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Macroeconomic and Fiscal Effects of Increased Efficiency in Medicine Procurement: A General Equilibrium Analysis of the Colombian Health System

Author

Listed:
  • Ávila-Montealegre, Oscar
  • Bauhoff, Sebastian
  • Botero, Jesús
  • Giles Álvarez, Laura
  • León-Moncada, Santiago
  • Larrahondo, Cristhian
  • Lozano-Espitia, Luis Ignacio
  • Melo-Becerra, Ligia Alba
  • Ortiz-Hoyos, José Luis
  • Rodríguez-Ávila, Jesús

Abstract

This study analyzes the macroeconomic and fiscal effects of greater efficiency in medicines procurement in Colombia, using both static (computable) and dynamic general equilibrium models. The findings indicate that implementing an efficient drug procurement policy could reduce the total health system spending, with potential savings of up to 8.4% in the short term and up to 10.8% in the long term. These savings could be reinvested within the health system, allocated to other sectors, or used to reduce tax burden on capital, consumption, or social contributions. The latter option would increase production by up to 1.1%, investment by 1.7% and consumption by 0.8%. Potential measures to achieve such efficiency gains include promoting and purchasing generic drugs, conducting joint procurement, and implementing price regulation.

Suggested Citation

  • Ávila-Montealegre, Oscar & Bauhoff, Sebastian & Botero, Jesús & Giles Álvarez, Laura & León-Moncada, Santiago & Larrahondo, Cristhian & Lozano-Espitia, Luis Ignacio & Melo-Becerra, Ligia Alba & Ortiz-, 2025. "Macroeconomic and Fiscal Effects of Increased Efficiency in Medicine Procurement: A General Equilibrium Analysis of the Colombian Health System," Working papers 110, Red Investigadores de Economía.
    • Handle: RePEc:rie:riecdt:110
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    File URL: https://publications.iadb.org/es/efectos-macroeconomicos-y-fiscales-de-una-mayor-eficiencia-en-la-compra-de-medicamentos-un-analisis
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    More about this item

    Keywords

    Medications; Health expenditure; Health system; Colombia; Taxes; General equilibrium models; Pharmaceutical policy;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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