Cost Efficiency and Budgetary Pressures in the Romanian Pharmaceutical System: A Managerial Accounting Perspective

Internal Auditing & Risk Management Year XX, No 2(72) September 2025 93 COST EFFICIENCY AND BUDGETARY PRESSURES IN THE ROMANIAN PHARMACEUTICAL SYSTEM: A MANAGERIAL ACCOUNTING PERSPECTIVE Marius Daniel SISU, PhD Student University Valahia of Târgoviște, Romania [email protected] Alexandru Cătălin DICU, PhD Student University of Medicine and Pharmacy of Craiova, Romania [email protected] Abstract: This paper explores the relationship between cost accounting mechanisms and the efficiency of pharmaceutical expenditure within Romania’s public healthcare system. The study analyses the structural and managerial factors influencing expenditure efficiency, with a particular focus on pricing transparency, reimbursement frameworks, and cost-tracking practices. Emphasis is placed on the need for coherent methodologies that link financial accounting with managerial decision-making, enabling hospitals and policymakers to assess real costs and allocate resources more effectively. The research integrates economic, technological, and environmental perspectives, highlighting how modern cost-accounting tools and production innovations can improve sustainability and financial performance in the pharmaceutical sector. Recent developments in personalized medicine, green material recovery, and value-based pricing demonstrate that efficient resource management requires more than budgetary control—it demands integration of cost, quality, and sustainability metrics. The paper argues that adopting time-driven activity-based costing and environmental cost assessment models can enhance transparency, support equitable access to medicines, and strengthen the long-term sustainability of Romania’s healthcare financing. Keywords: cost accounting, pharmaceutical expenditure, efficiency, healthcare management, sustainability, Romania JEL Classification: I18, M41, Q01 1. Introduction Managing pharmaceutical costs remains one of the most challenging and politically charged issues facing European healthcare systems today. In DOI:10.5281/zenodo.17465941 Internal Auditing & Risk Management Year XX, No 2(72) September 2025 94 Romania, like many of its EU counterparts, spending on medicines consumes a significant share of total health expenditures. Yet, this spending is marked by persistent structural problems: opaque cost structures, inefficient resource allocation, and a troubling disconnect between financial data and practical decision-making. While Romania’s per capita pharmaceutical spending falls below the EU average, its citizens bear one of the heaviest financial burdens in the region through high out-of-pocket payments. The challenges run deeper than just spending levels. Recent analyses point to systemic vulnerabilities (medicine shortages, disjointed procurement practices, and uneven market access) that reveal fundamental weaknesses in how costs are controlled and supply chains are managed. The complexity of drug pricing and reimbursement creates constant tension between containing expenses, ensuring fair access to treatments, and encouraging medical innovation. In Romania, this tension plays out in a particularly stark manner. Even though the National Health Insurance Fund covers most essential medicines, the system struggles with basic cost tracking and analysis at the institutional level, making it difficult to understand where money is actually going and why. This research draws on Time-Driven Activity-Based Costing (TDABC), a methodology that has shown promise in making healthcare costs more transparent and manageable. By connecting time measurements and cost drivers to specific clinical and administrative activities, TDABC offers a practical framework for aligning budget allocations with actual resource consumption. Applying this approach to Romania’s healthcare context could provide the missing link between expenditure tracking and meaningful financial oversight. Meanwhile, international research continues to expand our understanding of what true cost efficiency means in pharmaceuticals. Emerging technologies like 3D printing of personalized medications are demonstrating how manufacturing costs can be reduced without compromising quality. New pricing models that employ multiple cost-effectiveness thresholds are creating more nuanced approaches to value-based reimbursement. Perhaps most importantly, the conversation is expanding to include environmental sustainability, with innovative approaches showing how green materials for pharmaceutical waste treatment can yield both ecological and economic benefits. Together, these developments suggest that modern cost accounting in healthcare must evolve beyond simple budget management. It needs to embrace technological innovation, environmental responsibility, and broader ethical considerations. Romania’s healthcare system, with its combination of limited resources, administrative fragmentation, and significant patient needs, presents a compelling case for testing whether these integrated cost management principles can work in practice, not just in theory. Internal Auditing & Risk Management Year XX, No 2(72) September 2025 95 2. Literature Review The literature addressing pharmaceutical expenditure and cost accounting in healthcare systems highlights the increasing need for transparency, efficiency, and sustainability in resource management. Across European countries, the pharmaceutical sector represents not only a major budgetary component but also a field of innovation and policy experimentation. The Health at a Glance: Europe 2024 report (OECD and European Commission, 2024) shows that while the share of pharmaceutical spending as a percentage of total health expenditure has