Cost-sharing and pharmaceutical utilisation in Russia: evidence from a household survey

The Russian pharmaceutical sector is currently undergoing reform of the procurement, distribution and financing of medical drugs. The political imperatives underpinning these changes are wide ranging, and include the desire to protect local industry while benefiting from higher quality or less expensive imports. It is also felt that there should be some form of cost sharing between consumers and the government, in the belief that this will deliver socially optimal usage of pharmaceuticals and help control disease. Routine official statistics on drug use in the Russian Federation are unavailable, and data collected prior to the collapse of the Soviet Union can no longer be used for predictive purposes. The former centralised health system, offering universal free care, has disintegrated and the local production and distribution of pharmaceuticals has all but collapsed. While attempts are made to preserve the principle of free universal access, in reality patients are having to pay an increasing proportion of medical and pharmaceutical costs, and are facing greater problems in securing medication. Hospitals rely increasingly on humanitarian aid for supplies of drugs, and patients are often forced to secure a full range of medication, including antibiotics and anaesthetics, prior to hospital admission. Traditionally certain categories of the population have been exempted from pharmaceutical charges. Exemption categories are now no longer standard across the Federation: the universality of exemption status proclaimed in December 1992 (Decree 970) was largely overturned in July 1994 (Decree 890) which gave oblasts (regional governments) considerable autonomy in deciding eligibility for exemption, the list of exempt items, and reimbursement levels. The introduction of Compulsory Health Insurance has further eroded the principles of solidarity. Nor are entitlements widely publicised, particularly if oblast governments cannot afford to honour them and, even if patients are aware of their exemption status, claiming the reimbursement for which they are eligible is problematic. The household survey used in this study suggests that many are not aware of their exemption status and some are denied the right to purchase preparations against an exemption certificate. Future government policy is likely to be directed at designing an equitable and affordable system of cost-sharing with patients, and this paper aims to assist this process. The following section outlines the economic theory underpinning co-payments, including discussion of the impact of cost-sharing on consumer decisions and government revenues. The remainder of the paper addresses the impact of exemption status, and other socio-economic variables, on pharmaceutical use in Russia. Estimates are derived from a survey of over 4,000 households conducted in Russia in 1996. The data and sample are described in Section III. Separate models for the utilisation of prescriptions and for the overall level of household expenditure on pharmaceuticals are presented in Section IV. The analysis generates price and income elasticities of the demand for pharmaceuticals, which can be used to calculate the impact of different levels of co-payment. The policy implications of this are drawn out in Section V, while concluding comments are made in Section VI.