Pharmacoeconomics 2010; doi: 10.
2165/11584890-000000000-00000
COMMENTARY
Is There a Role for Pharmacoeconomics
in Developing Countries?
Zaheer-Ud-Din Babar and Shane Scahill
School of Pharmacy, Faculty of Medical and Health Sciences, University of Auckland,
Auckland, New Zealand
The special issue of PharmacoEconomics[1]
pertaining to developing nations was a welcome
move, with authors discussing various themes
relating to pharmaceutical economics. The topics
discussed included cost-effectiveness analyses
and the future of health technology assessment
(HTA) in healthcare decision making in the greater
Asia region. However, papers in this special issue
did not provide an answer to a fundamental ques-
tion: why is pharmacoeconomics vital for develop-
ing countries? Pharmacoeconomics is a complex
science and its practical utility depends on the con-
text in which it is being applied. To appreciate the
true value of this science as a decision-making
tool, it is important to elaborate on the context
within which healthcare decisions are being made.
Furthermore, an understanding of the local health
system is also required in order to establish whether
complex economic techniques need to be applied
and whether they are feasible and valuable tools
for a particular jurisdiction.
We argue that there is a need for a model that
could aid in determining the perceived need and
benefits of using pharmacoeconomics in form-
ulary development in a given developing country.
However, we do not present a full model; rather,
we highlight some of the components that could
be used to build such a model. Health and phar-
maceutical indicators from international agencies,
evidence-based pharmacy-system research as well
as the literature concerning how people perceive
pharmacoeconomics in developing countries could
serve as these components.
1170-7690/10/0000-0000/$49.95/0
2010 Adis Data Information BV. All rights reserved.
1. The Use and Understanding of
Pharmacoeconomics in Developing
Countries
The application of pharmacoeconomics for com-
paring pharmacy services and treatment options
is an accepted and valuable tool.[2] However, the
utility of pharmacoeconomics for selecting drugs
for national medicines formularies depends on
various factors, including health system design
and performance, the pharmaceutical situation[3]
and the countrys expenditure on pharmaceuti-
cals (evaluating the pharmaceutical situation of a
country requires pharmaceutical sector assess-
ment, including whether people have access to
safe, effective and affordable essential medicines
of acceptable quality).
We argue that it may not be necessary for
many low-income countries to use complex cost-
utility or cost-effectiveness techniques for select-
ing drugs for a national formulary. A medicine
pricing policy could work as a first-line tool.
In the recent issue of PharmacoEconomics,
Yang[4] outlined the growth of pharmacoeco-
nomics in Asia; however, he did not differentiate
between countries (while discussing the utility of
pharmacoeconomics), nor did he allude to any
country-specific cost-effectiveness threshold. Al-
though South Korea, Taiwan, the Philippines,
Thailand and Malaysia are at different levels of
health system development, Yang[4] did not take
this into account and used a generic statement
that, in all these countries pharmacoeconomics
2 Babar & Scahill

has been or will be increasingly used. Although
this may be the case in Taiwan and South Korea,
for the Philippines, Malaysia and Thailand, the
use of the simpler WHO medicines policy frame-
work,[5] rational pricing policies and the use of
generic medicines could be more appropriate as
first-line strategies. The need for a careful approach
in applying pharmacoeconomics has also recently
been suggested by Oortwijn et al.,[6] who noted
that HTA is developing with uneven speed in
middle-income countries.
Based on the need to understand the context of
individual health systems as they relate to the
utility of pharmacoeconomics, we provide case
study descriptions of three different country group-
ings. Criteria for the groupings are based on (a) the
countrys socioeconomic status; (b) recent phar-
maceutical reforms; and (c) the advancement and
maturity of health systems.
