What do consumers pay for pharmaceuticals in a transition economy, and who is hit hardest? Kazakhstan is in the midst of emerging from a Soviet Union state to a market economy. It has seen a significant dip in Gross Domestic Product and available revenues for health as a result. New sources of revenues, such as out-of-pocket payments, both formal and informal, have become widespread. In this paper we use the results of a 1996 Living Standards survey jointly sponsored by the World Bank and the Kazakhstan Government to examine patterns of prescribed pharmaceutical spending.

We use a two-part regression model that is utilized to adjust for the skewness of non-spenders and heavy utilizers. Results suggest that upper-income groups spend more in absolute terms, but low-income groups pay a higher share of their income for pharmaceuticals. Pharmaceutical expenditure is positively related to poor health status, chronic illness and rural area residence. Our estimates suggest that on average people in rural areas spend 16% more than people in urban areas. The analysis shows that certain types of illnesses impose significant out-of-pocket burden for consumers – gynaecologic as well as intestinal and cardiac. The findings can be used for developing and designing a new 10-year World Bank-financed programme for restructuring the health sector. They also suggest the need for prioritizing rural care, as well as covering pharmaceuticals for specific types of care interventions and certain demographic groups.