KUALA LUMPUR: IHH Healthcare Bhd
is confident of tackling rising costs in the private healthcare supply chain, acknowledging that profit margins are high in some areas within the value chain.
The biggest global healthcare group in the world cited cancer drugs as having very high profit margins.
The Singaporean government is trying to tackle this matter as well, said IHH Healthcare’s group chief executive officer Dr Prem Kumar Nair.
“Yes, there are certain areas of medical supplies where the margins are very high. I won’t quote any specific examples but that’s what the Singapore’s Health Ministry is trying to address with respect to cancer drugs because cancer drugs have some of the highest profit margins,” he said at a media briefing yesterday.
“But to be fair to the pharmaceutical companies, this is where they have taken years to develop these drugs – intellectual property and developmental costs can go up to US$1bil and they need to recoup these costs.
“What Singapore did was to consolidate purchases. Singapore was all purchasing at different prices from the big pharmaceutical companies supplying oncology drugs and they became very expensive,” he said.
One of the tasks of Singpore’s Agency for Care Effectiveness is to see whether various drugs that are available are the right type for patients.
They also look into the pricing of the drugs and consolidate it at the national level to get better pricing for the entire country, Prem Kumar said.
“This is a very good initiative. In our forum this morning, Health Minister Datuk Seri Dr Dzulkefly Ahmad also spoke about procurement as one area that is to be looked at to reduce costs. As for us at IHH, we have started to do this already.
“Doing this will help to bring down our costs. We don’t anticipate that every time supply prices go up that we will increase our prices.
This is not sustainable for both insurers and cash-paying patients. We have to look for savings. We believe that for Malaysia there is an opportunity for considerable savings in procurement,” Prem Kumar added.
IHH also pointed out that medical inflation continued to be of particular concern especially in Malaysia due also to the weakness of the ringgit some years back, adding that the currency had seen a slight appreciation this year.
“This year the tide is changing, but in the last five years, the ringgit had depreciated and, given this depreciation, many suppliers would have repriced their products. To some extent, this caused rising prices in Malaysia,” IHH chief financial officer Dilip Kadambi said.
“But we are able to drive economies of scale through group procurement. Through our size and scale we can make procurements more cost efficient and thereby bring that cost efficiency to the patient eventually,” Dilip added.