1.1 Group 1: South Korea and Taiwan
Both South Korea and Taiwan have developed
regulatory structures regarding pharmaceuticals
(table I).[12,13] In addition, pharmacy-system re-
search is advancing and pharmaceutical reforms
have recently taken place in these countries.[12,13]
Pharmacy-system research encompasses research
related to drug distribution, drug regulation, drug se-
lection, procurement, pricing, generic medicines, and
access and affordability of medicines. Pharmacy-
system research can be integrated into health-
system research and can be part of the national
health policy of a country.[14] Some policy re-
forms have dealt with more complex issues, such
as remuneration of pharmacists and the issue of
dispensing separation; where the roles of phar-
macists and doctors in prescribing are clearly
differentiated.[12,13,15] The parameters on health
system performance, income level, expenditure
on pharmaceuticals and gross national income
(see table I) indicate that both South Korea and
Taiwan have relatively advanced pharmaceutical
systems and may be ready to apply pharm-
acoeconomic models to help ensure rational med-
icine expenditures.
That Taiwan has a Centre for Drug Evalua-
tion (CDE) also supports the notion that this
country has a relatively advanced pharmaceutical
system. The CDE performs regulatory evaluations

Table I. Socioeconomic and health indicators of developing countries and the utility of pharmacoeconomics for selecting drugs for re-
imbursement and essential medicines lists
Country Gross national Income Health Health Total expenditure Approximate utility of
income ($US per level[8] system expenditure on pharmaceuticals pharmacoeconomics
capita) 2008[7] performance per capita ($US) (as % of total health
rank[8]a 2007[9] expenditure)[8]
Iran 3 540 2 96 253 12.6 Medium
Indonesia 1 880 1 103 42 26.7 Low
South Korea 21 530 2 51 1362 15.9 High
Malaysia 7 250 2 89 307 11.2 Medium
Pakistan 950 1 124 23 27.1 Low
Philippines 1 890 2 113 63 43.5 Low
Saudi Arabia 17 870 2 58 531 19.9 Medium
Thailand 3 670 2 99 130 29.3 Low-medium
b b
Taiwan 22 900 (y 2005)[10] 1745 22.8[11] High
a Ranked out of 191 countries according to disability-adjusted life-expectancy.
b Data for Taiwan are scarce, as Taiwan is not a member of many international agencies.
1 = low income level; 2 = middle income level; high = pharmaceutical systems are generally well established. Countries either have or are in the
process of establishing economic evaluation authorities, using economic guidelines from developed countries. However, local health needs
should be taken into account; low = pharmaceutical systems need restructuring and strengthening. The use of pharmacoeconomics could be
low; medium = pharmaceutical systems and regulatory authorities are generally established, with few areas still needing improvement and
strengthening. Pharmacoeconomics could be used in a few cases and for selected drugs.

2010 Adis Data Information BV. All rights reserved. Pharmacoeconomics 2010
Pharmacoeconomics in Developing Countries
of marketing application dossiers of new drugs
and provides advice to the Taiwanese Department
of Health.[6] Taiwan also explicitly evaluates evi-
dence reports from the HTA agencies in the UK,
Canada and Australia.[16]
Furthermore, South Korea has a Health Insur-
ance Review Agency (HIRA), which has developed
pharmacoeconomic guidelines for pharmaceutical
companies so that they can prepare economic
data before submitting a drug application for re-
imbursement and pricing.[6] South Korea is also
in the process of establishing a national agency
along the lines of the UK National Institute for
Health and Clinical Excellence (NICE).[17] How-
ever, Oortwijn et al.[6] have cautioned that estab-
lishing formal HTA agencies in middle-income
countries is not the total solution and that complex
local healthcare needs, service delivery arrange-
ments and mechanisms available to implement
guidance within the clinical community all need
to be considered.
1.2 Group 2: Iran, Malaysia and Saudi Arabia
According to the WHO,[8] the health systems
in Saudi Arabia, Malaysia and Iran are con-
sidered satisfactory and established (albeit less
than Group 1 see table I), although they still have
some unresolved issues regarding access to med-
icines, affordability and medicine reimbursement.
For example, in Malaysia, the prices of bran-
ded and generic drugs were found to be 16- and
6-fold higher than international reference prices
(IRPs), respectively.[18] These median price ratios
were derived from a standard methodology[19]
developed by the WHO and Health Action In-
ternational (HAI), which indicates whether prices
are high or low in developing countries. If this
ratio is <1 for public sector data (government
hospitals, clinics, etc.) and <2 for private sector
data (private pharmacies, medical stores), then
the prices are considered reasonable.
