LIFE SCIENCES Archives

07/09/2016by EOS Intelligence EOS Intelligence No Comments

Traditional Chinese Medicine: Ready for the Global Stage?

427views

In late 2015, Chinese researcher Tu Youyou was awarded the Nobel Prize for creating anti-malaria drug, using Traditional Chinese Medicine (TCM). Artemisinin, an active compound extracted from an aromatic herb sweet wormwood (which has been in use for treating malaria in China for more than 1,500 years now) was the key ingredient in preparing the prize-winning drug.

Based on herbs and other natural ingredients, the traditional medicines in China treat a range of health conditions, including common cold, pain, gastrointestinal ailments, and chronic illnesses, among others. TCM sector, fully supported by the Chinese government, has its own ecosystem in the country comprising dedicated practitioners, educational institutes, and the pharmaceutical companies manufacturing traditional medicine products.

Despite having been in use for more than 2,000 years (as claimed), domestic market for traditional medicines is smaller in comparison to that of conventional prescription and Over-The-Counter (OTC) drugs. The sector requires competitive TCM products for market expansion. However, this looks a distant possibility, as TCM-based clinical trials account for only about 5% of all trials (open studies) in China at present. This can be attributed to dearth of large organized TCM players with enough funds to invest in R&D. It also suggest that majority of Chinese consumers of traditional medicines rely on time-tested legacy preparations.

The State Council (the highest administrative body in China) meeting held in February 2016 asked for strengthening the sector through policy initiatives, such as increasing the number of traditional medicines in national essential medicine list, ensuring higher quality supervision (farm-to-factory), promoting modern production techniques, and consolidating a largely unorganized sector at supply side. The plan is also to support research and development and to look for ways to hasten industrialization and export of TCM.

Amid the urgency shown by the State Council, and in the light of recent Noble Award, it would be interesting to see if traditional medicines have the potential to provide alternative to conventional medicines at global stage, or will they largely remain a domestic (Chinese) phenomenon.

EOS Perspective

Though policy makers in China see enough potential still waiting to be tapped, the traditional medicines sector needs to overcome challenges in overseas as well as domestic market.

It is apparent that the Chinese government’s efforts to promote traditional medicines overseas in foreign markets have not yielded desired results. For instance, to boost TCM trade, the government announced a program in 2012 to establish 10 TCM trading centers worldwide. While there are no updates available on proposed plans to set up these TCM trade centers, in 2015, the first center of traditional Chinese medicine in Central and Eastern Europe was opened in a Czech hospital, as a pilot project.

The policy makers in China need to work around the fact that the expansion of traditional medicines beyond China is constrained due to doubts about their efficacy and possible side effects. One of the ways to allay fears of non-Chinese consumers (in order to ensure wider acceptance) is to get recognition through Western regulatory bodies, such as FDA. However, this can be a time consuming process, as evident from the history of TCM registrations outside China.

At present, the best approach seems to be to strengthen domestic TCM sector while identifying the TCM-friendly overseas markets and the therapeutic segments with potential to be successful abroad.

For competing at global level, TCM sector requires more TCM-focused companies, such as Dihon, Chinese herbal and OTC manufacturer (which was acquired by Bayer in 2014 with Bayer’s intent to strengthen its position in Chinese OTC market that currently consists of about 50% of herbal medicines). Dihon boasts of a strong TCM portfolio, including its star product Dan E Fu Kang, which is marketed as a gynecological medicine for women’s health indications. Dihon-like companies that have a few best-selling TCM drugs under their belt are exactly what the Chinese TCM sector needs in order to develop and expand abroad.

If successful, the envisaged state policies might lead to creation of a number of large TCM companies, with enough financial power to invest in research and development, thereby creating a robust traditional medicine portfolio. At present, only few known large players, such as Traditional Chinese Medicine Co. and Jiangsu Kanion Pharmaceutical, are operating in the Chinese market.

TCM sector’s international expansion should focus on OTC drugs with safety and success record proven in China, and introducing these drugs in markets where regulatory requirements for market approval are less stringent e.g. in Asia and Africa. Manufacturers of TCM can also look for complementing the existing conventional medicines (instead of replacing them) for life threatening diseases e.g. cancer. While not treating the actual disease, traditional medicines can contribute to providing a wholesome treatment. For instance, past studies in China suggest that TCM is effective in treating side effects, such as radiation injury and inflammation, nausea, and gastrointestinal disorders due to radio/chemotherapy.

