Drug Price Controls: Clinic Closures, RM31 Billion Wage Loss in Private Healthcare

KUALA LUMPUR, 31 January – Drug price controls could shut down a third of private clinics in Malaysia and affect up to 136,000 jobs in the private healthcare sector in 2037.

According to a cost-benefit analysis of the proposed policy, seen by code bluedrug policy regulation could see around 33% or 2,600 clinics go out of business, as existing consultation fee laws mean clinics are largely reliant on drug revenue to remain profitable.

Drug price caps are expected to result in savings of 40-50% for patients in private clinics, as drugs represent a significant portion of their expenditure, based on the “comprehensive cost-benefit assessment of the Medicine Pricing (Preliminary Results)” Malaysia Productivity Corporation (MPC) public consultation document which was released after consultation with private industry groups from November 29 to December 6 last year.

Private General Practitioner (GP) and Dental Clinic consultation fees are currently capped at RM10 to RM35 and RM25 to RM250 respectively under Schedule 7 of the Private Health Facilities and Services Act 1998 (PHFSA ) (Law 586). Under Schedule 13, private hospital specialist consultation fees are fixed by law at a rate of RM80 to RM235.

Efforts to deregulate fees for private GPs, dentists and specialists by the Pakatan Harapan administration, 13 years after they were passed into law in 2006, have failed to materialize following the landmark Cabinet decision in December 2019 for deregulation.

General practitioners in private clinics have long demanded that their fees be harmonized with those of their hospital counterparts, whose consultation fees were increased in 2013 from RM30 to RM125.

Another cap on drug prices would hurt their bottom line even more and force many GP clinics to close permanently. This, in turn, will lead to fewer healthcare access points for patients, especially in less urban areas that serve the bottom 40% (B40) and middle 40% (M40) of income groups. , increasing the number of private clinics from 8,000 to about 5,400, if the policy is implemented.

The cost-benefit analysis also revealed that the proposed policy will lead to a 22% to 27% drop in total hospital revenue, forcing some hospitals to reduce investment and consider closing their outpatient wings to focus on services instead. non-drug and hospital. .

Savings to patients in private hospitals through drug price controls are estimated at 20-25%. Major private hospitals in Malaysia are mostly owned by government-linked companies.

Employment graph from “Comprehensive Cost-Benefit Assessment of Drug Pricing Policy (Preliminary Results)” conducted from November 29 to December 6, 2021, led by the Malaysia Productivity Corporation (MPC).

The private healthcare sector is expected to be an engine of socio-economic growth for Malaysia and, on a business as usual basis, it will generate RM1 trillion over the next 15 years, from 2022 to 2037.

The sector is also expected to create around 100,000 new jobs, serve 13 million patients a year and bring in RM44 billion in planned investment in Malaysia over the same period.

It currently employs approximately 133,000 employees, which is expected to increase by 9% between 2021 and 2037. Based on the cost-benefit analysis of the drug price control policy, employees in the private healthcare sector could lose up to RM31 billion in wages, in net present value terms, over the next 15 years to keep businesses afloat.

It was also noted that drug price controls in 2037 would put 91,000-136,000 jobs (or 30-40% of the then 227,000 employees) at risk of pay cuts, wage growth freezes or redundancies, representing an economic loss of approximately RM4. 0.5 billion to 6.1 billion RM that year.

The impact measured by the study excludes the downstream impact on industries dependent on the private healthcare sector, such as commercial landlords and building services.

The Comprehensive Cost-Benefit Assessment (CBA 2.0) on Medicine Pricing Policy is the second cost-benefit analysis of proposed medicine price controls. It covers approximately 5,000 products, expanding the scope of the product beyond the first cost-benefit analysis, with MPC describing this latest review as a “more holistic impact assessment” of proposed drug price controls through “information based on data”.

The Ministry of Health (MOH) wants to regulate drug prices in the private health care sector by using an external reference pricing mechanism to cap wholesale prices and then set cap retail prices for prescription drugs in private hospitals, clinics and pharmacies, on the basis of regressive prices. wholesale cap increases. External reference prices are determined by comparisons of drug prices in Commonwealth countries, other countries in the region, or those with income levels similar to those in Malaysia.

The MPC served as the government’s main coordinating body that coordinated and facilitated public-private collaboration on ABC between government agencies, independent economists, and groups representing local and foreign pharmaceutical manufacturers, multinational pharmaceutical corporations, private hospitals and doctors.

The CBA 2.0 working group includes five members from the private healthcare sector: the Pharmaceutical Association of Malaysia (PhAMA); the Malaysian Organization of Pharmaceutical Industries (MOPI); the Association of Private Hospitals Malaysia (APHM); the Malaysian Medical Association (MMA) and the Pharmaceutical Research & Manufacturers of America (PhRMA).

Members of the CBA 2.0 working group among government agencies include Ministry of International Trade and Industry (MITI), MOH, Ministry of Finance (MOF), Bank Negara Malaysia (BNM), Economic Planning (EPU), Malaysia Healthcare Travel Council (MHTC), Intellectual Property Corporation of Malaysia (MyIPO), Department of Statistics Malaysia (DOSM) and MPC.

The cost-benefit analysis was carried out by an independent global data science company which MPC did not name.

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