Pharmaceutical Policy in Armenia


Policy paper


1. Introduction

The pharmaceutical service of the Republic of Armenia (RA), aiming to provide the population of the country with pharmaceuticals, as well as appropriate services, has undergone fundamental changes during the last 10 years. There are visible achievements, however such basic goals of the pharmaceutical service, as ensuring availability of essential pharmaceutical products for the population, ensuring quality of medicines and their rational use, have been attained only partly.


In spite of the fact that official data on medicines consumption in Armenia is unavailable, the rough estimates suggest that the total pharmaceutical expenditures on medicines consist of less than 2500-3000 dramas or about 4 USD per capita per year without taking into account the humanitarian assistance. A comparison with the data of other countries demonstrates an extremely low level of medicines consumption in Armenia. In OECD on average, the total expenditures on pharmaceutical goods per capita were 188.2 and 239.7 USD in 1990 and 1996, respectively [2]. In 2000, the pharmaceutical expenditures in some of the Western European countries exceeded 350 USD per capita, while in Central and Eastern Europe they were mainly 20-100 USD (Romania and Albania have pharmaceutical expenditures even less than 20 USD) [8].  The countries of Sub-Saharan Africa had the lowest recorded pharmaceutical expenditures at 7.8 USD in 1990  [11].


Many patients in Armenia lack an access to medicines they need. A study, carried out by PADCO in November 2001, found out that only 81 % of households, whose members were prescribed medicines, had an opportunity to buy these [9]. The results of our study (August, 2002) show that 24% of all households interviewed were unable to buy medicines, completely or partly. Moreover, problems with access to medicines were reported not only by groups of poor and very poor, but also a group of not poor households with average monthly expenditures per person higher than 23 USD (the poverty line for 1998-1999) [5]. 


The supply of poor-quality and unsafe medicines at the pharmaceutical market - also deserves attention. Cases of revealing counterfeit and unregistered medicines in recent years reveal the imperfection of a quality assurance system in Armenia. Similar situation is observed in the markets for pharmaceuticals in other CIS countries requiring complex intervention at different levels of the drug procurement system.


Irrational use of drugs is widespread, specifically an inadequate prescribing patterns by doctors and an inadequate dispensing by pharmacy staff, as well as inappropriate use by patients.


The described problems in the field of the pharmaceutical service do not allow ensuring protection and to improve health of the population of Armenia, and also lead to not cost-effective use of very limited financial resources of the state and the population.


The basic problems of pharmaceutical service and their reasons are interconnected. The international experience in the last 30 years has convincingly proved, that successful solutions to effective management of drug supply can only be achieved on the basis of a comprehensive approach and within a common framework [4, 15]. Proceeding from this, the WHO recommends  “that all countries formulate and implement a comprehensive national drug policy” [15].


The purpose of this paper is discussing the key issues related to the pharmaceutical service in Armenia, possible strategies to tackle the existing problems, and also present recommendations on national pharmaceutical policy.






2. Problem description  


2.1 Background of the problem


2.1.1 Access to medicines


In 1992 the proclamation of independence of Armenia and the transition to a new economic system required essential changes in the pharmaceutical service. Significant increase of drugs prices, caused by liberalization and a reduction of the public health care financing have led to a sharp decrease in access to medicines for the population. The public pharmaceutical expenditures planned in 1998-2002 are approximately equivalent to 0.5 USD per year per capita [3, 10]. Moreover, it is recognized, that the real allocation usually was much below than planned, in particular the real public health expenditures in 1998 were about 70% and in 2000 – 50% of approved budget. In comparison, in the OECD on average, the public pharmaceutical expenditures in 1996 was 137 USD per capita [2], in developing countries it is usually less than 30 USD, and in 38 countries, it is less than 2 USD [16]. This shows that the public financing of medicines in Armenia is at a level of the poorest countries in the world. It does not allow providing even for the basic needs of the population. It should be noted that not only the absolute figure of the public pharmaceutical expenditures is low, but also the share of these expenditures in the total health budget. Thus, in the period 1998–2002, the financing allocated for centralized procurement of medicines, consisted of 4.6 up to 5.8 % of the total public health budget in Armenia. In OECD on the average (1996), the share of pharmaceuticals is 10 % [2], in the Western European countries (2000) – 10-20% [8], in Bulgaria - 18,4 % [12], in the Czech Republic, Hungary, Greece and Portugal (1996) it was over 25 % [2], in many of the NIS and the CCEE (2000) – more than 30% and in some cases – 50-60% [8].


