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Thai government's move to curb medicine prices – what does it mean for multinational pharma?

08 July 2015 Sophie Cairns

Thailand, like several of its neighbours, is fighting a years-long battle against runaway pharmaceutical prices. High distribution margins, poor healthcare coverage, overpricing at private hospitals, medical tourism and the lack of an established drug pricing mechanism have all been blamed for increasingly unaffordable treatment.

One solution, so far, comes in the form of Thailand's Drugs Bill. The bill includes draft legislation requiring pharmaceutical firms to reveal their pricing structures as part of the approval and registration process. This would, in theory, lead to direct drug price controls. The Bill, which is still awaiting scrutiny by the cabinet, has led to accusations from Deputy Prime Minister Yongyuth Yuthavong that it breaches international trade principles, as the government faces protests from NGOs and patients over what they see as over-priced medicines and restricted access to healthcare.

Thailand's lack of a uniform pharmaceutical pricing policy has led to significantly varying prices for the same products at different sites, according to the World Health Organization (WHO). Not only that, innovator brands had a median mark-up of 31% in the public sector and 22% in the private sector, while the lowest priced generics had a median mark-up of 80% in the public sector and 96% in the private sector, the WHO says.

What does the Drugs Bill mean for multinational pharma companies?
If the Drugs Bill passes in its current form it is likely that the market access process will become more bureaucratic. Specifically, sections 48 and 49 of the Bill require pharma companies to provide pricing structure to Thailand's FDA, including manufacturing and marketing costs. This requirement would apply only to new patented drugs rather than new unbranded treatments or new generics. In addition to this, Thailand's increasing collaboration with the United Kingdom's HTA assessment agency NICE indicates a likely greater emphasis on cost-effectiveness in future.

However, even if Sections 48 and 49 are removed from the Drugs Bill, drug price controls remain on the horizon. Even Thailand's Deputy Prime Minister Drug Yongyuth Yuthavong - who wants the sections removed as they would force drug makers to "disclose confidential commercial information" - has suggested setting up a panel to set the median prices of pharmaceuticals to curb prices. Future price controls could be based on five factors: drug production costs, maximum profits, price comparisons with other countries at similar stages of economic development, price comparisons with similar treatments and drugs, and individual price negotiations between drug makers and hospital operators. A committee will be formed to study the proposal and a timeframe is pending.

Another price control mechanism under consideration
Earlier this month, Thailand's Internal Trade Department, FDA and the Public Health Ministry agreed to require pharmaceutical firms and distributors to print the prices of medicines on their packaging. This is an attempt to force private hospitals to rein in their drug price markups which have resulted in vastly overpriced treatments. For example, according to NGO Aids Access Foundation, an HIV drug manufactured by the Government Pharmaceutical Organisation is sold to hospitals at THB900 for 30 pills. However, in some private hospitals, the cost for the same pills can reach up to THB20,000. In future, private hospitals will have to charge patients in accordance with the prices on the packaging.

Unsurprisingly, Thailand's private hospitals dislike this idea, with the Private Hospitals Association arguing that pricing at public and private institutions was not comparable given their cost differences. Still, while this pricing differential may be common in many countries, it could also be argued that unlike in Thailand, the risk of abuse of private prescription costs also tends to be lower, as the prescriber tends not to be directly linked to the drugs dispenser. It may be that the next step in Thailand's drug pricing policy will not only be increased focus on cost-effectiveness, but also the separation of drug dispensing from other private hospital operations. China has already made moves in this direction in its public hospitals and Malaysia has been debating it - can Thailand be far behind?

Sophie Cairns is a senior life sciences analyst for IHS
Posted 8 July 2015


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