancing the sustainability of health insurance schemes in Africa. Learning from the models pioneered by PBMs in the USA, we have taken concrete steps this year to build a comprehensive drug’s benefits scheme for health insurers in the markets we operate in.
We are fortunate that our journey as a company began by developing an electronic prescription system that enabled us to monitor medicine utilisation in real-time. The data we gathered through our e-prescription software (over 25,000 patients in 50+ hospitals and 150 pharmacies) helped us find dispensation patterns for different prescribed drugs. It became clear to us that if we wanted to help patients receive high quality medications, we had to find solutions to address the financing aspect of prescriptions.
Today, we work with multiple health insurers in the region. We have helped them reduce their costs on some chronic drugs by as much as 50%. These savings for the insurance company has enabled them to remove our partner pharmaceutical companies drugs off their exclusionary lists, with an immediate impact on these companies market share. In one pilot, a partner pharmaceutical company increased patients on its drugs from 0 to 300 within 5 months at a single hospital in the Mutti network.
mPharma believes that every doctor should be able to prescribe the best medicines for their patients. Our mission is to enable the patient to find and afford that medication.
We are always thinking about market access solutions. We look forward to learning from your experiences and sharing our knowledge with you.