It is clear, that at such level of public financing for pharmaceuticals in Armenia it is impossible to meet the needs even of the most vulnerable groups of the population and patients with priority diseases, such as cancer, diabetes, tuberculosis, mental and some other deceases. Due to lack of public financing in 2000 only 18.2% of the drug needs of patients with priority diseases were met by providing them free-of-charge medicines purchased centrally by the Ministry of Health. The vaccines, serums and medicines for treatment of tuberculosis were not purchased by the Ministry of Health at all and the demand for these products was met only partly through donations by international agencies and other organizations outside Armenia. Public finances spent for purchasing Cytotoxic drugs for treatment of cancer what is the second most common cause of mortality in Armenia covered only 9.9 % of the required sum [10].


Despite that the Soviet system of reimbursement, based on free-of-charge or on preferential terms dispensing medicines from community pharmacies to out-patients to cover particular vulnerable groups and specific diseases and further direct compensation of these pharmacies, has never been revoked, in fact it is not operating since the initial stages of the reforms process. This resulted partially from the privatization of the public pharmacies and the contracted public health care finance. Thus, patients can receive free-of-charge only donated or centrally purchased for the Ministry of Health (financed from the State Budget) products. These products were dispensed to out-patients by the Ministry of Health’s special pharmacy, then by few pharmacies, by the Cancer and some other policlinics and some physicians.


Furthermore, due to reduction of public health budget and drugs prices increasing hospitals, being underfunded, were unable to provide necessary medicines. Medicines and other pharmaceutical products, which in former USSR were given to inpatients free-of-charge, began to be bought by the patients mainly out-of-pocket.


2.1.2 Efficiency, safety, quality


The new economic approaches required appropriate legislation and regulation documents, but their development lagged behind and were deprioritised in the reform process. The Law “On medicines" was passed only in 1998, more than 3 years after final draft presenting to the Ministry of Health. It has since undergone criticism by experts, including its authors, as in a process of debate many important sections were modified.


Disorganization in the centralized system of drug supply has lead not only to deficiency of medicines, but also to appearance at the market of a number of drugs with unknown quality. The market for pharmaceuticals was diversified and medicines began to be sold at the so-called street "little tables", posing challenges for proper control quality.  However, there are some positive developments which made it possible to manage quality of medicines at the pharmaceutical market by the end of the 1990s. These include creation of drug registration system in Armenia in 1992, and since 1997 identifying the requirements on renewal of registration of all medicines, formerly registered in the USSR, and the introduction of licensing regimes for pharmaceutical enterprises and regulations on import of drugs. According to the Agency on drugs and medical technologies data, the control of imported pharmaceuticals prevents the presence of poor-quality medicines (about 50 products per year) at the market. As a result, the percent of unregistered medicines in the market was reduced from 28 % to 3-4 % for the period 1996–2001 [6]. Nevertheless, cases of selling medicines of unknown quality at community pharmacies are still observed. There are products that have bypassed the official import channels and others, produced in Armenia. Counterfeit medicines were also found among the products received through humanitarian assistance. The problem of counterfeit medicines exists all over the world, and during the last years counterfeit and poor-quality medicines were found out in many countries of the CIS.


