Drug pricing control to have limited impact on healthcare sector: AmResearch

PETALING JAYA: The effects of the drug pricing control (DPC) by the Health Ministry is expected to have a limited impact on the healthcare sector margins, according to AmResearch.

“Although there is still no clear drug pricing guideline, we believe any impact on the selling price of drugs can be partially covered by other charges (such as hospital bed charges, consumables and medical devices), limiting the impact to its margins,” it said in a report today.

It estimated that drug sales to be around 20-25% of revenue for the hospitals.

The Health Ministry intends to use external reference pricing (ERP) to benchmark drug prices in Malaysia against seven to eight selected countries by choosing the average three lowest reference prices to determine the ceiling price sold to dispensing channels in Malaysia.

“One of the highlights is a phased implementation of the DPC whereby the first phase is to apply the mechanism on single-source products which are generally patent-protected medicine (instead of medicine with generic alternatives),” said AmResearch.

Meanwhile, the research house noted that private healthcare operators in Malaysia may be negatively impacted by a weaker ringgit against the dollar as costs of key inputs such as drugs, medical supplies and medical equipment are affected by the US dollar.

“On the other hand, a cheaper ringgit might boost Malaysia’s medical tourism volume. Malaysia’s medical tourists contribute around 5–6% of IHH Healthcare and KPJ Healthcare’s revenue,” it said.

AmResearch expects the hospital’s operational metrics to continue to improve on the back of an increase in medical tourism, underpinned by the RM25 million allocated to the Malaysian Healthcare Tourism Council for the Malaysia Year of Healthcare Travel 2020 programme which is expected to strengthen Malaysia’s position as the preferred destination for medical tourism.

“However, we expect the hospitals’ net margin improvement to be limited (+/-1 percentage point) on the back of a continued drag from gestational costs of its newly opened hospitals as well as upcoming new hospitals.”

source https://www.thesundaily.my/business/drug-pricing-control-to-have-limited-impact-on-healthcare-sector-amresearch-IK1826208