Price Controls Equal Cheaper Medicines? – FPMPAM

Private hospitals should display a price list of standard procedures and medications.

It is questionable if ceiling pricing for pharmaceuticals will really lead to cheaper medicines. On the contrary it can push health care providers to use the ceiling price for a product it could have sold for cheaper.

Furthermore, simplistic price controls like this could also have unintended consequences on other stages of the supply chain and on small clinics and pharmacies. It will ultimately benefit the big boys and result in monopolistic or oligopolistic supply chains in the private sector which in the long run, is detrimental to patient’s choice and access.

It must be remembered that the government gets its medications at a much lower price than the private sector. In essence it means that the private sector is subsidising for the cost of medicines supplied to the public sector.

Thus for any medication, merely using the government base price (reference price)  and adding a maximum of 30 % margin for retail is too simplistic and unrealistic.

The government base price for any single unit of medicine given to the patient does not take into account the many other cost like wages of staff, cost of maintaining the facilities, storage cost, dispensing cost etc. In the private sector, all these cost items do add up to the final retail cost of the medication.

This is the logical explanation why cost of medicines in the private sector is generally higher than in the public sector as shown by the UKM study.

For ceiling pricing to be meaningful for both private and public sectors, the price for supply of any particular medication and the cost of its final dispensing to the patient must be the same for both sectors. This means that there should be no more subsidy for the cost in the public sector.

All relevant activities cost must be added in the final cost of the medicine when given to the patient. In the end, the actual cost of the medication provided by the government will then be significantly higher.

The question, is the government willing to pay for the same medication at the same price as the private sector?

We are clearly not comparing apples with apples. Lots more research on long-term impact assessment and consultation with all stake holders will be needed.

This issue was already discussed and unanimously agreed at the Reference pricing and reimbursement workshop of the Dasar Ubat Nasional in Nov 2013.

The agreed position was that reference pricing should be for the public sector and that private sector pricing should be left to market forces. The government may choose to set guidelines but market must be allowed to function as free market.

If the government’s aim is to make healthcare more affordable, accessible and to foster competitive prices, it can start with getting private hospitals to display a price list of their standard procedures and medications so that patients can compare. This should be easy enough given that major private hospitals which are already owned by government-linked corporations (GLCs).

Medical bills in private hospitals are not just due to medicine prices, but a whole list of other items which need to be paid for. Patients in the public hospitals get these for minimal cost, if not free because they are subsidised by the taxpayers.

Dr. Steven KW Chow is President of the Federation of Private Medical Practitioners’ Associations Malaysia (FPMPAM)

  • This is the personal opinion of the writer or publication and does not necessarily represent the views of CodeBlue.

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