The Certification system required availability of certificate of conformance for products at pharmacies was introduced as a means of certifying quality through the channel of distribution. However it was cancelled very soon. This cancellation can be explained and is reasonable only by the fact that actually it has never operated at wholesaler and pharmacy level. As a result of absence in former USSR of the modern requirements to organization of drug manufacturing, the industrial enterprises of that period did not meet to the Good Manufacturing Practice (GMP) standards. According to the Armenian Drug and Medical Technologies Agency, 2103 of registered in Armenia on 1.03.2001 medicines were produced by manufacturers, which comply with GMP and 600 – by those, which don’t comply [6]. Many manufactures continue to produce medicines under the same conditions, which do not assure an appropriate quality of products. Nevertheless, these medicines are less expensive, and withdrawal of such products, both local and imported, from the market, would result in deprivation of a large part of the population from access to affordable medicines.


2.1.3 Rational use of medicines


Irrational use of medicines has become aggravated in Armenia due to the hard socio-economic situation arisen in the country. The lack of necessary medicines in hospitals and a low purchasing power of the population has sometimes led to use of available and affordable medication that is not necessarily represent the most appropriate treatment. An extremely low and irregularly paid salaries have lowered the motivation of the health professionals and worsened the quality of care. Availability of new medicines at the  market  and the  poor access to information about these has made it difficult for the health professionals to maintain their  knowledge.


Due to introduction of system of paid health services many patients are unable to visit medical establishments and choose to practice self-medication, even in the cases of diseases requiring confirmation of diagnosis and /or a supervision by a doctor. According to the data of the Drug Agency, 67% of randomly selected citizens of Yerevan prefer self-medication and one of the most used medicines is analgin (metamizolum) – drug withdrawn from market in many countries due to a high risk [6]. Community pharmacies have begun to sell without prescription practically all prescription-only medicines, except for narcotic and psychotropic ones. The privatization of the former state pharmacies and creation of a number of private community pharmacies and kiosks, in the absence of adequate documents regulating both pharmacy practice, and control of pharmaceutical establishments activity, have lead to reduction in the quality of pharmacy services. There is little understanding of the new role of the pharmacist in the health system  and little knowledge on the new standards of  pharmacy practice and the concept of pharmaceutical care that have been recognized internationally.


2.2 The current situation


2.2.1 Access to medicines


Significantly increased pharmaceutical expenditures are planed in the state budget for 2003, amounting to about 1.7 USD per year per capita. This includes both primary and secondary health care and reaches the unprecedented figure of 18.4 % of the total public health budget. Despite that this financing will not cover all necessary expenditure on medicines, it testifies to the recognition by the Government of necessity of adequate financing for the pharmaceutical sector.


However, there is no price regulation and this lead to cost escalation. Prices of many medicines are at the level observed in OECD and have even more increased after withdrawing the privilege on VAT for medicines in 2001. For example, price of Ciprofloxacin (Bayer/Germany) is very high, when comparing with other countries, in particular among countries of Europe and North America, where an information is available. In 2001, only in Germany price of Bayer’s Ciprofloxacin was higher than in Armenia. In India price of 100 units (500mg) of Bayer’s product was 15 USD, in Armenia – 371 USD. Price of Simvastatin what is available in Armenia only as Zocor (MSD/Netherlands) was at the middle level when comparing with other countries (low price for this drug is observed only in India and Nepal where a cheap generic is available). [10].


Calculations confirm, that cost of treatment is high and frequently is inaccessible to the patients. For example, in 2002 an average cost of treatment for hypertension (the 3rd stage), a very common condition in Armenia, according to approved clinical guidelines equaled about 14 USD, that makes about 30 % of an average monthly nominal salary or 150 % of an average monthly pension. An average cost of treatment using the cheapest products according to a frequently used prescribing scheme was even higher at about 37 USD (2001) [10].


The results of the households survey (2002) show that many of them are unable to buy medicines, completely or partially. Predictably, the ability of households to afford medicines varies depended on their income. Percentages of households, who reported that they were not able to buy medicines they needed, were 63.1% among those included in the group called “very poor” (average monthly expenditures less than 14 USD), 22.2% - in the group of “poor” (average monthly expenditures less than 23 USD) and 14.9% - in the group of “non pure” [5]. Another study from 2002 has confirmed these results showing that more than 11 % of respondents could not buy the necessary medicines, and 17% stated that they have bought medicines with difficulties and will be unable to manage in case they need these again.


