Are we paying way too much for our drugs?

  • Health
  • Tuesday, 22 Jan 2019

A pharmacist collects packets of boxed medication from the shelves of a pharmacy in London, Britain. In general, Malaysians dont seem to be getting the best prices for their medicines as many of them are marked up, according to a survey. — Bloomberg

The attainment of universal health coverage is premised on affordable medicines and other cost-effective medical technologies.

An affordable price is one that can reasonably be funded by health budgets and/or out-of-pocket (OOP) by individuals.

The price of a medicine is influenced by the market. It includes the price paid to the manufacturer, price paid by the purchaser, prices from suppliers and prices paid to third parties like tendering agents.

A patented medicine usually has a high price until the patent expires, and competition and/or generics materialise.

The prices of generics after the patent expires are much less than the original patented drug and usually decrease with time.

Prescription medicines comprised about a third of private household OOP healthcare expenditure in Malaysia. The OOP expenditure in 2014 was 39.3% of total health expenditure.

The Health Ministry’s budgetary allocation for medicines in 2018 was RM4.1 billion (15.43% of total budget of RM26.58 billion), which was the same as in 2017.

The budgetary allocation for medicines and service upgrades in 2019 is RM10.8 billion (total budget of RM28.7 billion). Time will tell how much of this allocation will be utilised by the former.

The World Health Organization (WHO) defines essential medicines as “those that satisfy the priority health care needs of the population”.

They are selected with “due regard to public health relevance, evidence on efficacy and safety, and comparative cost-effectiveness”.

Drugs on essential medicines lists “are intended to be available within the context of functioning health systems at all times in adequate amounts, in the appropriate dosage forms, with assured quality and adequate information, and at a price the individual and the community can afford”.

The Health Ministry has an essential medicine list called the National Essential Medicine List (NEML).

Public sector prices

The International Reference Pricing (IRP) is the process of cost comparison through external reference or cross-reference, i.e. using the price of a medicine (generally ex-manufacturer price, or other common point within the distribution chain) in one or several countries to derive a benchmark or reference price for the purposes of setting or negotiating the price of the product in a given country.

It is “generally considered a benchmark of the prices that well-functioning, efficient public procurement systems can obtain, and prices are based on purchasing medicines that meet WHO quality standards”.

As a very substantial purchaser of medicines, it would be expected that the Health Ministry would be able to procure medicines at a lower price than the private sector.

However, the Harvard Study group report to the Health Ministry on the procurement of medicines tells a different story.

“In Malaysia, public sector procurement prices were on average three to four times the corresponding IRP for the period 2010–2014 when purchases were weighted by total expenditure, and around twice as high as the corresponding IRP when weighted by volume …

“From 2010 to 2014, between 22% (2012) and 30% (2011) of all medicine products were procured at prices below the IRP.

“During the same period, between 45% (2013) and 50% (2012) of medicine products were procured at more than two times the IRP.

“However, in the most recent year (2014), medicines purchased at or below two times the IRP accounted for nearly 80% of medicines by volume, and this share has gradually increased from 2010 for the basket of medicines with an IRP match from 2010 to 2014.

“These medicines, however, accounted for only 55% of total expenditures, indicating that higher procurement prices for high-cost, but low volume, products have a substantial impact on the budget for medicines.

“This is a potential area for improvement in medicines procurement in the public sector.”

Drug prices, medicines, healthcare, universal health coverage,
Health Minister Dr Dzulkefly Ahmad (right) looks at the medicine received by a patient at the Hospital Kuala Lumpur pharmacy counter during a surprise visit in this filepic, while Health director general Datuk Dr Noor Hisham Abdullah looks on. A report shows that the Health Ministry needs to improve on how it procures medicine, especially in terms of price.

Private sector prices

The affordability of essential medicines in the private sector were reported by researchers from the Health Ministry, who conducted their study annually for two weeks every July from 2011 to 2015.

They reported that the “mark-up of generic medicines was significantly higher than that of innovator medicines during the study period.

“While the mark-up of generic medicine was 31%–402%, that of innovator medicine was 24%–86%.

“There was no significant increase in the median price ratio for 11 selected generic medicines. However, the median price ratio of the 11 innovator medicines significantly increased.

“Affordability of all generic medicines was below the two-day wage for treatment, with captopril (25mg tablet) reporting the highest cost (1.1–1.7-days’ wages).

“Among innovator medicines, omeprazole (20mg capsule; 6.2–7.0 days’ wages) reported the highest median treatment cost.” (Source: Nur Sufiza Ahmad & Farida Islahudin. Patient Prefer Adherence 2018; 12: 1231–1237)

Third parties

The Health Ministry’s procurement process for medicines has been in the limelight recently.

The Health Ministry’s statement on its internal investigation on the matter was countered by retorts that claimed that the top six tendering agents collectively were awarded approximately “RM5.93 billion or 92.21% of the approximate RM6.44 billion total tender contracts value”.

The Health Ministry’s statement did not address the value that tendering agents brought to the process and patient care.

Going forward

The inevitable calls for the establishment of an independent body to investigate whether public funds have been spent efficiently and effectively as possible are logical.

Such an independent investigation should include the Health Ministry, which is the end user, as well as the Finance Ministry and other government agencies, whose policies and procedures dictate the procurement process, the prices to be paid for medicines, the role of tendering agents and their value, if any, to patient care.

The objectives should not be limited to the allegations of impropriety, but also to determine the causes of the Health Ministry paying prices higher that IRPs as a result of obsolete policies and/or unfavourable contracts even in the absence of corrupt practices.

When middlemen take a share of the healthcare ringgit, there will be less money for patient care with consequent impacts on safety and quality of care.

Any increase in the prices of medicines will impact negatively on patients’ access to treatment, as health budgets are finite.

There are consequences to a decrease in affordable medicines.

This has led to, and continues to lead to, dissatisfied patients; decreased productivity; increased morbidity and mortality arising from the use of, and change to, different medicines, or to patients foregoing some medicines due to the increased prices; and an inevitable increased burden on public sector healthcare facilities.

The addressing of the issue of affordable medicines will go a long way in the attempt to attain universal healthcare coverage.

Dr Milton Lum is a past president of the Federation of Private Medical Practitioners Associations and the Malaysian Medical Association. The views expressed do not represent that of organisations that the writer is associated with. The information provided is for educational and communication purposes only and it should not be construed as personal medical advice. Information published in this article is not intended to replace, supplant or augment a consultation with a health professional regarding the reader’s own medical care. The Star disclaims all responsibility for any losses, damage to property or personal injury suffered directly or indirectly from reliance on such information.

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