It may take long for TCM to challenge conventional medicines and make commercial impact at global level. Till it happens, the traditional medicine market will remain China-centric. Only disruptive policy interventions will make the sector dominant at domestic level, thereby setting the stage for a global take-off.

20/07/2016by EOS Intelligence EOS Intelligence No Comments

FDI Regulations in Indian Pharmaceutical Sector: A Game-changer?

560views

In June 2016, the Indian government liberalized its FDI policy in the pharmaceuticals sector by allowing 74% FDI under automatic route in brownfield pharmaceutical investments (investment in an existing plant). Earlier, even though 100% FDI was allowed in the brownfield projects, government approval was mandatory for investments beyond 49% stake. In greenfield pharmaceutical investments, the existing FDI policy allows 100% FDI under the automatic route. The recent changes effectively introduce a new regime, under which a foreign company is now allowed to hold a majority stake in an Indian pharmaceutical company without government approval in either brownfield or greenfield projects.

This has been done with a view to boost the development of the Indian pharmaceutical sector. The move is likely to increase the number of investments in the sector along with a decrease in investment timelines leading to a greater inflow of capital in a short span of time. In addition, the policy is likely to result in Indian pharmaceutical companies exporting products to the USA and EU, encouraging the sharing of technologies and overseas investment. An increase in the inflow of funds will also lead to the promotion of R&D activities in the country.

That being said, the liberalization of the FDI regulations has also a potential to threaten competition in the Indian pharmaceutical sector, as seen previously with Ranbaxy. In 2008, Daiichi Sankyo, a Japan-based company acquired a majority stake (including brands, R&D facilities, and production units) in Ranbaxy, a leading Indian generic manufacturer, for US$ 4.6 billion. However, the investment proved unfruitful as post the acquisition, Daiichi faced several regulatory hurdles with the US Food and Drug Administration regarding drug testing authenticity and manufacturing criteria. In addition, four of Ranbaxy’s plants were banned from selling medicines in the USA and Daiichi was made to pay US$ 500 million to the US Justice Department in order to settle the lawsuit. In 2014, Ranbaxy was acquired by India-based Sun Pharma with Daiichi as the controlling shareholder before Daiichi sold its entire stake in Sun Pharma for US$ 3.18 billion in 2015. Once a renowned brand, Ranbaxy has now lost its independent status and exists only as a shadow of Sun Pharma.

Thus, the new FDI regime could easily lead to the sale of several Indian generic pharma companies to pharmaceutical players intending to enter the Indian pharma market, which is considered a generic pharmaceuticals hub with market size estimated at US$ 20 billion as of June 2016. The policy could lead to foreign players grabbing market share and exercising greater control to sway the government to alter the IP regime. This could lead to India losing its independent industry providing low cost essential medicines.

However, things could also take an entirely different turn. Large, well-established Indian pharmaceutical companies might not be looking to receive new investments, which could lead to the acquisition of small and medium-sized Indian pharmaceutical companies by foreign players. This move could lead to the inflow of capital in these small companies, promotion of R&D activities, increased manufacturing of medicines, and higher exports.

While the impact of the FDI regulations change will be seen in the next couple of years, the government has already taken an arduous task of maintaining a balance between foreign investment-friendly regime and guarding the local generic medicines laws while protecting local players from large foreign companies.

07/04/2016by EOS Intelligence EOS Intelligence No Comments

Government Trumps Pfizer Deal

Since its announcement last year, a US$160 billion Pfizer-Allergan merger has been under an ongoing discussion, with great synergies and tax savings expected if the deal was to be finalized, (we wrote about it in our ‘Pfizer-Allergan Deal – What’s in Store for Allergan’ article in February 2016).

However, discussions came to an abrupt end, when the merger was called off on April 6th, 2016 in the wake of changes in tax rules by the US government to check inversions. New rules disregard last three years’ (at the time of deal) acquisitions by a foreign company in the USA in determining its market value. It is a general feeling that the three-year rule was introduced primarily to stop Pfizer-Allergan deal. Since its announcement, the deal was a talking point in political debates with some presidential hopefuls taking an open stance against it.