2.2.2 Efficiency, safety, quality


The "grey" market in pharmaceuticals continues to exist in Armenia. This includes sale of products of unclear quality, including drugs not registered in Armenia, which have entered the market avoiding the official channels. The real situation in this area is not enough known, as at present there is no requirement for certificates of conformance at pharmacies and body responsible for inspection of pharmaceutical establishments.


2.2.3 Rational use of medicines


Despite that there is a lack of research in this area seeking to identify and measure the quality of prescribing, dispensing and use of medicines, it is well-known that many factors leading to irrational drug use currently exist. These are unrestricted availability of prescription drugs, lack of independent information on medicines, prescribing patterns based on existing from the Soviet period approach that freedom to prescribe and select treatment scheme is the necessary condition and a right of physician and so forth. In addition, some important interventions started, for example introducing Drug and Therapeutic committees, Clinical Guidelines have little impact and not led to expected outcome. Our survey show that observed Drug and Therapeutic committees are in fact not operating. The Clinical Guidelines adopted are unknown to or unaccepted by physicians interviewed as they believe that new and more effective medicines have to be used. Lack of rules and regulations, insufficient efforts on education aimed to change approach, poor involving of target groups in developing and implementing strategies, as well as absence of management and supervision systems are important reasons of interventions failure.


The results of our survey (2002) show that there is a high level of antibiotics consumption, in many cases prescribed not by a doctor, in particular, 47% of antibacterial drugs, sold from pharmacies, were prescribed not by doctor. 30% of patients, asked for prescription medicine, have not visited doctor. 25 % of injections, sold from pharmacies, have also not been prescribed by doctor. It was confirmed that pharmacists carry out not only generic, but also therapeutic substitution, sometimes advising wrong medicines. The sale of medicines is often not accompanied by providing the necessary information on their use. In addition, there is no regulation on labeling and patient leaflet. The survey implemented by PO DURG show that the content of label and patent leaflets for many pharmaceuticals at market do not comply with WHO Recommendations and EU Guidelines in this area.


Neglecting consumer education in Armenia also causes the irrational consumption of medicines in Armenia. However, the results of our survey confirm that patients are interested in getting more information in the area of drug use and the majority of them read leaflet before use a medicine.


3. Policy options


3.1 Access to medicines


Various approaches can be considered in order to improve the present situation on access to medicines. Experts from the Ministry of economics and finance have recommended maintenance of pharmaceutical expenditures according to the 2003 increase. Proceeding increase of these financial allocations could be another approach. The introduction of measures for reduction of the unjustified wastes of drugs is also important. Introduction of Health Insurance System is another approach to secure access to drugs.


Clearly maintenance of public pharmaceutical expenditures at the present, or even a higher level, will not allow ensuring an equal access of the population to medicines. Such a conclusion can be made not only on the basis of comparison of the data on public pharmaceutical expenditures in Armenia and other countries, but also by calculations based on to what extent the drug requirement has been met by centralized purchasing. In 2000, the Ministry of Health purchased medicines capable to meet only 18 % of the needs, covering treatment of priority diseases without taking into account the needs of vulnerable groups. Thus, even a three or four-fold increase in the planned for 2003 expenditures will not allow to satisfy the priority needs. Continuing the tendency of increasing the public pharmaceutical expenditures seems to be essential. A lack of sufficient public finances, always mentioned when discussing access to health care and medicines, is not looked as a convincing argument, as even in 2003, when public health expenditures are 1.5% of GDP and public pharmaceutical expenditures have greatly increased, they represent only about 0.3 % of GDP, compared to 0.7% of GDP in the OECD in 1996 with a tendency to grow [2].


