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Pharmaceuticals and pricing policy in Malaysia

September 10, 2012

FMT LETTER: From Richard Kamalanathan, via e-mail

The World Health Organisation has stated that the global pharmaceuticals market is worth US$300 billion a year, a figure expected to rise to US$400 billion within three years. The 10 largest drugs companies control over one-third of this market, several with sales of more than US$10 billion a year and profit margins of about 30%. Six are based in the United States and four in Europe. It is predicted that North and South America, Europe and Japan will continue to account for a full 85% of the global pharmaceuticals market well into the 21st century.

Companies currently spend one-third of all sales revenue on marketing their products – roughly twice what they spend on research and development. The top 10 companies are a Pfizer, b.GlaxoSmithKline, c Sanofi-Aventis, 4 Novartis,e. AstraZeneca, f. Johnson & Johnson, g.Merck, h. Wyeth, i.Bristol-Myers Squibb, and j. Eli Lilly. The following table explains the consumer strength of pharmaceutical by countries:

Looking at the figures and data, it would not be wrong to say that a drug explosion is imminent in most of the advanced countries and that it would also spread far and wide to countries such as Laos and Myanmar. The consumption of pharmaceuticals in the fast growing economies such as China and Brazil has surpassed the Western economies by leaps and bounds and such a trend would not wait to target countries like Malaysia sooner than later.

The Malaysian scenario

The Malaysian Organisation of Pharmaceutical Industries (MOPI) says that in the last decade, the Malaysian pharmaceutical market grew at between 8 to 10% annually. The 2009 market size was estimated to be about RM4.5 billion for prescription and OTC medicines. The market for traditional medicines together with health and food supplements was estimated to be about RM3 billion. However the market still relies, to a significant extent, on imports for innovator products.

Pharmaceutical products manufactured by the Malaysian pharmaceutical industry can be broadly categorised as:

  • Prescription
  • Over-the-counter (OTC)
  • Traditional medicines
  • Health and Food supplements

Prescription medicines comprise patented and generic drugs, the sale and transaction of which are confined to doctors and pharmacists. OTC, traditional medicines and health/food supplements may be sold by non-professional outlets and sold freely to members of the public, Since 1986 when drug registration was started, the cumulative total number of applications received by the Drug Control Authority (DCA) as at the end of 2005 were, 16,554 for poisons (controlled medicines); 12,529 for non poisons; 28,546 for traditional medicines and 87,532 for cosmetics. As at the end of 2005 the number remaining on the register were 3,711 for prescription products (controlled medicines); 2,831 for OTC products (non poisons); 1,112 for traditional medicines and 82,792 for cosmetics.

Every medicine purchased or prescribed will have three categories to its use. For example the most prevalently used pain killer and fever medicine is Paracetamol.

  • Generic name – Paracetamol
  • Chemical name  – Acetaminophen (para-acetyl-amino-phenol)
  • Brand Name – Panadol (in Malaysia)

Paracetamol is also referred in the following brand names: Aceta, Actimin, Anacin-3, Apacet, Aspirin Free Anacin, Atasol, Banesin, Ben-u-ron, Biogesic, Crocin, Dafalgan, Dapa, Dolo, Datril, Extra-Strength, Efferalgan, DayQuil, Depon & Depon Maximum, Feverall, Few Drops, Fibi, Fibi plus, Genapap, Genebs, Lekadol, LemSip, Liquiprin, Lupocet, Milidon, Neopap, Ny-Quil, Oraphen-PD, Panado, Panadol, Panadrex, Panamax, Paracet, Parol, Panodil, Paratabs, Paralen, Phenaphen, Plicet, PyongSu Cetamol, Redutemp, Snaplets-FR, Suppap, Tachipirina, Tamen, Tapanol, Tempra, Tipol, Tylenol, Uphamol, Valorin, Xcel.


Pricing

In Malaysia, the manufacturers, distributors and retailers are allowed to set their own prices. In India, Essential Drugs should not cost more than twice the cost of production, and the maximum retail price and local taxes should be included in its final printed price (Kumar, 2004).
However, in Malaysia currently, there is no control on pharmaceuticals’ prices.