To secure maximum tax benefits of inversion deal, Pfizer shareholders were required to own 50-60% of the merged entity. Allergan’s market capitalization stood at US$120 billion (against Pfizer’s US$200), owing to three deals, i.e. Allergan-Actavis merger (US$66 billion), Forest Laboratories acquisition (US$25 billion) and Warner Chilcott purchase (US$5 billion), struck in last three years, thereby giving Pfizer shareholders more than 50% of the combined entity. However, this will not be the case now due to drastic reduction in Allergan’s market value as a result of three-year window provision. This also means that both the companies will have to go back to the drawing board.

For Pfizer, this means the need for an increased focus on management of its vast portfolio of drugs (a mix of patent and off-patent products) with an intent to further improve profitability. While Pfizer’s patented drugs command higher prices, the off-patent ones are subject to price decline thereby impacting the company’s profitability. After the announcement of Pfizer-Allergan deal, there were speculations about sale/spin-off of Pfizer’s off-patented portfolio. However, with revenue loss due to the broken deal, the plan (if still any) to sell off-patented business is likely to be put in freezer for some time to come. This could also mean more efforts on research and development front, and being inherently a research driven company, Pfizer has some potentially lucrative drugs in pipeline (including cholesterol lowering and cancer drugs).

For Allergan, the broken deal means looking for alternative ways to strengthen its position outside the USA. The company can take inorganic route to achieve this. No headway was made towards operations restructuring of the merged entity. Therefore, in all likelihood, the research and development assets of Allergan will remain intact, one positive outcome for the company out of the broken deal, as it has some good candidates in the field of ophthalmology, urology, and women’s health. With sale of its generic business to Israeli rival Teva Pharmaceuticals in July 2015, Allergan showed the intent to focus on patented products, therefore the company will have to look for means to raise its R&D budget.

The broken Pfizer-Allergan deal will remain in discussion in coming days from the point of view of missed opportunities for both Pfizer and Allergan, as well as for the political angle involved. Even if the decision was politically motivated, it may have put moratorium on inversion as a strategy for the time being, and it would be interesting to track moves not only in the pharmaceutical space but in other industries as well, following the new regulatory regime.

03/02/2016by EOS Intelligence EOS Intelligence No Comments

Pfizer-Allergan Deal – What’s in Store for Allergan

381views

In November 2015, Pfizer and Allergan announced a US$160 billion merger deal. Once finalized, the Pfizer-Allergan deal would follow three large mergers/acquisitions concluded by Pfizer in the last 15 years. Though relocation to Ireland to save higher corporate tax in USA is apparently the main purpose of this merger, it is expected to create a pharmaceutical powerhouse with more than US$60 billion in annual revenue. In the light of competitive advantage this deal is anticipated to yield, it becomes imperative to look at Pfizer’s evolution since its first mega deal in 2000.

Pfizer acquired US-based Warner-Lambert in a US$110 billion deal in 2000. With this acquisition, Pfizer gained ownership of blockbuster anti-cholesterol drug Lipitor, besides some popular consumer health brands, such as Listerine. Lambert deal was shortly followed by US$60 billion purchase of US-based Pharmacia in 2003. The deal, while catapulting Pfizer’s revenue by more than US$12 billion, allowed it to gain control of successful brands, such as Celebrex (inflammation) and Xalatan (glaucoma), along with R&D pipeline of cancer drugs and a specialist-focused sales force of Pharmacia.

Pfizer waited six years for its next acquisition, and bought US-based Wyeth for US$68 billion in 2009. This deal came amid imminent expiry of Pfizer’s 14 patents through 2014, including its best-selling drug Lipitor in 2011. Pfizer looked to benefit from Wyeth’s leadership position in vaccines, nutritionals, and biologics, including Prevnar, the first pneumococcal vaccine for infants. Wyeth’s portfolio potential had indeed been locked, as evident in the net 30%-90% increase in sales of its key brands between 2009 and 2014, post-acquisition.

These three deals helped Pfizer in becoming a US$50 billion company with a diverse product portfolio. However, it came with a challenge of ensuring operational efficiency and leveraging synergies with acquired companies. This was achieved through a range of adjustments, including lay-offs to eliminate overlaps and to consolidate various functions. Pfizer deals were severe on the employees of acquired companies, with more than 90,000 jobs eliminated (which may have included those lost to attrition) between 2000 and 2014. At the time of each deal, there were apprehensions regarding the future of research and development in Pfizer. Though the company managed to maintain its R&D budget at about 16% of revenues, several sites (including six from Wyeth and two from Pharmacia) were closed post acquisitions. It was soon reflected in the company’s product pipe line, with only 17 applications filed for new product approval between 2007 and 2014, in contrast to 43 during 2000-2006.

