What is the Opportunity Cost of Financing Branded Drugs?: The case of the Dominican Republic
Peer Reviewed
Date issued
Aug 2023
Subject
Saving;
Branding;
Health;
Health Care System;
Medicines Price;
Finance;
Health Expenditure;
Pharmaceutical Industry;
Procurement
JEL code
H10 - Structure and Scope of Government: General;
H11 - Structure, Scope, and Performance of Government;
H21 - Efficiency • Optimal Taxation;
H30 - Fiscal Policies and Behavior of Economic Agents: General;
H51 - Government Expenditures and Health;
H61 - Budget • Budget Systems;
I10 - Health: General
Country
Dominican Republic
IDB series
Criteria Network
Category
Technical Notes
The availability of numerous beneficial healthcare technologies presents both an opportunity and a challenge: while they have the potential to improve health outcomes, financial constraints limit their widespread adoption. This challenge is further exacerbated by an aging population and shifting epidemiological trends, which place increasing pressure on global healthcare expenditures. To ensure that rising healthcare costs translate into meaningful improvements in population health, it is essential that spending remains sustainable, does not displace other critical investments, and aligns with the overarching goals of health systems. Given the finite nature of resources, allocating funds to one technology necessarily restricts their availability for others.
In the Dominican Republic, public healthcare resources are often used to finance higher-cost branded pharmaceuticals, despite the availability of equally effective unbranded generics. This study quantifies the health opportunity costs associated with this resource allocation. While generics constitute 77 percent of the Dominican Republics retail pharmaceutical market, unbranded generics represent only 7 percent, with the remainder consisting of branded generics and innovative drugs. On average, unbranded generics are 3.5 times less expensive than their branded counterparts. If the Dominican Republics contributive regime were to replace branded drugs with unbranded generics, it could achieve annual savings of US$13 to US$60 million.
Redirecting these savings toward expanding health services could yield 4,000 to 18,000 additional life years in perfect health per year. More significantly, if these resources were allocated to closing coverage gaps in highly cost-effective interventions, the health gains would be even greater. Specifically, this study estimates that using the potential savings to bridge gaps in cervical cancer screening and diabetes detection and management would lead to substantial public health improvements. In a conservative scenario, the savings would enable the country to close 100 percent of the gap in cervical cancer screening and 59 percent of the gap in diabetes care, translating to an annual gain of 12,000 life years in perfect health. In less conservative scenarios, both coverage gaps could be entirely eliminated within 4 to 8 months of savings, resulting in 18,000 additional life years in perfect health, with remaining resources available for other health investments.
This analysis underscores the significant health benefits and cost savings that could be achieved through a more efficient allocation of healthcare expenditures, reinforcing the need for policies that prioritize the use of high-quality, cost-effective unbranded generics in the Dominican Republics public healthcare system.
In the Dominican Republic, public healthcare resources are often used to finance higher-cost branded pharmaceuticals, despite the availability of equally effective unbranded generics. This study quantifies the health opportunity costs associated with this resource allocation. While generics constitute 77 percent of the Dominican Republics retail pharmaceutical market, unbranded generics represent only 7 percent, with the remainder consisting of branded generics and innovative drugs. On average, unbranded generics are 3.5 times less expensive than their branded counterparts. If the Dominican Republics contributive regime were to replace branded drugs with unbranded generics, it could achieve annual savings of US$13 to US$60 million.
Redirecting these savings toward expanding health services could yield 4,000 to 18,000 additional life years in perfect health per year. More significantly, if these resources were allocated to closing coverage gaps in highly cost-effective interventions, the health gains would be even greater. Specifically, this study estimates that using the potential savings to bridge gaps in cervical cancer screening and diabetes detection and management would lead to substantial public health improvements. In a conservative scenario, the savings would enable the country to close 100 percent of the gap in cervical cancer screening and 59 percent of the gap in diabetes care, translating to an annual gain of 12,000 life years in perfect health. In less conservative scenarios, both coverage gaps could be entirely eliminated within 4 to 8 months of savings, resulting in 18,000 additional life years in perfect health, with remaining resources available for other health investments.
This analysis underscores the significant health benefits and cost savings that could be achieved through a more efficient allocation of healthcare expenditures, reinforcing the need for policies that prioritize the use of high-quality, cost-effective unbranded generics in the Dominican Republics public healthcare system.
NO
