A price control headache

Addressing the very complex issue of setting up a drug price control mechanism to ensure people have better access to affordable drugs. 

ELEEN Ooi, 38, could not believe her eyes when she got the bill for the removal of a peanut stuck in her four-year-old daughter’s nose.

The private hospital’s itemised bill for the 15-minute procedure ran into two full pages and came up to RM4,000.

And she noticed that she was charged RM43.60 for a baby nasal spray which she could get for RM27 from a pharmacy.

She also recalls being charged RM250 a box for a drug a doctor had prescribed to help her lose weight and manage her cholesterol levels that she later found she could buy for RM165 in one pharmacy.

She, like many patients, alleges that hospitals are charging high prices for drugs and services resulting in high insurance premiums in the country.

Drug prices are a major contributor to high healthcare costs and the government should regulate them across the board and at every dispensary, she says.

“The price of drugs needs to be more affordable for the public, especially drugs where patents have expired,” says Ooi, a lecturer.

She says when people cannot afford to sustain paying for the high costs of medicine, especially those taken for the long-term, they are forced to use the public health system.

For this reason, she welcomes the Cabinet’s decision to impose drug price controls.

A solution to fit all

Health Minister Datuk Seri Dr Dzulkefly Ahmad says the Cabinet approved the measure on April 12 and that the ministry will get pharmaceutical companies’ responses on the price control mechanism this month.

The ministry will use external reference pricing to benchmark drug prices in Malaysia, choosing the three lowest prices and averaging them to determine the ceiling price.

The ministry has not decided which country’s system it will model the control mechanism on, he said at a press conference held recently in conjunction with Pakatan Harapan’s first year in office.

Dzulkefly says the ceiling price will be imposed at the wholesale level as well as the retail/consumer level at clinics, hospitals and pharmacies.

Controlling the prices of drugs is provided for in the Price Control and Anti-Profiteering Act 2011, which is monitored by the Domestic Trade and Consumer Affairs Ministry. The Cabinet has agreed that this ministry will appoint Health Ministry officers as price assistant officers to carry out drug price control enforcement activities, he says.

Dzulkefly says the move will ensure that people have access to affordable drugs, especially expensive new drugs; it will also encourage innovation and healthy competition for industry growth.

The private sector may not be happy with a price control but the country needs a solution that fits all, he says.

It was recently reported that Penang Institute political studies senior analyst Lim Chee Han had quoted the 2017 Medicine Prices Monitoring report showing that the median mark-up for originators’ and lowest-priced generics’ retail prices in private hospitals was 51% and 167% respectively.

In pharmacies these figures were lower, at 22.4% and 94.7%.

“This shows that the mark-up range can be exceedingly large; in some extreme cases in private hospitals, it could even spike up to 117.4% and 900%!” Lim says.

NGOs welcome move, industry wants competition

Non-governmental organisations (NGOs) welcome a drug price control but local drug producers prefer market competition.

Third World Network (TWN) adviser Dr Lim Mah Hui says he supports the effort but it should not be rushed as it is a complex issue and the government needs to look at different models and choose the best to emulate.

Dr Lim says there is a lack of transparency in drug pricing at different levels – manufacturers, middlemen, pharmacies, hospitals and clinics – and there should be some regulation of the price range they can mark up.

“We hear about discriminatory preferential pricing. Manufacturers selling (the same) drugs at different rates to different buyers and some medicines not being made available to certain pharmacies.

“I am not saying that the industry should not make a profit, but the profits should be reasonable,” he says.

Africa introduced a single exit price in 2004 which requires the manufacturer to declare the price when the drug comes out of the factory. It also put a stop to discounts and preferential pricing, he says.

In June last year, The Star quoted Dr Lim saying the government should initiate centralised purchasing and regulate drug prices as is done in advanced countries, and carry out a study on the drug procurement system to ensure drug prices are affordable.

Last August, TWN programmes director Chee Yoke Ling also highlighted the need to tighten up unnecessary patent monopoly and additional patents that extend monopolies beyond 20 years, pushing up the cost of some crucial medications.

Malaysian Pharmaceutical Society president Amrahi Buang says the government’s decision shows it has the political will to address this chronic problem, calling it a “major breakthrough”.