Iran has done well in promoting safe and ef-
fective use of medicines and has an effective med-
icines regulatory authority.[20-22] About 90% of
the population has access to affordable medicines
and a recent WHO/HAI study[23] suggested that
government procurement medicine prices and pa-
2010 Adis Data Information BV. All rights reserved.
3
tient prices for generic medicines were reasonable
and that almost all surveyed medicines were af-
fordable for workers on the minimum wage. Few
originator brands are marketed; however, they
are an average of 3- to 7-fold higher than the price
of generic equivalents. Digoxin, metformin and
carbamazepine were found to be 6- to 9-fold
higher than the IRPs, indicating a need to reduce
the prices of these medicines.
These results clearly outline the need, particularly
in Malaysia, for intervention. Iran, Malaysia and
Saudi Arabia have all shown interest in pharma-
coeconomics;[20,23-26] however, the data shown in
table I and the evidence from WHO/HAI sur-
veys[27] show that using HTA alone for all medi-
cines as a blanket strategy will not solve the
issue of cost containment. These countries could
be potential candidates for applying medium-
level use of pharmacoeconomics. By this we mean
that countries could apply pharmacoeconomics
to selected drugs (such as biotechnologies) togeth-
er with other cost intervention strategies, includ-
ing effective pricing policies.
This argument is further supported by the lack
of trained and experienced personnel to conduct,
interpret and use HTA in developing countries,[6]
and further strengthened by the way in which re-
searchers perceive the term pharmacoeconom-
ics. In Malaysia and Iran, a universally accepted
definition of pharmacoeconomics is understood
and used;[20,23,26] however, this is not the case for
Saudi Arabia, where there is a relatively effective
drug regulatory authority,[28] but there seems to
be some discrepancy in understanding of the term
pharmacoeconomics[25] (table II).
Topics such as pharmaceutical system strength-
ening, pharmacoepidemiology, drug utilization
and Ministry of Health Pricing Committee are cov-
ered by the pharmacoeconomics umbrella in Saudi
Arabia. In Malaysia, pharmacoeconomics is not
used to select drugs for inclusion on the essential
drug lists; however, it is taught in undergraduate
and post-graduate pharmacy programmes.[26] Iran
has an acceptable level of pharmacy-system re-
search, seems to have a good understanding of
pharmacoeconomics and appears to use pharm-
acoeconomic principles in an appropriate fash-
ion[20-23] (table II).
Pharmacoeconomics 2010
4 Babar & Scahill

Table II. How do different countries perceive the term pharmacoeconomics?[20,21,25,29]

Country Concepts regarding the term pharmacoeconomics Agreement of concepts with the standard
definition of pharmacoeconomicsa
Pakistan Generation of local research data in priority areas Low (discrepancies)
Standard treatment guidelines and training
Improving pharmacy and pharmacological education
Development and strengthening of drug control organizations (district level)
Need for evidence-based educational, managerial and regulatory interventions
Iran Health technology assessment High
Pricing
New medicines
Saudi Arabia Drug evaluation in hospitals Medium (some discrepancies)
Drug utilization review
Ministry of Health Pricing Committee
New guidelines for pharmacoeconomics and pricing
a ISPOR defines pharmacoeconomics as the scientific discipline that evaluates the clinical, economic and humanistic aspects of
pharmaceutical products, services, and programs, as well as other health care interventions to provide health care decision makers,
providers and patients with valuable information for optimal outcomes and the allocation of health care resources.[30]
ISPOR = International Society for Pharmacoeconomics and Outcome Research.

1.3 Group 3: Indonesia, Pakistan, Thailand
and the Philippines
Indonesia and Pakistan are considered low-
income countries[8] (United Nations [UN] income
level 1), whilst Thailand and the Philippines are cat-
egorized as middle-income countries (UN level 2).[8]
Health system performance in these four countr-
ies ranges from a rank of 99 to 124 of 191 countr-
ies, according to disability-adjusted life-expectancy
(table I). These countries are less likely to benefit
from applying pharmacoeconomic strategies than
other countries, as their drug regulatory authori-
ties need strengthening and other medicines policy
interventions could more easily be employed in
the initial stages.
