Drug Companies, Pharmacists Slam Price Controls

By CodeBlue | 25 March 2019

AstraZeneca Malaysia country president Allen Patino denied that pharmaceutical companies enjoyed huge profit margins.

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PETALING JAYA, March 25 — Pharmaceutical companies and pharmacists protested against the government’s plan to regulate drug prices, contending that it could inadvertently make medicines more expensive instead.

Malaysian Organisation of Pharmaceutical Industries (MOPI) president Billy Urudra Sarvanantham said competition would lead to fair prices, pointing out that consumers could choose between different brands of medicines.

“If you look at many countries or even in Malaysia when you have price controls, it would lead to either prices being higher than what it should be, or having to subsidise the industry in some way,” Billy told the Pharmacy Renaissance Summit 2019 organised by the Malaysian Community Pharmacy Guild (MCPG) here yesterday.

“So allowing the normal market forces to determine price would be the right way to manage prices to a level which is fair to the industry, to the consumer, along the supply chain,” added the head of the group of pharmaceutical manufacturers.

The Health Ministry may introduce a price control mechanism for drugs — possibly price ceilings, according to Health Minister Dzulkefly Ahmad — by the middle of the year.

Pharmaceutical Association of Malaysia (PhAMA) vice president Allen Patino said price controls would not reduce medicine prices, as he disputed popular perception that pharmaceutical companies enjoyed huge profit margins.

“The average [cost] of developing a new medication is US$2.8 billion,” Patino told the conference.

He acknowledged that costs were much lower for one or two medicines, but said that on average, only one or two drugs reached the market for every 10 that were developed.

“So we have to pay for the other eight failures. That’s where the prices go up,” said Patino, who is also country president of the Malaysian subsidiary of British pharmaceutical giant AstraZeneca.

According to a study by the United States Government Accountability Office, the average profit margin for 403 drug companies worldwide in 2015 was 17.1 percent; it was 20.1 percent for the 25 biggest companies, but only 8.6 percent for the other pharmaceutical companies that year.

In comparison, the world’s 25 biggest software companies had an average profit margin of 21.7 percent in 2006, before falling to 13.4 percent in 2015. The world’s 500 biggest companies, excluding pharmaceutical, biotechnology, and software companies, had an average profit margin of 6.7 percent in 2015.

Patino also claimed that hospitals could mark up prices by 400 percent.

He pointed out that a lung cancer patient could be given the same targeted therapy drug in public and private hospitals in Malaysia, but the cost of treatment between both types of facilities was vastly different.

“That difference is the largest waste of the GDP. That doesn’t happen in South Korea because of the one single-payer system,” he said.

Patino questioned how the Health Ministry would roll out price controls for medicines, complaining about a lack of consultation with the industry.

Malaysian Association of Pharmaceutical Suppliers (MAPS) president Lim Teng Chyuan criticised external reference pricing (ERP), in which the price of a drug is benchmarked on prices of that product in other countries, saying that the model assumed that the reference countries got the price right in the first place.

“When it comes to reference pricing, of course you hope to reference the price at a study, for example, you’ve done a HTA (health technology assessment). But then again, the countries which are able to do HTA are the advanced countries. Inevitably you’ll end up with high prices,” Lim told the conference.

“ERP itself has its downsides. There’s a Middle East study that shows that when countries use ERP, they ended up with higher prices,” added the head of the group of pharmaceutical importers.

Lim also noted that the single exit price mechanism for medicines in South Africa — where all outlets had a standard price and dispensers were allowed to mark up by between five and 46 percent — affected independent pharmacists the most.

“They cannot even afford to have locums. Workers have to work overtime, resort to hiring pharmacy assistants instead of full-fledged pharmacists,” he said. “One pharmacist has to do the work of two and a half pharmacists.”

South Africa’s single exit price policy, according to Lim, also required offers of generics as a choice to patients.

“In the first year of implementation, prices came down 22 percent. But I would question the validity of this because what is the factor that caused the 22 percent reduction? Is it because of regulated markup or is it because of the generic switching?” Lim told the conference.

MCPG assistant honorary treasurer Loh Peng Yeow said price ceilings would not resolve price wars among community pharmacists.

“If a ceiling price is set at RM10, anybody can [price] at RM10 or RM8, so the price war will remain happening. If the ceiling price is set, it will reduce the margin,” the pharmacist said.

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