To sum up Pfizer’s strategy, the company acquired rivals with blockbuster brands to boost its topline, and to benefit from pooling of resources. The strategy worked on most counts, except for Celebrex where the sales failed to take off partially due to pull-out (from market) of a rival drug (Merck’s Vioxx) in 2004 owing to safety reasons. Notwithstanding the criticism for massive lay-offs, Pfizer managed to create a lean organization, thereby improving its revenue per employee.

Pfizer’s next acquisition target, Allergan, came in to existence following Ireland-based Actavis’ acquisition of USA-based Allergan Inc. in March 2015, post which the combined entity was renamed Allergan. Allergan then sold its generic drugs business to Israeli rival Teva Pharmaceuticals in July 2015.

As Pfizer’s deal with Allergan looks in sight, there are speculations regarding future shape of the combined entity in terms of employee strength, sales focus, and future product pipeline (i.e. R&D).

Pfizer-Allergan deal involves trimming of sales and administration expenses by more than US$1.0 billion. This is likely to be achieved (mostly) in North America where Allergan operations are concentrated.

Cuts worth more than US$600 million are expected in R&D. With Teva deal, Allergan showed intent to focus on branded proprietary drugs, and Pfizer is also a predominantly green-field research organization. Therefore it is not clear yet, which product programs will face the ax due to little overlap in research focus of two companies.

As Allergan declared end to lay-offs in June 2015, it was expected that most of the Actavis acquisition-related restructuring activity was over by the time Pfizer-Allergan deal was announced. This means the cost savings linked with Pfizer-Allergan merger will result from the existing operations (as of November 2015) of the two companies.

EOS Perspective

Based on precedence of Pfizer takeovers, there is a likelihood that Allergan might bear most of the brunt of cost cutting measures. However, at the outset, a simple merger is not likely to impact either efficiency or earnings (from R&D perspective) of the combined entity due to nearly identical revenue per employee (as of 2014) for both the companies, and Allergan’s significantly lower R&D expenditure (8% of its revenue vs. Pfizer’s 16%).

Cost cutting is likely to be undertaken with an eye on revenue and profitability in mid to long term. From Allergan’s perspective, we anticipate this to be achieved through the following:

Focus on products in the pipeline with good growth prospects: Allergan’s Rapastinel (anti-depressant) and Vraylar (schizophrenia) are in this category; another option for Pfizer-Allergan is to focus on drugs that are in advanced stages of trials i.e. Phase III and IV
Focus on high revenue earning products: While most Pfizer products (including those off-patented in recent years) generate revenues in the range of US$200 million to US$5 billion, Allergan’s portfolio is still underdeveloped (due to limited global exposure) except for few products from central nervous system (CNS), gastroenterology, and women’s health segments

At present, only mere speculations can be offered regarding the future shape of the combined entity, as no concrete steps have been announced. It will be interesting to track the decisions taken by Pfizer-Allergan in the coming months to achieve targeted cost savings.

29/12/2015by EOS Intelligence EOS Intelligence No Comments

Universal Healthcare Is Needed, but Isn’t Enough – Assessment of Public Health Insurance Targeted at Vulnerable Populations in South America

Ensuring an equal access to healthcare services that are affordable and of decent quality has increasingly been on the agenda of several developed as well as developing countries across the world. Throughout 2014 and 2015, we published a series of articles focusing on the South Asian region, in which we looked into various aspects of the universal healthcare in The Philippines, Cambodia, Vietnam, and Indonesia, followed by our final article in the series presenting holistic view on bridging the health insurance coverage gap in the region. But South Asia is not the only region working to achieve improvements in the functioning of healthcare systems and the universal health insurance coverage. In South America, where universal healthcare is more prevalent and public health insurance coverage gap is narrower than in most Asian nations, several countries have shown a range of approaches to enhance the equality to access and quality of services within their public healthcare. While the approaches differ, the common focus across the region has been to broaden the inclusion of particularly vulnerable groups of populations, such as the poor, elderly, and the unemployed. We are taking a look into public healthcare systems in selected countries to asses their strength in terms of catering to these beneficiaries.

As universal healthcare systems are unrolled and implemented to include large part of the country’s population, regardless of the geography, a well-functioning public health insurance system must focus on two important components: clear classification of its beneficiaries and appropriate structuring of the healthcare services financing.

