Wednesday, May 13, 2020

Drug Price Control 46, Pricing policies in 10 Asian economies

I am curious if there is any drug price control (DPC) or simply price dictatorship policy being done in our neighbors in the ASEAN and developed Asia. A friend showed me a copy of the latest quarterly report of IQVIA, formerly IMS Health. It is a by-subscription paper only. It’s cool. I checked two categories in the report and I chose 10 economies (this picture from

The country abbreviations are as follows:

PH – Philippines; ID – Indonesia; TH – Thailand; VN – Viet Nam; MY – Malaysia;
SG – Singapore; JP – Japan; KR – S. Korea; TW – Taiwan; HK – Hong Kong.

IQVIA MARKET PROGNOSIS 2020-2024 Key Findings
Published March 2020

Drugs Pricing
Pharmaceutical Business Environment
* EO 104 (Feb. 17, 2020) has MWP, MRP for 87 molecules or 133 drug formulas. Plus additional 35 molecules.
* Mandatory 20% price discounts for senior citizens, PWDs. To be extended to cancer patients, spouses of OFWs, single parents.
* Manufacturers say they have been hit hard by VAT exemptions and introduction of 20% discounts on medicines for senior citizens.
* After diabetes, high cholesterol, and hypertension, the next tranche of VAT-exemptions planned to be applied on drugs targeting cancer, psychiatric disorders, tuberculosis and kidney diseases, expected to come into effect from 2023 onwards.
* Some companies may withdraw some drugs, or withdraw completely from the market. Price cuts could drive reduction up to 1/3 in pharma jobs.
* Previous withdrawal of some multinationals (Eli Lilly and Bristol-Myers Squibb)
* Attractive market for foreign generic houses.
* Lack of skilled labor, high utility costs.
* Generics-only pharmacies will continue to flourish. Pharmacy and drugstore chains will further expand, small, independent players to become marginal.
* Pharmacies to witness demand spike in first part of 2020 due to panic purchases of cough and cold remedies, immune supplements, anti-infectives etc.

* Explicit regulatory price controls remain unlikely, tools designed to limit the price of products on the FORNAS will remain in place
JKN funding issues, HTAs, competition for e-catalogue tenders and private hospital cost containment efforts will all ensure that pressure on drug prices remains intense.
* Private hospitals now have access to e-catalogue bid prices, demand for discounts.
* Regulators to attach other factors like quality and supply capabilities, which would rule out submission of bids by small, low-quality manufacturers.
* Margins on JKN business will remain thin while demand for larger discounts in the private sector will pose further threat to manufacturer profits.
* Virus to negatively impact local pharma manufacturers given their heavy reliance on imported raw materials from China. Lengthy disruption to manufacturers’ supply could add upward pressure on prices particularly generics.
* Outbreak to boost demand for OTC medicines. Vitamins, antibacterial gels, cough and cold meds.
* Few multinationals will invest significantly  unless the operating climate improves. Regional generics and biosimilar players are more likely investors but will have to operate through joint ventures with local partners unless existing caps on foreign investment are relaxed.
* More consolidation in the distribution sector where falling prices, payment delays and rising compliance costs will further squeeze margins.

* Median pricing of National List of Essential Meds (NLEM) and some non-NLEM drugs will remain a key cost-containment policy in the public sector’s three healthcare schemes.
* Manufacturers enacting strategies to mitigate impacts of median pricing like  promoting product differentiation to compete with generics, forging partnerships with government bodies or local suppliers, investing in R&D, outsourcing sales and marketing activities.
* Competition among manufacturers to supply government hospitals will remain intense, with ministerial regulations under the Procurement Act favoring GPO and products on the Thai innovation list.
* Surge in air pollution in 2019-2020 to see surge in demand for-and-uptake of OTC medicines for respiratory and skin ailments, vitamin C supplements.  Exacerbated by COVID-19 outbreak as a result of the anticipated shift in patient behavior.
* Greater innovation in pharmaceutical sector,  formation of the Ministry of Higher Education, Science, Research and Innovation in May 2019. More conducive environment for R&D through clinical research roadmap (2018-2022), expanding the Thai innovation list, and speeding up the launch of and access to innovative medicines. 
* Government Pharmaceutical Organization (GPO) will continue as supplier of generic medicines to government hospitals.
* Drug prices under growing pressure as efforts to curb SHI reimbursement costs are stepped up.
* MOH to pursue consolidated tendering for more drugs. Logistical issues will limit near-term increases in the use of national tenders, however, leaving provincial tenders as the dominant mechanism for levering down prices in the public sector.
* Procurement prices for 139 off patent originator (OPO) products will be subject to negotiations, with negotiated prices coming into effect from early 2020.
* Further development of local manufacturing will be encouraged but regulatory compliance costs will lead to exit of some small domestic players.
* Demand for generics will continue to rise, driven by public sector procurement strategies, SHI reimbursement policies and further gradual increase in SHI coverage.
* Imposition of tighter quality standards will improve physician and patient attitudes to generics but regulatory compliance costs will trigger a degree of consolidation in the generics market. Biosimilars and cheaper ‘biocopies’ will gain some traction.