He adds, “The price control should not be applicable to all types of medicines but should focus on medicines requiring prescription and also address proper labelling and itemised billing,” he says.

Meanwhile, Medical Practitioners Coalition Association of Malaysia representative Dr M. Raj Kumar recently said that prices of drugs should be controlled but this should be done in tandem with the harmonisation of the fee schedule for general practitioners with private hospital-based doctors.

Malaysian Organisation of Pharmaceutical Industries (Mopi) president Billy Urudra says Mopi, which is made up of 45 members who are mostly local generic drug manufacturers, prefers that open market competition determines fair price instead of a price control. This was expressed to the Health Minister in a townhall meeting on April 2.

He says it is more important for the government to expedite approval of generic drugs to get them into the market faster and allow competition, and to update intellectual property laws to prevent the lengthening of protection for innovators that leads to continuous high prices.

A mechanism to establish a price based on prices from various countries seems acceptable, Urudra says, but it is best to choose a country that has a similar economic growth as Malaysia because benchmarking against developed countries may result in higher prices, he says.

Although Thailand and the Philippines do not have such a control mechanism, the prices in these countries could serve as a comparison, he adds.

Consider cost variance

While the Pharmaceutical Association of Malaysia declined comment for this article, the Association of Private Hospitals of Malaysia president Datuk Dr Kuljit Singh says the association does not support a move that seeks to control the prices of medicines in private hospitals.

Unlike dispensing in a retail pharmacy, medication administration in a hospital involves other costs, such as medication review, drug counselling, compliance monitoring, and titration of dosages as patient conditions change, he says.

He says there is a host of direct and indirect costs associated with dispensing medications in a hospital, which varies across private hospitals depending on geographical locations, levels of service, and specialities.

“We have cautioned against a blunt policy that disregards this cost variance and brought this up with the Pharmaceutical Services Division at a townhall meeting on Feb 28 this year.

“We were given an undertaking it would be considered,” he says.

Dr Kuljit also says that such policy and regulatory measures should be made in tandem with adjustments to private hospitals’ overall payment system where direct and indirect costs are lumped together into a few chargeable items – medication services is one of these.

“This was the result of a distorted payment structure for private healthcare where proposals to realign increases in these costs to their proper categories – such as room and board rates – were met with resistance.

“The increases were inevitable due to a number of factors such as inflation, exchange rates and higher manpower requirements,” he says.

Asked what other charges are lumped together with medicines and other “charge-able items”, Dr Kuljit says there is expensive equipment that hospitals can only charge for when used such as medical pumps, used after cardiac surgery in an emergency.

On why drug prices in private hospitals are much higher than that of drugs sold in pharmacy outlets, he says the overhead costs of running the pharmacies are lower and they can buy in bigger bulk.

Dr Kuljit argues that private hospitals make an average of 5% to 7% profit, up to a maximum of 10%, and this is considered low.

Ooi, who is also a business consultant, questions the need for the high mark ups on drugs when the hospitals are already charging for almost every other possible thing, including cotton wool.

“The only way to show proof is to see their bottom line,” she says.

Private hospitals have captive customers which retail pharmacies do not have, which indicates a higher economies of scale, she argues.

Moreover, most retail pharmacies are placed in prime locations with rental per month ranging from RM7,000 to as high as RM50,000, she says.

Meanwhile, TWN’s Dr Lim asks if private hospitals are not making money hand over fist, adding that the CEO of one healthcare company is one of the highest paid CEOs in the country, earning more than RM33mil last year, according to reports.

“And are the big private hospitals not making huge profits, or else why are they expanding?” he asks.

For decades, Malaysians have complained of high medical charges, with some facing a financial catastrophe or maxing out their insurance coverage in a health crisis. High drug costs are a major concern here.

The drug price control measure and a central pool procurement system for medicines (to begin at the end of the year) are the bold measures the government has announced it will implement to address the issue.

However, in tandem with these measures, the government also needs to remove the unnecessary extensions of patents and examine the role of the middleman in the drug supply chain to the government.

The political will to address all these issues will provide a glimmer of hope for patients in the next few years that they will have better access to affordable drugs.

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