Health spending is increasing globally due to demographic and epidemiological changes, rising demand for services driven by higher incomes, aging populations, and the emergence of expensive new health technologies. In Latin America and the Caribbean (LAC), health expenditure has risen from 6.6% to 7.9% of GDP over the past two decades. By 2030, it is expected to increase by another 2 percentage points. This projection excludes additional investments required to strengthen health systems post-pandemic. Given fiscal constraints caused by the pandemics economic impact, rising debt, and macroeconomic uncertainty, relying solely on higher budget allocations to sustain spending growth is not feasible. Instead, improving health outcomes will require smarter investments, better procurement practices, and efficient resource allocation. Prioritizing high-impact health interventions can ensure better population health without proportional increases in expenditure.
This policy brief highlights two significant inefficiencies in pharmaceutical spending in LAC: (i) The frequent funding of branded drugs, which are generally more expensive than unbranded generics offering equivalent therapeutic value and (ii) the procurement of high-cost pharmaceutical products with uncertain or low clinical benefits relative to their price, often at the expense of alternative investments that could provide greater health gains.
The Inter-American Development Bank (IADB) Social Protection and Health Division conducted case studies in three countriesDominican Republic, Chile, and Colombiato analyze these inefficiencies. The findings demonstrate that inefficient pharmaceutical spending results in lost health outcomes and increased household out-of-pocket expenses. This brief summarizes key findings from these studies and provides policy recommendations to improve the efficiency of pharmaceutical spending. Addressing these inefficiencies through better procurement strategies, increased use of generics, and improved price regulation could enhance the cost-effectiveness of health spending, ultimately benefiting population health in the region.