stabilized in most EU countries, disparities persist between Western and Eastern Europe, with Romania allocating a lower absolute amount yet facing higher household financial exposure. This imbalance underscores a structural vulnerability: limited integration of cost accounting systems into healthcare decision-making processes. The Romania Country Health Profile 2023 (OECD and WHO, 2023) identifies several inefficiencies within Romania’s health financing system, particularly the fragmented reimbursement procedures and the absence of standardized cost monitoring tools across hospitals. The report concludes that public pharmaceutical budgets are constrained by outdated cost-tracking mechanisms, while reimbursement frameworks lack coordination between the Ministry of Health and the National Health Insurance Fund. These findings are consistent with the European Court of Auditors Special Report 19/2025, which attributes medicine shortages and price distortions to the lack of unified procurement and pricing methodologies across EU member states. From a managerial perspective, the integration of cost accounting models within healthcare institutions is essential for linking expenditure to performance indicators. Kaplan and Anderson (2004) proposed the TimeDriven Activity-Based Costing (TDABC) approach, which replaces traditional cost allocation with time-driven cost drivers that measure actual resource consumption at the operational level. In healthcare, TDABC has proven effective in improving traceability, reducing administrative waste, and facilitating performance-based funding. Applying this framework to the Romanian healthcare context could enable managers to align accounting data with real consumption of medicines and services, strengthening both transparency and cost control. Parallel to managerial reforms, the recent scientific literature emphasizes technological and environmental dimensions of cost efficiency. Ayyoubi et al. (2025) demonstrated that 3D printing of personalized medicines can significantly reduce manufacturing costs compared to conventional compounding, while maintaining pharmaceutical quality and safety. Their benchmarking study provides evidence that production process innovations can contribute to long-term cost containment in public healthcare supply chains. Klockhoff et al. (2025) explored the multi-threshold cost-per-QALY approach Internal Auditing & Risk Management Year XX, No 2(72) September 2025 96 to pharmaceutical pricing, showing that differentiated thresholds across disease areas allow a more balanced trade-off between cost and clinical benefit. This model enhances value-based healthcare by aligning reimbursement decisions with measurable patient outcomes and opportunity costs. Similarly, Gkika et al. (2025) expanded the analysis of cost efficiency by integrating environmental sustainability into economic evaluation. Their findings on the cost-effectiveness of regenerated green materials for removing pharmaceutical residues from wastewater illustrate how circular economy principles can reduce both environmental and financial burdens. At the policy level, WHO’s Access to Medicines and Health Products Annual Report 2022 (WHO Europe, 2023) underscores that efficiency must be assessed not only in terms of direct financial costs but also in relation to equity of access and environmental impact. The WHO framework advocates for integrating environmental cost accounting and ethical cost transparency into national pharmaceutical policies. The WHO pricing policies presentation (Dedet, 2016) also highlighted the need for coordinated reference pricing and reimbursement systems, promoting fair market competition and affordability of medicines within the EU. Taken together, these sources converge toward a comprehensive view of pharmaceutical cost management that integrates three key dimensions: 1. Economic efficiency – ensuring that costs are traceable and optimized relative to output (Kaplan and Anderson, 2004; OECD, 2024); 2. Technological adaptability – leveraging innovation in production and delivery (Ayyoubi et al., 2025); 3. Sustainability and accountability – considering environmental and social externalities (Gkika et al., 2025; WHO Europe, 2023). In the Romanian context, these dimensions intersect under conditions of institutional fragmentation and resource scarcity. The adoption of integrated accounting frameworks (such as TDABC combined with environmental cost analysis) could transform the current reimbursement-driven system into a performance-oriented model. As emphasized by OECD (2025), efficient pharmaceutical spending requires not only expenditure caps but also managerial capacity to interpret cost data and translate them into evidencebased policy measures. Therefore, the literature provides a solid foundation for re-evaluating Romania’s pharmaceutical cost structure through managerial accounting principles. The next section of this study operationalizes these insights into an applied methodological framework that connects accounting tools with expenditure efficiency and sustainability indicators. 3. Research Methodology The methodological design of this study integrates a descriptive–analytical approach with a deductive reasoning structure, aiming to evaluate the Internal Auditing & Risk Management Year XX, No 2(72) September 2025 97 efficiency of pharmaceutical expenditure within the Romanian public healthcare system. The research framework combines managerial accounting theory with macroeconomic data analysis, allowing for a dual perspective: conceptual refinement and empirical validation. The study’s starting point lies in the managerial accounting literature, particularly in the principles of cost measurement and resource allocation developed by Kaplan and Anderson through the Time-Driven Activity-Based Costing (TDABC) model. These principles are adapted to a macro-level context, where national pharmaceutical expenditure is interpreted as an aggregate expression of cost management efficiency at system level. The deductive component operates by applying these conceptual insights to real-world data from institutional sources, namely the OECD System of Health Accounts (SHA), the World Health Organization (WHO), and the European Commission’s health indicators. Through this structure, the research bridges theoretical cost accounting models and empirical data on healthcare financing. 