The alarming increase in drug prices has indicated the need for price regulation. But the pharmaceutical industry often warns that any such price control may hamper innovative research in the country. (Zaheer: 2010). However almost all research and innovation of pharmaceuticals are  done in the west. India, China, South Korea and Australia are the only Asia Pacific countries that have this capabilities though clinical trials are conducted at University Hospitals, Ministry of Health General Hospitals and at selected private hospitals and clinics (Balasubramaniam:1995). The situation has not changed much in the last fifteen years.

Price control affects the sale and consumption of a drug, and thus constitutes the major influence on the expenditures. The pricing decision is probably the single most important aspect of marketing a pharmaceutical, yet most countries do not allow companies to set drug prices independently. In an attempt to reduce expenditures on drugs, the government regulated drug prices because this is the simplest means of decreasing overall drug costs.

Grebmer (1987) has argued pricing regulations can be found in most of the European and Middle Eastern countries, as well as in Australia and New Zealand. Large proportions of the Far East also regulate prices of new products and require approvals for price increases (Wertheimer and Grumer, 1992).

Thus we have that many low, middle, and high-income countries control their prices vigorously; however Malaysia, a middle-income country, does not do so. The developed countries like US and UK have maintained a relatively free market because of the economic gains in selling the drugs to worldwide consumers however the developing countries like Malaysia have little support for a free market economy because of their minimal or nonexistent contribution in global research and development. As such, it is difficult for the developing countries to justify the free market for pharmaceuticals.

For example, Paracetamol was  was discovered in 1877 and came in to  general use in 1887. What kind of research and innovation can be done on this OTC (over-the-counter) drug? However global and local firms have done cosmetic adjustments to this particular drug and are selling in various different forms for fever and as a pain killer. Chronic use of this drug is known to have augmented blood cancer.

Essential Drugs

The Drug Control Authority of Malaysia does not seem to have a level-headed policy on how this drug can be sold and at the prices pharmacies themselves determine. There are grave irregularities not only in the pricing of pharmaceuticals at very exorbitant prices but a rational National Drugs Policy has never been emanated. The National Medicines Policy does not concur with the recommendations of the World Health Organisation on Essential Drugs.

World Health Organisation (WHO) has defined Essential Drugs  as  “those drugs that satisfy the health care needs of the majority of the population; they should therefore be available at all times in adequate amounts and in appropriate dosage forms, at a price the community can afford.

The WHO has published a model list of essential medicines. Each country is encouraged to prepare their own lists taking into consideration local priorities. At  present over 150 countries have published an official essential medicines list. The WHO List contains a core list and a complementary list.

The core list presents a list of minimum medicine needs for a basic health care system, listing the most efficacious, safe and cost-effective medicines for priority conditions. Priority conditions are selected on the basis of current and estimated future public health relevance, and potential for safe and cost-effective treatment.

The complementary list presents essential medicines for priority diseases, for which specialised diagnostic or monitoring facilities are needed. In case of doubt medicines may also be listed as complementary on the basis of consistent higher costs or less attractive cost-effectiveness in a variety of settings.

The compilation of an essential medicines list enables health authorities, especially in developing countries, to optimise pharmaceutical resources.

The list is important because:

  • It forms the basis of a national drugs policy in many countries, both developed and developing (e.g. South Africa, Eritrea).
  • Governments refer to WHO recommendations when making decisions on health spending

While it is  imperative that the  government declare its equitable medicines and drugs policy on how the essential drugs are administered for the poor and needy and as to how the pricings are controlled as argued vaguely in the National Medicines Policy it is also imperative that the government declare openly the number of branded vitamins, cosmetics and traditional medicines sold over-the-counter  by untrained sales personnel and also all the traditional medicines that are sold through direct selling agencies towards a coordinated National Medicines and Drugs Policy as recommended by the World Health Organisation.


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