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Drug Revolving Funds (DRF) to make low price quality drugs available, Himachal Pradesh
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Subject Area="Public / private partnership (including NGOs)." Objective="Availability of quality drugs."
Details for Reform Option "Drug Revolving Funds (DRF) to make low price quality drugs available, Himachal Pradesh"

Background: Buying drugs represent a major part of expenses for patients—more than 80%, according to Baseline Survey, 2003-2004. Due to a shortage in state-supplied drugs, patients often have to purchase branded drugs from private outlets. The quality of the drugs, available in the market, is often uncertain and they are also expensive. The drugs would cost three to 5 times less if an outlet were to procure from a bulk supplier for generic drugs. Action: In order to make sure essential drugs are available in health facilities and to demonstrate financial and technical feasibility for a demand-driven system, the piloting of a facility-based Drug Revolving Fund (DRF) for essential drugs was planned with the support of GTZ, the German agency for technical cooperation in India. There was seed money of INR 2 lakh (200,000) for the revolving fund. (Details of expenses are given in the reference section). Health facilities for the pilot were selected based on: (i) Interest shown by the community and the staff to establish a DRF. (ii) High outpatient load (at least 100 new patients per day). (iii) Limited number of private outlets nearby (not more than 6). In the initial phase, it was planned a DRF would be introduced at two Community Health Centres. The initial development costs—provision of the building, equipment, and a starting stock of three months’ supply of drugs—were covered by the project. The project also selected and trained two pharmacists for each DRF and paid their salaries, INR 5000 per month (€84.9), for one year. Recurring operating costs and the cost of providing free drugs to below-poverty-line patients were met by levying a profit margin on the selling price. The margin was calculated by factoring in the percentage of registered below poverty line people in the catchment area to estimate recurring costs. One of the most important aspects of the DRF, however, was forming a DRF Society. The societies are composed of two bodies: (i) The Governing Body (GB), presided over by the Sub divisional District Magistrate (SDM) and Chief Medical Officer (CMO), who is the patron. The Block Medical Officer (BMO) is member secretary. (ii)Executive Body (EB), headed by the Medical Officer (MO) in charge; two other medical officers, a ward sister and a pharmacist are members. The society functions as a governing board for the DRF; its members, it is stipulated, should meet regularly, at least once every three months. From the second year on, the costs of running the DRF is borne by DRF societies from the profits the outlets make. A drug management software was also developed and used by the project. Suppliers, who could ensure the supply of WHO-GMP certified drugs, were engaged. Supervision of DRF activities by an external expert, for 3 to 5 days per month, was also planned. Results: The success of the initiative from 2002 to 2004 is reflected in terms of the increase in the facilities’ profit which has enabled them to: (i) Increase the number of drugs purchased from 46 to 450. (ii) Recruit four more pharmacists, allowing them to provide them 24 hour services. (iii) Provide 9% free medicine to people living below the poverty line (BPL) (iv) Provide INR 10,000 in three months for different activites in hospital welfare. These amounts are to be revised and increased in their next meetings.

Cost Approximately INR 5-6 lakh for the initiation of the DRF.
Place One DRF counter was opened at CHC Daulatpur (District Una), a 50-bed hospital, as a pilot in January 2003, followed by the opening of another DRF counter at CHC Jwalamukhi (District Kangra), a 10-bed hospital, in May 2004.
Time Frame About one year for preparations—selection of facilities and staff, staff training, registration of the society, application for drug licence, etc. Another year of intensive supervision is necessary.

Drugs available: Quality drugs available on the hospital premises round the clock. Low cost: Essential drugs available in generic forms are considerably cheaper than the branded ones.


Stiff competition: from the market, in the form of apparently cheaper deals, means the DRF counters struggle to survive. Internal non-cooperation: Health officials, entitled to prescribing medicines, may oppose.


State Government Order.

Who needs to be consulted

State government, funding agency, local government official in the health department, MO and staff of the particular health facility, state and district Drug Inspectors.



The model is self sustainable; however, ground realities need to be assessed for cooperation from the health facility staff and for awareness of the patients regarding availability of better and cheaper drugs. The selection of the facility is also very crucial. If the patient load is not enough, the DRF cannot sustain itself. Selection of doctors with the DRF is very important. Doubtful prescription practices leading to a nexus with local chemists shops limit the success.

Chances of Replication

The DRF concept can be replicated. Investments, particularly in supervision and monitoring, are especially high for the first DRF. Having more DRFs and linking them up so that they procure drugs in large quantities can work out to be even more economical.


Making good quality drugs available around the clock at a cheaper cost is a challenge for health administrators. It needs strong support from the medical fraternity. Consumer awareness and satisfaction with DRF shops is crucial to their viability. So, in order to be successful a lot of effort in areas of supervision, monitoring and training is needed.


Submitted By

Dr. Anuradha Davey, Research Consultant, National Institute of Medical Statistics, February, 2006.

Status Active
Reference Files
Investment in establishing a Drug Revolving Fund.doc
The quarterly expenses and income statement for DRF.doc
CHC Daulatpur, Una District20.JPG
DRF Jwalaji CHC, Kangra district8.JPG
CHC Daulatpur, Una District23.JPG
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