The rising cost of drugs

Prescription medicines comprise about one-third of a Malaysian household's out-of-pocket expenditure. Photo: TNS

There are many factors affecting the final price of medicines that consumers have to pay.

A PATIENT with chronic renal failure diagnosed at a public hospital was referred to a dialysis centre operated by a non-governmental charity, as facilities in the public hospital were fully taken up.

She had to make an advance payment of RM270 for a week’s treatment at the first session of each week prior to the approval of a government subsidy of RM50 per dialysis, and an advance payment of RM120 on the first session of each week after approval from the Health Ministry (MOH).

Guarantors were also required to undertake financial support in the event she failed to pay the dialysis fees.

In addition, she had to pay for the prescribed medicines.

The story above, which is a daily occurrence, illustrates one of the challenges faced by patients with chronic disease.

Everyone gets sick from time to time. The diseases can be communicable, e.g. dengue, malaria and typhoid, or non-communicable, e.g. diabetes, high blood pressure and cancer.

The former are of limited duration, and the latter are prolonged, i.e. chronic.

Treatment is medical, i.e. medicines, rest, exercise, physiotherapy, etc, or surgical, e.g. an appendectomy for appendicitis.

Both medical and surgical treatments require medicines.

The expenditure on medicines constitute a major proportion of healthcare costs in developing countries, and Malaysia is no exception.

This means that access to treatment is much dependent on the availability of affordable medicines.

Although access to medicines depends on rational selection and use; affordable prices; sustainable financing; and reliable supply systems, affordable prices are the most affected by globalisation.

The vast majority of research into medicines is done in developed countries.

When these medicines are available for sale, they are protected by worldwide patent rights.

The majority of medicines produced by many developing countries are generics, i.e. medicines whose patents have expired.

The prices of patented medicines is considerably more than that of generics.

The prices of generics produced by different companies also vary.

Although trade in medicines is increasing rapidly, most of it takes place between wealthy countries, with developing countries accounting for a fraction of imports and exports.

It is estimated that one-third of the developing world’s population is unable to receive or purchase essential medicines regularly.

According to the Malaysian National Health Accounts, the public and private health spending in 2012 was RM22.46bil and RM19.79bil respectively, i.e. a public:private share of 53%:47% with a similar pattern from 1997 to 2012.

Prescription medicines comprised about a third of private households’ out-of-pocket expenditure.

Any increase in the prices of medicines will impact negatively on patients’ access to treatment.

Foreign exchange and GST

There are currently two major influences on the prices of medicines in the country. They are changes in foreign exchange rates and the goods and services tax (GST).

As patented medicines and the raw materials of generics are imported mainly from North America, Britain and Europe, changes in the foreign exchange rates impact on the cost of medicines.

According to Bank Negara, the exchange rate of the US dollar, pound sterling and euro on Sept 15 were RM4.3060, RM6.6444 and RM4.8700 respectively, compared to RM3.2145, RM5.2200 and RM4.1671 respectively on Sept 15, 2014.

In short, the ringgit’s depreciation against the US dollar, pound sterling and euro was 33.96%, 27.29% and 16.87% respectively.

It is no wonder then that a substantial increase in the prices of medicines is expected by the end of 2015 because of the ringgit’s depreciation.

The MOH has an essential medicine list (NEML, at that is based on the World Health Organisation (WHO) list, which has separate lists for adults and children.

The WHO’s combined list, after allowing for replications, contains 359 medicines by generic names.

All medicines registered by the MOH’s Drug Control Authority were previously exempted from sales tax. However, effective April 1, GST was imposed on medicines not on the Customs’ National Essential Medicine List gazetted on March 19 (

The Customs NEML is markedly less than that of the MOH’s NEML and the WHO essential medicine list.

Much has been publicised about the number of items on the Customs NEML, which contains separate listings of the same medicine under its various doses and manufacturers. For example, paracetamol, a common painkiller, was listed 199 times in the Customs list compared with three times in the MOH’s NEML.

Some expensive medicines, e.g. diabetes, high blood pressure and cancer medicines, are not on the Customs list.

There has been no plausible rationale for having separate NEMLs from the MOH and Customs for the implementation of GST.

The inevitable increase in the prices of medicines not listed in the Customs list is due to the GST itself and the cost of administration of GST.

Even public hospitals like University Malaya Medical Centre are not spared from GST, with reports that it has to pay RM4mil monthly.

This is compounded by an overall decrease in its budgetary allocation.

TPPA and the Pharmacy Bill

Two other factors may lead to additional increases in the prices of medicines.

They are the Trans Pacific Partnership Agreement (TPPA) and dispensing separation in the proposed Pharmacy Bill.

The United States and 160 other nations currently belong to the World Trade Organisation (WTO), which oversees the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

The TPPA appears to offer much stronger protections for pharmaceutical companies than those set by TRIPS.

Patents could be extended beyond 20 years, delaying the rate at which generics can be marketed, leading to developing countries having a reduced ability to get brand-name medicines at generic costs.

Governments in developing countries could also lose their bargaining power to get generic drugs at reasonable prices.

There is no issue about physical access to medicines in private clinics currently.

However, with dispensing separation in the proposed Pharmacy Bill, patients will have to get their prescriptions from the doctor and then get it dispensed by a pharmacy.

This would involve additional time and transport costs, etc. Furthermore, the patient has to pay the doctor’s consultation fees, the pharmacist’s fees and the price of the medicines.

The healthcare expenditure for each ill episode would inevitably increase, and there would also be delay in commencing treatment with an increase in the risk of complications.

In summary, increases in the prices of medicines result in a decrease in the affordability of medicines.

This has led to, and continues to lead to, dissatisfied patients, decreased productivity, and increased morbidity and mortality arising from the use of and change to different medicines, or to patients forgoing some medicines due to the increased prices.

In addition, there will be an inevitable increased workload in public sector clinics and hospitals.

Dr Milton Lum is a member of the board of Medical Defence Malaysia. This article is not intended to replace, dictate or define evaluation by a qualified doctor. The views expressed do not represent that of any organisation the writer is associated with.

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The rising cost of drugs


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