‘Win Some, Lose Some’, Minister Tells Hospitals About Price Controls

By Boo Su-Lyn | 29 July 2019

Malaysia’s Health Ministry is trying to reference the cheapest drug prices from other countries.

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KUALA LUMPUR, July 29 — Health Minister Dzulkefly Ahmad today told private hospitals that the government would not regulate their professional fees, but insisted on going ahead with drug price controls. 

Association of Private Hospitals of Malaysia (APHM) president Dr Kuljit Singh had appealed to the government to review their decision to regulate the price of drugs. 

He said other countries could impose price controls on medicines because they had national health care financing mechanisms, unlike Malaysia’s tax-based public health care system.

“As much as we can understand that the government is trying to reduce the bills of private hospitals, all private hospitals are equally concerned in keeping the cost low. But the cost of running any hospital, including public hospitals, is extremely expensive,” Dr Kuljit said in his opening speech at the 27th APHM International Healthcare Conference here today.

He pointed out that income from drugs was the single largest component of hospital revenue, ranging from 20 per cent to 40 per cent, depending on the hospital’s specialties, level of service, and operational models.

“Pricing controls for drugs will need to factor in mark ups to cater for differing operating costs arising from level of service provision, geographic locations,” Dr Kuljit said.

Dzulkefly said in response at the conference that he understood private hospitals’ anxiety.

“But in business, you win some, you lose some. Important thing is, nett nett you must win,” he said in his opening address.

He also said the Health Ministry was looking at pooled procurement among public and private hospitals to buy drugs for cheaper.

“With economies of scale, we’ll be in a better position to negotiate for better drug prices.”

Dzulkefly pointed out that drug price controls were practiced in other countries, including the United States and Australia. US president Donald Trump has reportedly hinted at tying American drug prices to cheaper ones set in European countries, but Republican party members themselves oppose price controls.

The Health Ministry has said that it will use external reference pricing (ERP) to benchmark drug prices in Malaysia against prices in other countries. 

The three lowest prices from those countries will be averaged to set the price ceilings for pharmaceutical products in Malaysia, where the government determines a certain percentage of markups that can be imposed at the wholesale level and retail points like hospitals, clinics, and pharmacies.

Today, Dzulkefly expressed hope that Malaysia would see a single-payer health care system, which means health spending is primarily made by the government, rather than the current multi-payer system that sees health care payments made by the Health Ministry, the Education Ministry, private insurance, corporations, and out-of-pocket payments among others. 

“With that in place, we’ll have a semblance of reformed health care services.”

Dzulkefly told reporters later that his vision was to create a health financing system that is “not only borne by the government, but also by the private sector, insurance companies, state governments, ‘waqaf’ (Islamic endowment) sources, and other sources that are combined into one payment system, with the government as one entity.”

The Najib administration tried unsuccessfully in 2011 to move the country towards a social health insurance system called 1Care that was modelled after the United Kingdom’s National Health Service (NHS).

The then Barisan Nasional government’s social health insurance proposal received massive pushback amid claims that employees and businesses would be required to contribute 10 per cent of their monthly earnings, citizens would be assigned to specific GPs, and clinic visits would be limited to six times annually.

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