Increase of public financing is necessary, but insufficient measure. It is very important also to develop and introduce a complex of measures intended to increase value for money and to reduce waste at each stage [15]. Measures of cost containment are used in many countries and improving cost-effectiveness would be extremely important for country with a so limited budget such Armenia. Nevertheless, analysis of the situation allows to see waste at all stages of drug management circle. For example, the results of PO DURG study show irrational drug selection at centralized procurement, in particular selection medicines outside the Essential drugs list. Irrational prescribing of expensive medicines have been promoted by physicians interviewed at local hospitals. Various measures could improve the situation, for example following to operating principles of Good procurement practice will result to cost-effectiveness of public expenditures at the centralized purchases. Very different prices on the same product observed in various pharmacies even inside of one town (in particular, Yerevan) testify about an obvious expediency of introducing price regulation, in particular on marks-up.


Withdrawing the privilege on VAT for medicines since January 1, 2001 has led to prices rising. However, this increase was not as high as it was expected due to being partially smoothed out by increasing of number of wholesalers, and, correspondingly, a stronger competition. System of price regulation should be based on the results of a detailed research, otherwise, the unreasonable restrictions will lead to closing the pharmaceutical enterprises (wholesalers and pharmacies), reducing a competition and temporary disappearance of a number of products from the market. Restoration of the privilege on VAT would allow to pharmaceutical organizations to increase their turnover. Under the conditions of price regulation introduced and control of this regulation implementation, the privilege on VAT will led to visible reduction of prices.


The introduction of drug financing system based on health insurance, widely used in Western Europe, can be perspective in Armenia only after increase of the incomes level of the population and improvement of an economic situation in the country.


Thus, the complex approach including both increasing public drug financing and introducing measures intended to improve management and provide cost-effectiveness, is likely to be the best reform strategy.


3. 2 Quality assurance


One of the basic elements of quality assurance is the Good Manufacturing Practice (GMP). The expediency of prohibition in RA manufacturing what does not comply with the GMP requirements, has been extensively discussed. However, as a result of implementing such requirement, all small-scale manufactures, including those carrying out packaging, will be forced to be closed. Only 3 enterprises, build more-or-less according to the GMP standards will be kept. Some medicines, for example the widely used Tincture of Iodine, will have to be imported in packaged form, that essentially will increase their cost.


The options of promoting development of a local industry, in compliance with internationally accepted standards, to ensure availability of good quality products at cheaper price in the market and lead to closing down of old and poor quality enterprises is certainly a good solution in the long run. Developing local pharmaceutical industry would also be contributing to a national economy.  Other important elements of quality assurance are state inspection of all enterprises engaged in pharmaceutical activity, and   system of sanctions in case of irregularities that could be effectively enforced.  The creation of the detailed regulation guidelines ensuring the objectivity and transparency of the inspection, may lead to fall in cases of infringements, including selling of poor-quality products. In the case these measures are not taken, a lowered during reforms quality of pharmaceutical services will be not improved and will be not developing further. However, it is necessary to be very careful when introducing such regulatory framework in order not to diminish further the credibility of the inspection process.


3.3 Rational use of medicines


An international experience confirms that rational use of medicines can be achieved only through a comprehensive approach to this issue. “A combination of strategies tailored to the needs of the different groups and different environments is needed” [15]. According to the WHO recommendations in this area strategies to promote rational drug use can be educational, managerial or regulatory. Analysis of the local situation and problems identified confirms the necessity of combining approach to achieve objectives stated in this area.


The main policy options to be discussed in the area of rational drug use are the approach based on the development of clinical guidelines leading to essential drugs list and formularies and the approach based on refuse a concept of limited drugs list and support freedom of physicians to prescribe any medicine. The first approach is recommended by the WHO and used in many countries (Essential Drugs List in developing countries and Formulary system in industrialized countries) confirming its effectiveness. The second one was used in the former USSR and is the keystone of philosophy for the majority of physicians in Armenia despite the official acceptance of Essential drugs concept by the Ministry of Health since 1992.


The first option indicates the most cost-effective therapeutic approach, on the basis of valid clinical evidence, while absolute freedom in chousing treatment often lead to irrational drug use and related medical and economic consequences. This has also been proven in Armenia. For example, according to the results of study, carried out by the Agency on drugs and medicines technology in order to identify rationality of antibiotic prescribing, irrational prescribing of single dose was observed in 27.2% cases and irrational prescribing of course dose - in 39.1% cases [6]. Surveys implemented by PO DURG show that the minimal cost of treatment for pneumonia (light or medium severity) according to clinical guidelines approved and based on using inexpensive generics is about 1-2 USD (2002), while an average cost of treatment according to a frequently used prescribing scheme based mainly on use of new expensive antibiotics was much higher - at least 50 USD (2001) [10].