In Pakistan, a WHO/HAI pricing study[31] re-
vealed that prices of branded drugs are an aver-
age of 2- and 3-fold higher than the IRP in the
public and private sectors, respectively. As a re-
sult of non-availability of drugs at government
hospitals, the people of Pakistan spend 77% of
their healthcare budget buying medicines.[8] There
are issues with availability, affordability and un-
ethical medicine promotion. Understanding of the
principles of pharmacoeconomics does not ap-
pear to be clear, with concepts such as standard
treatment guidelines, and pharmacy and phar-
macology education all referred to as pharma-
coeconomics[29] (table II).
Indonesia has similar problems: procurement
prices paid by local government were 74% greater
than IRPs for generic medicines. Patient prices
were 2.4- and 2.8-fold greater than IRPs in the
public and private sectors, respectively.[32] In
Thailand, prices of public sector-procured generics
were 1.46-fold higher than IRPs, while innovator
brands were 3.3-fold higher. The prices patients
pay in the private sector were 11.60- and 3.31-fold
higher than IRPs for branded and generic drugs,
respectively.[33] The results of this study highlight
priority areas for action and a requirement to im-
prove the drug pricing policies.[33]
In the Philippines, a survey in 2005 using
WHO/HAI methodology[34] found that prices of
originator brand medicines sold from private retail
outlets were an average of 15-fold greater than
the IRP, while the lowest-cost generic equivalents
were more than 6-fold greater than the IRP. The
situation in public facilities was similar, with re-
ports of originator brands and lowest-priced gen-
eric medicines being procured at 14- and 5-fold the
IRP, respectively.[34] Given this situation, it would be
more rational for the Philippines to apply other pric-
ing strategies before utilizing pharmacoeconomics.
Thailand appears to have the expertise and ca-
pacity to understand and apply pharmacoeconomic
techniques.[35] The Philippines and Thailand both
have HTA programmes that help guide and apply
pharmacoeconomics.[6] However, additional benefit

2010 Adis Data Information BV. All rights reserved. Pharmacoeconomics 2010
Pharmacoeconomics in Developing Countries
could be gained from strengthening pharmacy sys-
tems and applying pharmacoeconomics for selected
drugs.
Medicine prices are very high in Thailand and
the Philippines, and pricing-intervention strate-
gies could improve the access to and affordability
of medicines. In this context, Thailand also seems
to be on the higher economic scale in this group and
is in a better position to apply low- to medium-
level use of pharmacoeconomics.
2. Moving Forward
We argue that the use of pharmacoeconomic
theory and modelling should not be hyped-up but
should be realistic according to a countrys health
status, academic capacity and pharmaceutical sit-
uation. We demonstrate that, in many cases, the
countrys socioeconomic and health indicator stat-
us matches performance in the pharmaceutical
sector. This provides some support for integrating
these socioeconomic components into a model for
determining the utility of pharmacoeconomics that
could be titled the approximate-utility model of
pharmacoeconomics. Further work is required in
this area and the aim of this article is to create
debate and provide a platform for discussion and
continued dialogue.
Acknowledgements
No sources of funding were used to prepare this article.
The authors have no conflicts of interest that are directly rel-
evant to the content of this article.
References
1. Singer ME. Developing nations special issue. Pharmaco-
economics 2009; 27 (11): 887-9
2. Babigumira JB, Sethi AK, Smyth KA, et al. Cost effective-
ness of facility-based care, home-based care and mobile
clinics for provision of antiretroviral therapy in Uganda.
Pharmacoeconomics 2009; 27 (11): 963-73
3. WHO. WHO operational package for assessing, monitoring
and evaluating country pharmaceutical situations: guide
for coordinators and data collectors [WHO/TCM/2007.2].
