The crowding out effect of out-of-pocket medication expenses of two major non-communicable diseases in Pakistan

Abstract

Background: Elevated blood pressure (i.e. hypertension) and diabetes (BPD) are the two major noncommunicable diseases that expose households to high out-of-pocket treatment costs in low-and middle-income countries. Medication is the biggest share of BPD treatment expenses, and households with someone suffering from BPD may need to adjust consumption of other commodities to pay for essential BPD medicines. We assess how BPD medication expenditures are associated with crowding out of other household commodities in Pakistan. Methods: We analyze self-reported household consumption data from the nationally representative Pakistan Household Income and Expenditure Survey 2015-16. We estimate conditional Engel curves under the Quadratic Almost Ideal Demand System framework to examine the differences in average consumption shares between BPD medication-consuming and not-consuming households. Results: We find that BPD medication expenditures are associated with crowding out of food and crowding in of other medical expenditures for all households, but the magnitudes of crowding out and crowding in are larger for the poorer households. BPD medication spending is also associated with crowding out of education and personal care for middle-class and wealthier households. Conclusions: Our results indicate that allocations for essential commodities, like food and education, are lower for BPD medication-consuming households and inform policies for preventive health promotions and affordable treatment for hypertension and diabetes.