In order to ensure the right terms of access to the public healthcare system, a country’s population that can benefit from such public insurance is typically segmented into various groups, such as the working population, grey economy workers, poor population, and the senior citizens. The strength of a public health insurance system lies in its ability to effectively target these various groups with dedicated plans and schemes, as these sections of the population may have different healthcare needs.

A public health insurance system is usually financed through government funding and contributions from the employed population (which apart from the formally-employed population can also include informal sector), with most of the public funding directed at subsidizing the healthcare for poor citizens and other underprivileged groups (depending on their proportion in total population). A system with specific coverage targeted at each of these groups is likely to be more efficient in terms of generating required finances, redistributing them according to beneficiary requirements, and in channeling healthcare resources.

South American countries are known for their inclination to provide or to work towards providing universal healthcare to their citizens. While the shared focus across the region has been to improve equity in access and financing of health services, in several cases leading to tangible positive health outcomes of the populations, public health insurance systems in most of these countries have evolved over a period of time to their current state through experimentation and deliberations over various policies to achieve a system that works best in the local scenario.

South American countries adopted various models to develop and enhance their public healthcare systems and, based on respective exigencies, their public health insurance systems are unique. Despite these differences, a broad level country comparison is possible on the basis of some common parameters, to evaluate how healthcare needs of key population groups are addressed in these countries. This comparison indicates the relative strength of public health insurance systems from the target beneficiaries’ point of view.

EOS Perspective

As South American example indicates, the development and implementation of universal healthcare system is not a solution as such, but rather a first step to ensure that healthcare needs of all population groups, especially the vulnerable ones, are well taken care of. Universal healthcare systems with no dedicated, targeted programs oriented specifically at certain groups in terms of type and availability of services, provisions and procedures, access to healthcare facilities, and assigned funding, are likely to be able to address needs of these groups only to a limited extend.

From beneficiary’s point of view, this results in unavailability of certain health services, lower trust in the system, and might simply lead to negative health outcomes of these populations. Given their limited financial abilities, these beneficiaries are unlikely to turn to private sector where their healthcare needs would be met (unless private insurance players, looking to fill gaps, with or without government collaboration, are able to provide cost-effective health insurance coverage, again targeted specifically at these groups).

25/03/2015by EOS Intelligence EOS Intelligence No Comments

Universal Health Access in Southeast Asia – Bridging the Coverage Gap

494views

Affordable and accessible health care service is a common objective for governments across developed as well as developing nations.

Global trends suggest that generally countries, as they attain prosperity, tend to move towards a Universal Health Care (UHC)/ Social Health Insurance (SHI) regime, in which 100% population is provided with health care coverage (scope varies from country to country). There are some exceptions in the developed world, with the USA being an example.

In the Southeast Asian region, each country is at a different phase/stage regarding the implementation of universal health access. Several of these countries, such as Indonesia, Philippines, and Thailand, have implemented UHC (as a policy). The remaining countries in this region have various types of health insurance schemes to cover certain sections of the population, and are experimenting with some schemes to judge their effectiveness. It is expected that these countries will eventually work towards the common goal of achieving 100% UHC.

The following illustration captures the current health care sector situation (from UHC/SHI perspective) in four Southeast Asian countries (Cambodia, Indonesia, Philippines, Vietnam), and highlights few areas that require immediate attention in order to successfully manage universal health access for their citizens.

———————————————————————————————————————

Details on country-specific social health insurance design and infrastructure:

06/02/2015by EOS Intelligence EOS Intelligence No Comments

Thailand – Is Just 100% Universal Healthcare Access Good Enough?

1.6kviews

Thailand has a well-developed healthcare system, as compared with most of the Asian countries. Majority of the health-related Millennium Development Goals (MDG) have been achieved, though a rapidly ageing population and the burden of non-communicable diseases remains a challenge for the public healthcare system. A better disease prevention mechanism, health promotion, and adequate primary care are some of the priorities of the Thai government in the healthcare sector.

This article is part of a series focusing on universal healthcare plans across selected Southeast Asian countries. The series also includes a look into the plans in The Philippines, Cambodia, Vietnam, Indonesia, and Thailand.

Thailand achieved Universal Healthcare Access (UHA) status in 2002 with the launch of health insurance benefits for 30% of the population that was outside the health insurance ambit till then.