Geneva: WHO, 2007 Dec [online]. Available from URL:
http://apps.who.int/medicinedocs/documents/s14877e/s14
877e.pdf [Accessed 2010 Aug 29]
4. Yang B-M. The future of health technology assessment in
healthcare decision making in Asia. Pharmacoeconomics
2009; 27 (11): 891-901
2010 Adis Data Information BV. All rights reserved.
5
5. How to develop and implement a national drug policy. 2nd
ed. Geneva: WHO, 2001 [online]. Available from URL:
http://apps.who.int/medicinedocs/pdf/s2283e/s2283e.pdf [Ac-
cessed 2010 Aug 28]
6. Oortwijn W, Mathijssen J, Banta D. The role of health
technology assessment on pharmaceutical reimbursement
in selected middle-income countries. Health Policy 2010;
95: 174-84
7. The World Bank. GNI per capita, Atlas method (current
US$) [online]. Available from URL: http://data.world
bank.org/indicator/NY.GNP.PCAP.CD [Accessed 2010
Aug 26]
8. WHO. The world medicines situation [WHO/EDM/PAR/
2004.5]. Geneva: WHO, 2004 [online]. Available from
URL: http://www.searo.who.int/LinkFiles/Reports_World_
Medicines_Situation.pdf [Accessed 2010 Aug 19]
9. The World Bank. Health expenditure per capita (current
US$) [online]. Available from URL: http://data.worldbank.
org/indicator/SH.XPD.PCAP [Accessed 2010 Aug 22]
10. Taiwan: Hutchinson country facts [online]. Available from
URL: http://www.talktalk.co.uk/reference/encyclopaedia/
countryfacts/taiwan.html [Accessed 2010 Jul 7]
11. Leung GM, Wagstaff A, Lindelow M, et al. The health
systems of China, Hong Kong and Taiwan. In: Heggen-
hougen K, Quah S, editors. International encyclopedia of
public health. San Diego (CA): Academic Press, 2008: 656-71
12. Kima HJ, Chungb W, Lee SG. Lessons from Koreas phar-
maceutical policy reform: the separation of medical
institutions and pharmacies for outpatient care. Health
Policy 2004 June; 68 (3): 267-75
13. Chou YJ, Yip WC, Lee CH, et al. Impact of separating drug pre-
scribing and dispensing on provider behaviour: Taiwans
experience. Health Policy Plann 2003; 18 (3): 316-29
14. Laing R. Health and pharmacy systems in developing coun-
tries. 2001 Apr 9 [online]. Available from URL: http://www.
wto.org/english/tratop_e/trips_e/hosbjor_presentations_e/
05laing_e.pdf [Accessed 2001 Apr 9]
15. Kwon S. Pharmaceutical reform and physician strikes in
Korea: separation of drug prescribing and dispensing. Soc
Sci Med 2003 Aug; 57 (3): 529-38
16. Tarn TY-H. Case of Taiwan HTA. Presentation at the 3rd
Asia-Pacific ISPOR Conference; 2008 Sep 7-9; Seoul
17. Kim C. Health technology assessment in South Korea. Int J
Technol Assess Health Care 2009; 25 (Suppl. 1): 219-23
18. Babar ZU, Ibrahim M, Izham M, et al. Evaluating drug
prices, availability, affordability, and price components:
implications for access to drugs in Malaysia. PLoS Med
2007; 4 (3): 466-75
19. WHO, Health Action International. Medicine prices: a new
approach to measurement. 2003 ed. [working draft for field
testing and revision]. Geneva: WHO, 2003 [online]. Avail-
able from URL: http://whqlibdoc.who.int/hq/2003/WHO_
EDM_PAR_2003.2.pdf [Accessed 2010 Aug 28]
20. Cheraghali AM. Pharmacoeconomics: an effective tool for
prioritization in Iran healthcare system. Iranian J Phar-
maceutical Res 2008; 7 (2): 89-91 [online]. Available from
URL: http://www.ijpr-online.com/docs/20082/IJPR606.pdf
[Accessed 2010 Aug 27]
21. Dinarvand R. New national drug policy in Iran leading to
expanded pharmaceutical market and extended access of
Pharmacoeconomics 2010
6 Babar & Scahill
public to medicines. Iranian J Publ Health 2009; 38 Suppl.