* MOH announced in May 2019 that external reference pricing will be used to benchmark against cheaper medicine prices in eight other countries, with a ceiling price being set based on the average of the three lowest prices identified.
* Timeline of implementation and reference countries considered are uncertain.
* Information sharing by the MOH, Ministry of Defense (MOD) and  Ministry of Education (MOE) will place them in stronger negotiating position with manufacturers.  
* Government plans to implement price controls at wholesale and retail level. No specific proposals have yet been publicized. 
* Malaysian companies increasingly looking to the export market as a new revenue stream over the past 12 months. They face the challenge of increasing volumes to generate economies of scale to compete with Indian manufacturers on price. 
* Innovative drug sector – dominated by foreign companies – still accounts for a sizeable value share of pharmaceutical market, faced with a number of headwinds over the next few years. These include a large patent cliff, greater drug price regulation, and competition for tenders in the public sector.
* Future growth may be curtailed by the price controls that the government is planning to impose at the retail level.
* Pricing pressure in public sector will remain strong as subsidy list expands.
* Downward prices intensified by government’s bulk-purchasing practices. 
* Medicine prices in private sector will face less pressure than in public settings, with regular market dynamics remaining the main factor affecting price in the near-term at least. Major private hospital groups began to establish centralized purchasing agreements for some therapies.
* Multinational drugmakers are well established in Singapore and continue to expand their manufacturing output via new production plants and upgrading existing facilities.
* Retail pharmacists are set to take on a larger role in the primary care setting, relieving the burden on doctors and helping to reduce repeat general practitioner (GP) consultations. The separation of prescribing and dispensing functions remains a distant prospect.
* According to MHLW, the April 2020 biennial NHI price revision will see price cuts averaging 4.38%, whilst any price rises will not be permitted to exceed prices set in the one-off price revision of October 2019.
* More than a dozen high-cost therapies will undergo considerably larger price cuts on the basis of their high sales values, including leading product Keytruda (pembrolizumab). 
* Revision to methodology for setting prices of new medicines will see more innovative medicines that are not PMP-eligible undergo price cuts four years after their initial listing.
* Japan’s pricing environment progressively eroding prospects for innovative medicines.
* Industry unlikely to withdraw investment in developing and commercializing new products in the near term, but global launch strategies could place Japan lower down the priority list in the longer term.
* COVID-19 impact on pharma manufacturing since China is a key global source of APIs.
* Sales force retained by many pharmaceutical companies is declining. Research-based companies are refocusing on specialty medicines, which require more targeted promotional activity.
*Ministry of Health and Welfare (MOHW)  committed to expand patient access to medicines for rare diseases (such as cancer).
* These will be in addition to actual transaction price (ATP) cuts imposed every two years; ATP cuts in January 2020 averaged 1.96%.  
* Risk-sharing agreements (RSA) to become more prevalent to secure reimbursement subsidies for high-cost medicines.
* Changes to generic pricing system will be phased in from July 2020. Generic products currently priced at 59.5% of the originator price in the 12 months following patent expiry, falling to 53.55% after one year.
* Domestic companies are diversifying business interests beyond generics. Leading players are investing in R&D activities and upgrading manufacturing facilities to boost export trade
* Environment for multinational companies is perceived as somewhat hostile. The market is considered to offer sufficient growth potential to remain attractive, but pricing pressures will mean careful consideration of launch strategies to avoid damaging prices in key markets such as China.
* Sales and marketing activities being held to increasingly higher standards as a result of legislative changes and industry-imposed standards.
* Price volume agreements (PVAs) will remain one of the main tools to limit the budget impact of expensive new drugs. PVAs limit the amount a company can earn, they have the advantage of enabling new drugs to obtain reimbursement listing more quickly.
* Companies with a Managed Entry Agreement (MEA) likely to need to sign PVA.
* First MEAs were implemented in 2019 for three immuno-oncology products. MEAs are one way for a new product's price to be screened from international comparisons.
* Stricter regulatory standards resulted in some consolidation in the domestic industry over the past few years; low prices at home have increased the importance of export markets, especially for new products seeking better price.
* Growth in imports is outpacing that of exports and imports account for much of the Taiwanese market.
* Strong growth in biomedicine start-ups, helped by extensive government support. First new drugs from Taiwanese companies being launched worldwide.

* Tendering and negotiations are central to drug pricing. Benchmarking with competitors is the norm, although prices remain free from explicit regulatory control. Institutional market prices will continue to be controlled indirectly by tender-based procurement and the significance of HADF listings, while health maintenance organizations (HMOs) and private providers will adopt more aggressive approaches to purchasing in a bid to lever prices down.
* Private sector growth will be fueled in part by immediate post-launch demand for new drugs from Chinese patients, although this has begun to moderate as China’s drug launch lag narrows to three months from prior 1-2 years.
* Enhance R&D capabilities of public hospitals through an earmarked sum of HK$17 million in fiscal 2020 budget. Government set aside HK$1.2 billion to fund Hong Kong Genome Project implementation through 2025 to deliver improvements in cancer and rare disorders treatment.  

So of the 10 economies reviewed here, only the Philippines has new DPC policy. And this EO 104 (February 2020) is on top of price control under EO 821 (July 2009) which remains in effect until today.

Malaysia plans to have DPC both at the wholesale and retail levels, but no details yet when, how many molecules and so on.

Some good alternatives to drug price dictatorship are as follows:

1. Indonesia’s HTA, competition in e-catalogue tenders, private hospitals’ access to e-catalogue bids.
2. Thailand’s stiff competition among manufacturers to supply government hospitals.
3. Vietnam’s negotiated pricing for off patent originator (OPO) products.
4. Malaysia’s information sharing by different Ministries/agencies.
5. Singapore’s government bulk-purchasing practices.
6. Japan’s high sales values and volume, bulk purchase.
7. Korea’s Risk-sharing agreements (RSA) to reimburse subsidies for high-cost medicines.
8. Taiwan’s Price volume agreements (PVAs) with manufacturers.
9. Hong Kong’s Tendering and price negotiations. And
10. Philippines’ own Generics law, new off-patent medicines become available to local generics firms for cheaper mass production.

The important thing is that innovators should be encouraged to bring their new, patented drugs to the country. Let them come and compete among each other. We should not scare and demonize them with price dictatorship and even patent confiscation via compulsory licensing. Later the local generics firms will join the competition.

See also:

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