Compete to lower drug prices and save lives — Azrul Mohd Khalib

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SEPTEMBER 13 — With medical inflation increasing from 12.7 per cent last year to a projected 17 per cent for 2018, addressing the escalating cost of healthcare in Malaysia is an urgent priority for the government. Dealing with the crippling burden posed by a large proportion of the population living with non-communicable diseases such as diabetes, kidney diseases and cancer is a daunting challenge.

It is within this context that Deputy Minister of Health Dr Lee Boon Chye recently announced that the government would soon introduce the mechanism of price controls on medicines, prior to the upcoming tabling of the 2019 Budget.

Addressing the cost of healthcare is incredibly complex and differs from country to country. There is no one-size-fits-all approach or shortcut to achieving optimal balance between the paying costs of providing high quality healthcare and ensuring equitable, accessible and affordable treatment for all.

It goes without saying that the well-being and interest of patients should be at the heart and centre of any such decision-making.

I am not worried that pharmaceutical companies may lose out in making their margins. Malaysia is a relatively small market compared to our neighbours, Indonesia (population: 270 million), Thailand (70 million) and Philippines (95 million).

However, I am worried for the thousands of Malaysians whose lives depend on access to innovative medicines, to drugs which have yet to have generic or biosimilar counterparts or who are waiting for advanced therapies currently out of reach of most Malaysian patients.

This effort at cost-containment though high-minded and well-intentioned, is fraught with risks and consequences which extend beyond the health sector. Most economists consider price controls as a drastic action which distorts the market and often end up victimising the very people they are intended to help. Contrary to popular belief, they are not magic bullets.

Through a general circular dated 15 July 2013 from the Chief Secretary to the Government titled “National Policy on the Development and Implementation of Regulations” (Pekeliling Am - Bilangan 1, Tahun 2013), the government introduced the Regulatory Impact Assessment (RIA) process.

Similar in intent to an Environmental Impact Assessment (EIA), the RIA is a process of evaluating the likely impacts of a proposed regulation, both beneficial and adverse.

The circular indicates that a RIA is required of all proposed legislation, government regulations and decisions which have a regulatory impact on businesses.

This is to ensure that proposed regulations would have clear objectives, provide a comprehensive cost-benefit analysis, and obtain input and views from necessary stakeholders.

The general circular further emphasised on the need for the RIA to be carried out to ensure effective and fair administration through enhancing transparency, equality, and accountability in public administration. All ingredients vital to a good regulatory environment for developing sound economic conditions which will attract foreign investment, facilitate businesses and provide access to research, new markets and innovative technology.

Have the Ministry of Domestic Trade and Consumer Affairs, and the Ministry of Health undertaken a RIA before the proposal for price controls of medicines was adopted for implementation? Has the Regulatory Impact Statement been published, and have consultations with stakeholders taken place?

The advantages and disadvantages in the use of price controls should be fully understood and made known to the Malaysian public before they are imposed.

After all, increasing transparency, accountability and consultation were among the promises of the new government.

We need to learn from countries which have already implemented similar mechanisms.

Canada imposed controls on factory-gate prices, reference-based pricing, prices freezes and limits on mark-ups.  They succeeded in controlling prices but drug expenditure continued to rise due to population demographics, prescribing practices, and increasing prevalence of non-communicable diseases.

The United Kingdom’s Pharmaceutical Price Regulation Scheme is voluntary, runs in five year cycles and is as a result of negotiations between the government and the pharmaceutical industry. Collaboration and consultation were critical in developing the drug pricing legislation and regulations.

The reality is that imposing price controls for medicines in Malaysia will send yet another red flag to the international pharmaceutical, biotechnology and life sciences community.

Combined with last year’s issuing of a government use license which exploited the patent of a Hepatitis C drug, Malaysia’s reputation could take another hit and the country regarded as a risky and unpredictable place to introduce new innovative drugs for the treatment of illnesses such as cancer and rare diseases. Fewer new drugs would become available to Malaysian patients, depriving them of the benefits of advances in medical research.

We support the Malaysian government’s intent to gradually increase the use of generic drugs to 80 per cent from the current 60 per cent by 2020. In fact, some of the first targeted cancer drugs are now reaching the end of their patents, enabling for generics to be produced. It has the potential to save hundreds of millions of ringgit each year, and to help deal with ballooning healthcare costs for a population which is both suffering from non-communicable diseases and ageing.

But not all drugs, particular those that are new and innovative such as targeted and immunotherapies, have their generic or biosimilar equivalent available today. We can’t possibly tell people to be patient and to wait.

Patients do not have the luxury of time to wait 12-20 years for patents to expire to get treated. Neither can they afford to just visit a neighbouring country to access the treatment needed. They need access to these drugs here so that they can get a chance to live their lives today.

I recently attended the 2018 Clinical Trials Day jointly held by Clinical Research Malaysia, the National Cancer Institute and the Clinical Research Centre.

Organised to increase public participation in clinical trials and to highlight the country’s contributions to global efforts in clinical research and innovation, the event proudly touted the organisations’ involvement in industry-sponsored research towards development of innovative therapies and drugs.

Being an R&D and clinical trial destination site for contract pharmaceutical research brings in hundreds of millions of ringgit in foreign investment to Malaysia and builds local capacity to conduct advanced biopharmaceutical research.

These achievements would all be at risk should Malaysia be red-flagged.

The World Health Organisation states that "A competitive marketplace is the best way to ensure low prices for medicines. Proper organisation of the market and application of anti-trust (monopoly) laws should facilitate price competition. However, if pharmaceutical markets do not become competitive, governments may choose to institute price controls."

Has the situation become so uncompetitive that price controls are needed? The Malaysian Competition Commission’s 2017 report titled “Market Review on Priority Sector Under Competition Act 2010 – Pharmaceutical Sector” (, describes and cautions the existence of opaque direct-negotiation mechanisms, inherent monopolies and the use of middlemen acting as intermediaries or tender agencies, throughout the public sector’s drug procurement process. All of which adds on to the cost of medicines.

These middlemen are paid commission for practically every pill, solution and tablet which goes through this process. Cutting them out and having the government deal and negotiate directly with pharmaceutical suppliers would increase competition and significantly reduce the cost involved.

Competition provides for the possibility of better and improved treatment options, lower drug prices, increased affordability and coverage. It contributes to improving the quality of life for patients and most importantly, potentially save lives.

The Minister of Health has previously highlighted that public healthcare reform needs to include a more competitive, accountable and transparent medicine procurement and supply chain framework. One that works in the best interest of patients, and not just to save money for the government.

* Azrul Mohd Khalib is CEO of the Galen Centre for Health & Social Policy.

**This is the personal opinion of the writer or organisation and does not necessarily represent the views of Malay Mail.

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