Family planning programs: getting the most for the money.

At a time when funding for family planning programs is shrinking, it is important for donors to know how to get the most change in contraceptive prevalence per dollar spent. By some estimates, roughly half of family planning program funds, net of labor costs and capital outlays, are used to subsidize contraceptive prices.1 Price subsidies may serve as an important source of income support for families, but it is not clear they have been cost-effective in increasing contraceptive use. Although researchers have studied the effect of contraceptive prices on contraceptive demand (commonly measured in terms of price elasticity), virtually none have compared the cost-effectiveness of contraceptive price subsidies to alternative expenditures on quality, promotion or distribution. Lacking the data that such research could provide, donors and managers have designed programs around the little information that is available. In this case, it has often meant using estimates of price elasticity to argue for the subsidization of contraceptive supplies. Harvey, for instance, used the results of a regression of social marketing condom sales against social marketing condom prices to advance the commonly cited “1% rule” of contraceptive pricing—one coupleyear of contraceptive protection should cost less than 1% of per capita income or gross national product.2 These types of arguments for price subsidies have two faults. First, the research on which they are based typically assumes that contraceptive users are incapable of switching brands or methods. Harvey, for instance, assumed that a drop in social marketing brand condom sales represented a decrease in contraceptive prevalence. In reality, consumers of contraceptives, like consumers of most other things, may substitute one brand or method for another when prices or other product differences suit them. Such research, then, may overestimate the importance of contraceptive price as a determinant of overall use. The second fault with these arguments for price subsidies is more critical. Even if contraceptive use were extremely sensitive to price, that alone would not justify price subsidies. To make wise decisions about pricing, we need to know the cost-effectiveness of price subsidies relative to the costeffectiveness of expenditures on other program activities.