Evaluation of an Alternative Distribution Model of Medicines - Essay Example

According to the research findings the Emerging Markets healthcare system differs significantly from those in the established or developed world. The most relevant difference for the purpose of this study is that most inhabitants of the emerging markets have to pay “out of pocket” for the medicines they consume. Over 85% of the population has access to health insurance, however, the available stock of medicines, and the limited and reduced formulary (list of products the government healthcare system offers) drive patients to buy the medicines at a pharmacy at their own expense.

The high price of medicines in Mexico is a consequence of regulatory deficiencies and an expensive supply chain. From the regulatory perspective, the pricing process does not evaluate properly the local conditions, and the outcome of this process is the Maximum Price to Public. This Maximum Price is printed in the boxes of the medicines so Patients can see that the price they pay for their medicines do not exceed that Maximum Price. The problem is that the Maximum Price is extremely high. No pharmacy sells at Maximum Price.

All pharmacies offer discounts of 30 to 50% based on the Max Price. This is misleading since the Max Price is only a ceiling and do not reflect the costs of the product and the supply chain. This approach does not put any pressure to the supply chain to improve the efficiency and effectiveness of it. The supply chain has 4 elements: 1) The Manufacturer 2) The Wholesaler 3) The Pharmacy and 4) The Patient. The supply chain middlemen (wholesaler and pharmacies) represent close to 60% of the price a patient pays for the medicine.

PASOS Pacientes Asociados Approach PASOS concept is to create a purchasing group to get access to medicines and services required to treat chronic diseases such as HEB, Diabetes, Hypercholesterolemia, Alzheimer and HIV. Many of these diseases are treated very similar. The medicines available for these treatments are reduced, and usually expensive. The opportunity is to group a large number of patients that require similar treatment (Medicines and services) to buy directly from the manufacturer, avoiding the incremental price caused by the wholesaler and the pharmacy.

PASOS will only increase 10% of the product cost by 10% to pay for its operation. Since the target is chronic diseases, an automatic re-fill program is in place, that delivers the medicine at the home of the patient and charge it automatically to the credit card associated with the account. The PASOS core advantage is the Service Center. PASOS Service Center is responsible to keep a solid and friendly relationship with all the associates. The Service Center ensures the patients are receiving the products and services promptly.

The Service Center objective is to establish a friendly and solid relationship with the patient, and