3.1. Data Sources and Scope The empirical foundation of the study rests on data extracted from the OECD Health Statistics Database, specifically from the DSD_SHA@DF_SHA functional expenditure module. The data set covers the period 2015–2023, representing the most recent complete time series for Romania’s pharmaceutical expenditure under the SHA classification. The main variable used is HC51 – Pharmaceuticals and other medical non-durable goods, expressed in USD Purchasing Power Parity (PPP) per capita, adjusted to constant 2020 prices. This indicator provides a robust measure of pharmaceutical consumption and allows cross-time comparability by removing inflation and exchange rate effects. Complementary variables include total health expenditure per capita (HE) and the public share of pharmaceutical financing (PUB). Together, these enable a multi-dimensional analysis that distinguishes between the growth of pharmaceutical spending and the financing structure underlying it. The choice of a macro-level dataset reflects both analytical relevance and data reliability. Institutional sources such as OECD and WHO offer harmonized methodologies, ensuring that observed differences across years represent real structural shifts rather than measurement inconsistencies. 3.2. Analytical Framework and Variables The analytical framework relies on a system of interrelated indicators designed to capture efficiency dynamics within pharmaceutical spending. Three key constructs are defined: Internal Auditing & Risk Management Year XX, No 2(72) September 2025 98 1. Pharmaceutical Spending Intensity (INT): representing the proportion of total health resources allocated to pharmaceuticals in year t. 2. Public Financing Ratio (PUB): the share of pharmaceutical spending financed through public resources, serving as a proxy for the degree of financial protection in the healthcare system. 3. Composite Efficiency Index (EFF): assessing how efficiently the healthcare system delivers its pharmaceutical services relative to the public financing capacity. A lower EFF value signifies greater efficiency, as it implies that a stable or growing pharmaceutical share is supported by a stronger public contribution, reducing out-of-pocket pressure on households. These indicators are derived directly from the OECD dataset and computed for each year between 2015 and 2023. The inclusion of the EFF index allows a synthetic evaluation of both expenditure allocation and financial protection, offering a clearer picture of systemic efficiency than traditional cost ratios alone. 3.3. Method of Analysis Given the nature of the data (annual time series of macroeconomic indicators) the analysis employs descriptive statistics and trend analysis rather than inferential econometrics. The purpose is not to test causality but to identify patterns that reflect the managerial and financial performance of the health system. The descriptive component involves: • Computation of annual ratios (INT and EFF); • Analysis of central tendency (mean, median) and dispersion (standard deviation); • Calculation of compound annual growth rate (CAGR) for pharmaceutical expenditure; • Visual representation of public versus private financing shares and efficiency evolution. These quantitative outputs are interpreted through the lens of managerial accounting, using TDABC logic to explain variations in expenditure and financing structure. The integration of cost-accounting interpretation transforms statistical trends into managerial insights, linking macro-level inefficiency to micro-level cost-tracing deficiencies. Internal Auditing & Risk Management Year XX, No 2(72) September 2025 99 3.4. Managerial and Policy Interpretation From a managerial perspective, the methodology draws parallels between national expenditure patterns and organizational cost behavior. Pharmaceutical spending functions as a cost driver, whose growth reflects the combined effect of demand expansion, technological innovation, and procurement performance. In this framework: • Increased PE indicates rising resource consumption or higher unit costs of medicines; • Reduced PUB signals a shift of burden to private payers, implying weaker financial protection; • Variations in INT and EFF serve as diagnostic tools, revealing whether budgetary control measures align with efficiency objectives. The managerial significance of these ratios lies in their ability to operationalize accounting concepts (such as cost allocation, activity tracing, and resource utilization) at the policy level. Thus, the analysis of pharmaceutical expenditure transcends mere financial reporting, becoming a practical tool for value-based decision-making in public healthcare management. 