Includes bibliographical references (leaves 73-80).Drugs are an important factor of production in health care. They constitute a significant proportion of health care expenditure in both developed and developing countries rendering financing of drugs an important health care concern. Previous studies have focused on health care financing in general and less on drug financing specifically and more so in least developed countries. This study therefore aims to provide an overview of the drug-financing situation in Uganda demonstrating the flow of funds for drugs in the health sector. The study further investigates whether the available financial resources could be sustained over time and assesses financial sustainability of resources for drugs in the public sector required to meet the drug component in the National Minimum Health Care Package. Data collection methods involved in-depth interviews with key informants in the relevant institutions and document reviews of financial records and other major relevant publications. The data obtained was analyzed using well-established methodologies. Financing mechanisms were analyzed using a framework consisting of aspects regarding viability, reliability and level of funding. The fund flows for drugs in the health sector were analyzed using the modified National Health Accounts methodology and finally financial sustainability was assessed using projections from the available financial resources. The study findings reveal a mix of financing mechanisms from both the public and the private sector employed to make drugs available to the population. The largest source of drug funding is out-of-pocket expenditure by households followed by central government tax revenue including donor support. There has been a noted increase in drug funding in the public sector though this is not adequate to cover the quantified drug need in the country. The size of the market for drugs increased over the review period (2001-2004) with an estimated total drug expenditure of 210 billion Uganda shillings. The projections show that the available financial resources for drugs will not be able to cover the predicted drug requirement within the National Minimum Health Care Package more so with the introduction of drugs required to treat new diseases like HIV/AIDS and the change to more expensive treatments for endemic diseases like malaria. The study concludes with policy recommendations urging government's commitment to allocate more resources to health and consequently to drugs so that there is less reliance on donor funding. It recommends that more effective means of utilizing available resources by mobilization of domestic resources including out-of-pocket payments through better-designed and well-managed health insurance schemes