The first approach lead not only to more rational prescribing, but also to a better supply of drugs and to lower cost due to the following reasons: nationally agreed clinical guidelines are based on valid clinical evidences and able to take into account national peculiarities; training and information can be more focused; prescribers gain more experience with fewer drugs; procurement, storage, distribution, dispensing are easier with a reduced number of drugs; procurement of fewer items in larger quantities results in more price competition and economies of scale [15].


Thus, it is clear that the approach based on concept of essential drugs is an appropriate one for the current situation in Armenia. However, existing in the country experience of proclamation of such a policy without its promotion confirms necessity of developing not only a policy document, but also an implementation plan (master plan) and its further monitoring and evaluation. Approval of the special Program “On the essential drugs” specifying detailed activities, finances and responsible agencies is required, otherwise, the idea of the limited number of drugs will not be fully implemented in practice. It is confirmed by the fact that although the first essential drug list was introduced in Armenia in 1992, it has had little impact and many strategies and practical implications of the essential drugs concept are still far from being well implemented.


An active promotion of the importance of rational drug use among health professionals and population is also essential. This should involve not only education and knowledge dissemination, but also, changing philosophy in order to take into account not only the benefit, but also the risks connected with the use of medicines. Otherwise the widely practiced unreasonable use of medicines may result in undesirable consequences for the health of the population, and also excessive costs burdening the system and the health systems users. 


4. Economic aspects


It is important to add, that the introduction of strategies aimed to improve pharmaceutical service will require further financial investments. However, if this is not done, the expenses will be higher. Irrational drug use leads to an enormous waste of resources [15]. Use of poor-quality products or chaotic use of drugs could lead to some adverse health consequences associated with higher cost of care. In the United States expenditures on overcoming of consequences caused by misuse of medicines are in the range of billions dollars per year. Lack of access to medicines at the initial stages of illness can lead to increase in chronic conditions associated with a more protracted treatment at a higher cost to the society in terms of burden of disease and health system resources requirements.


5. Conclusions and recommendations


An extremely low level of both public pharmaceutical expenditures and population incomes, under conditions of high prices of pharmaceuticals place severe constraints on the population access  to medicines. The existing systems of quality assurance of products and inspection of the pharmaceutical enterprises are not fully effective and cannot prevent completely the appearance  of poor-quality medicines at the pharmaceutical market. There is a lack of drive towards rational use of medicines due to deeply rooted physicians and population preferences, training, and ethos of medical treatment.  Inappropriate use of medicines is likely to be an important factor in failing to improve the health of the citizens in the best way, given the available resources.


The basic recommendation on this study are:


1.                    Approval of a National pharmaceutical policy document.


2.                    Introduction of an appropriate legislation, passing of a new Law “On Medicines” and adapting the regulatory framework.

3.                    Development and approval of a dedicated Program on essential drugs aimed at a broad introduction of the essential drugs concept.

4.                    Public pharmaceutical financing to be raised to 0.7 % GDP by 2009 but not less than 10 USD.

5.                    Development and introducing a system for drug price regulation.

6.                    Development and introduction of a package of measures aimed to reduce waste on medicines.

7.                    Re-introducing of a privilege on VAT payment for medicines.

8.                    Development of a local pharmaceutical industry in compliance with GMP standards.

9.                    Creation of a control body responsible for inspection of pharmaceutical enterprises in Armenia according to objective and transparent principles. Such inspections should involve representatives of professional associations and nongovernmental organizations (including those representing consumers).

10.                Introduction of Formulary system in medical establishments.

11.                Promotion of the Good prescribing practice and rational drug use and their inclusion in the curricula of health care professionals.

12.                Organising campaigns aimed to educate the population in appropriate use of pharmaceuticals.




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