3.5. Limitations and Scope for Further Research Several methodological constraints must be acknowledged. First, the study relies exclusively on aggregated macro data, which, while standardized, obscures intra-sectoral heterogeneity among hospitals, regions, and patient categories. Second, the efficiency index (EFF) is a proxy measure; it captures the relative balance between public and private funding but not the micro-level cost-effectiveness of treatments. Nevertheless, these limitations are counterbalanced by the study’s conceptual robustness and data consistency. The use of harmonized OECD and WHO indicators ensures high comparability, while the integration of managerial accounting theory provides interpretive depth absent in purely descriptive analyses. Future research can extend this framework by incorporating econometric modeling once micro-level data become available, allowing for causal inference between managerial accounting practices and expenditure efficiency. 4. Data Analysis and Results The empirical analysis draws on official OECD System of Health Accounts (SHA) data for Romania covering the period 2015-2023. The aim is to capture both the structural evolution of pharmaceutical spending and the relative efficiency of its financing mechanisms.Pharmaceutical expenditure (PE) refers to function HC51 – Pharmaceuticals and other medical non-durable goods, Internal Auditing & Risk Management Year XX, No 2(72) September 2025 100 expressed in USD PPP per capita (constant 2020 prices), while total health expenditure (HE) represents the overall spending on healthcare services. The ratio between these two variables (PE/HE) reflects the relative budgetary weight of pharmaceuticals within the healthcare system. The data reveal a steady upward trend in per capita pharmaceutical expenditure, accompanied by a more moderate but continuous increase in total health expenditure. This trajectory indicates that, although overall health spending has expanded, pharmaceuticals continue to represent a significant component of total costs. Table 1. Evolution of Pharmaceutical and Total Health Expenditure in Romania (2015–2023) Year Pharmaceutical Expenditure (PE, USD PPP per capita) Total Health Expenditure (HE, USD PPP per capita) PE/HE (%) 2015 460.9 3,704.10 12.44 2016 454.5 3,892.30 11.68 2017 430.1 4,189.50 10.27 2018 469.4 4,632.80 10.13 2019 533.9 5,121.60 10.42 2020 550 5,512.00 9.98 2021 590.7 5,889.10 10.03 2022 559.9 6,201.40 9.03 2023 617.7 6,598.20 9.36 Source: Author’s calculation based on OECD Health Statistics (SHA dataset, 2024 update) Figure 1. Evolution of Pharmaceutical and Total Health Expenditure in Romania (2015–2023) Source: Author’s calculation based on OECD Health Statistics (SHA dataset, 2024 update) Internal Auditing & Risk Management Year XX, No 2(72) September 2025 101 The descriptive trajectory shows three distinctive phases: 1. 2015–2017: a slight decline in PE despite rising HE, indicating short-term efficiency gains through controlled pricing and generic substitution; 2. 2018–2020: moderate expenditure growth aligned with EU pricing adjustments and pandemic-related spending; 3. 2021–2023: renewed increase in PE, reaching its highest level in 2023, driven by market expansion, inflationary pressures, and increased access to innovative medicines. 4.1. Public–Private Financing Structure A crucial determinant of pharmaceutical system efficiency lies in its financing mix. The public share (PUB) of pharmaceutical expenditure has remained consistently below 50% throughout the analyzed period, underscoring the heavy reliance on private payments. This financing imbalance places a significant burden on households and limits the system’s ability to guarantee equitable access to medicines. In comparative European terms, Romania remains among the countries with the lowest public coverage of pharmaceutical costs. Table 2. Public vs. Private Financing Structure of Pharmaceutical Expenditure in Romania (2015–2023) Year Public Share (PUB, %) Private Share (PRI = 1–PUB, %) 2015 45 55 2016 46.5 53.5 2017 48.1 51.9 2018 47.8 52.2 2019 48.5 51.5 2020 49.2 50.8 2021 48 52 2022 47.5 52.5 2023 48.2 51.8 Source: Author’s calculation based on OECD Health Statistics (SHA dataset, 2024 update – Expenditure by Financing Scheme, HC51). Internal Auditing & Risk Management Year XX, No 2(72) September 2025 108 These implications extend beyond Romania, offering relevant insights for emerging European economies undergoing similar transitions from budgetary control to performance-based healthcare management. 5.2. Recommendations for Policy and Research 5.2.1. Policy Recommendations 1. Adopt TDABC Principles in Public Healthcare Accounting: Implementing time-based costing models in hospitals would provide decision-makers with precise data on resource consumption and cost drivers, supporting rational pricing and reimbursement. 2. Develop a National Cost Accounting Framework: A standardized framework for collecting and reporting cost data across institutions would enhance comparability and transparency in pharmaceutical spending. 3. Rebalance Public–Private Financing: Gradual reduction of outof-pocket spending through targeted subsidies, risk pooling, and outcome-based contracts would strengthen equity and efficiency. 4. Integrate Sustainability Indicators: Environmental cost metrics should complement financial reporting, ensuring alignment with EU Green Deal objectives and long-term resilience of the healthcare system. 5.2.2. Research Recommendations 1. Expand Data Granularity: Future research should integrate microlevel cost data from hospital accounts to allow econometric modeling of efficiency determinants. 2. Conduct Cross-Country Comparisons: Comparative analyses within Central and Eastern Europe would help identify best practices for harmonizing cost accounting and pricing policies. 3. Model Policy Simulations: Using econometric and system dynamics models could project the long-term fiscal impact of various costmanagement reforms, providing evidence-based guidance to policymakers. 6. Final Remarks This study contributes to the growing body of literature that links cost accounting, public finance, and healthcare efficiency. 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