1: 158-61 [online]. Available from URL: http://journals.tums.
ac.ir/upload_files/pdf/13390.pdf [Accessed 2010 Aug 29]
22. Cheraghali AM. Iran pharmaceutical market. Iranian J
Pharmaceutical Res 2006; 1: 1-7 [online]. Available from
URL: http://www.sid.ir/en/VEWSSID/J_pdf/92720060110.pdf
[Accessed 2010 Aug 29 ]
23. Iranian National Society of PharmEconomics [online].
Available from URL: http://pharmeconomics.com/ [Ac-
cessed 2010 Jul 29]
24. Iran, medicine prices, affordability and availability. Am-
sterdam: Health Action International, 2010. (Data on file)
25. Sultan MSA. How to integrate pharmacoeconomic data in
the Middle East countries: the status in Saudi Arabia.
Pharmacoeconomics Meeting, Servier International; 2008
Jan 24; Cairo
26. University Sains Malaysia. Discipline of Social and Ad-
ministrative Pharmacy, School of Pharmaceutical Sciences,
Pharmacoeconomics, Undergraduate course. Penang [on-
line]. Available from URL: http://www.usm.my/dsap/un
dergrad.asp [Accessed 2010 Aug 24]
27. Health Action International. Medicine prices, availability,
affordability and price components [online]. Available
from URL: http://www.haiweb.org/medicineprices/survey_
results.php [Accessed 2010 Aug 29]
28. Kingdom of Saudi Arabia. Saudi Food and Drug Authority
[online]. Available from URL: http://www.sfda.gov.sa/En/
Drug/Topics/Human_Drugs.htm [Accessed 2010 Aug 23]
29. Hameed A. Pharmacoeconomics and outcome research in
Pakistan [online]. Available from URL: http://www.ispor.
org/conferences/shanghai0306/pdf/07-Pakistan-Hameed.pdf
[Accessed 2010 Aug 20]
30. International Society for Pharmacoeconomics and Out-
comes Research (ISPOR). Brief definition [online]. Available
2010 Adis Data Information BV. All rights reserved.
from URL: http://www.ispor.org/terminology/default.asp
[Accessed 2010 Sep 20]
31. The Network for Consumer Protection. Prices, availability
and affordability of medicines in Pakistan. Islamabad: The
Network for Consumer Protection, 2006 [online]. Available
from URL: http://www.haiweb.org/medicineprices/surveys/
200407PK/survey_report.pdf [Accessed 2010 Aug 19]
32. WHO, Health Action International. Indonesia: medicine
prices, availability and affordability [online]. Available
from URL: http://www.haiweb.org/medicineprices/surveys/
200408ID/sdocs/Indonesia-summary-report-FINAL.pdf [Ac-
cessed 2010 Jul 23]
33. Sooksriwong C, Yoongthong W, Suwattanapreeda S, et al.
Medicine prices in Thailand: a result of no medicine pricing
policy. Southern Med Review 2009; 2 (2): 10-14 [online].
Available from URL: http://apps.who.int/medicinedocs/
index/assoc/s16381e/s16381e.pdf [Accessed 2010 Jul 27]
34. WHO, Health Action International. Philippines: public
procurement prices of medicines [online]. Available from
URL: http://www.haiweb.org/medicineprices/surveys/200807
PHB/sdocs/zPhilippines-procurement-Final.pdf [Accessed
2010 Aug 22]
35. International Health Economics Association (iHEA). Chu-
lalongkorn University: introduction to pharmacoeconom-
ics [online]. Available from URL: http://www.healtheco
nomics.org/education/2004/06/chulalongkorn-university-
introducti.html [Accessed 2010 Aug 26]
Correspondence: Dr Zaheer-Ud-Din Babar, School of
Pharmacy, Faculty of Medical and Health Sciences,
University of Auckland, Private Mail Bag 92019, Auckland
1142, New Zealand.
E-mail: z.babar@auckland.ac.nz
Pharmacoeconomics 2010