Thailand boasts of world class medical facilities (especially in the private healthcare sector), and is among the world’s largest medical tourism markets. The government is looking to further develop Thailand into an “International Health Center for Excellence” under its second strategic five-year plan (2012-2016).

The plan focuses on four major areas: medical services, integrative wellness centers, development of Thai herbs, and traditional and alternative Thai medicines.

With almost 100% population already covered by UHA, and a reasonably developed healthcare infrastructure in place, the government’s focus is likely to be on improving the quality of healthcare services. This will create opportunities for the companies operating in the healthcare industry.

INFRASTRUCTURE

Key Stakeholders

The Ministry of Public Health (MoPH) is responsible for public healthcare services and for governing and regulating the healthcare industry, including healthcare-related NGOs, medical professionals, hospitals, and clinics. In a series of Decentralization Action Plan (1999, 2008, and 2012), responsibility for some of health facilities was delegated to local authorities at provincials (municipal and general hospitals) and sub-district level (health centres); However, the Thai healthcare system still remains highly centralized (and more dependent on public healthcare services).

Healthcare Service Delivery

Public healthcare service delivery system includes:
- Primary Care: Community health posts and primary healthcare centres (village level) and health centres (sub-district level)
- Secondary Care: Municipal health centres and community hospitals
- Tertiary Care: Provincial and regional hospitals, and medical schools

At provincial and regional level, some of the hospitals are under the administration of other government bodies, such as the Army, Police, and Ministry of Education (MoE). All community hospitals and health centres in rural areas are operated by the MoPH. The healthcare infrastructure consist of the following:
- Community Care Centers: ~50,000
- Health Centers: ~10,000
- Community Hospitals and Municipal Health Centers: ~ 1,000
- Provincial Level Hospitals: ~ 200
- Regional Level Hospitals: ~ 80

KEY CHALLENGES

Unequal Distribution of Services

Despite a well-developed healthcare infrastructure and almost 100% population coverage, inequalities still exist in terms of accessibility and quality of care

There is a variance in the geographical distribution of health workers and other resources; urban centres such as Bangkok have access to better quality healthcare as compared with the rural populace, which faces a shortage of clinical resources

Duplication of Efforts

Thailand’s healthcare sector consists of several stakeholders, including ministries, government agencies, and the local governments involved in management and financing of healthcare facilities. This has resulted in duplication of administrative systems (including payment, reporting, and monitoring), eventually leading to inefficiencies

DESIGN

Beneficiary Classification

In Thailand, the UHA covers the population not covered by
- Civil Servant Medical Benefit Scheme (CSMBS) for government employees, pensioners, and their dependents
- Compulsory Social Security Scheme (CSSS) for private employees or temporary public employees
- Private Health Insurance (for individuals and private firms)
- Once registered, people joining the UHA scheme receive a gold card to access services in their health district, and, if necessary, be referred for specialist treatment elsewhere

Healthcare Insurance Financing

Source of finances for different social health schemes is as follows:
- UHA – general tax revenue
- CSMBS – general tax
- CSSS – premium (as a % of salary)

Payment System

The payment system varies according to the insurance scheme
- UHA – The payment system is capitation-based for most of the services; and rest of the services, such as dental care are on fee-for-service basis; funding allocated to the contracting facilities for Primary Care are on a population basis
- CSMBS – Outpatient services are on fee-for-service basis; inpatient services are on Diagnosis-related group (DRG) system (to classify hospital cases into groups to determine cost)
- CSSS – the payment system is capitation-based for most of the services; and rest of the services, such as dental care are on fee-for-service basis

Benefits

The coverage is comprehensive in case of UHA and CSMBS and includes both inpatient and outpatient treatment. However, there are few conditions, such as:
- UHA – Treatment available in contracted hospitals only; facilities, such as private bed and special nurses are not available
- CSMBS – Private hospitals available in case of emergency care only; special nursing services not available
- CSSS – Coverage is coverage is comprehensive except that it doesn’t include annual physical check-ups, and work-related illness and injuries

Co-payment (Reimbursement) System

At present no co-payment regime is applicable for UHA, however, 30-Baht co-payment (per service) is applicable to patients who receive prescriptions and are willing to pay. For the population covered by CSMBS and CSSS, co-payment system is applicable in case of emergency care.

Reimbursement System for Drugs

For UHA, CSMBS, and CSSS the drug benefit package is based on the National List of Essential Drugs (NELD), and the drugs can be reimbursed without any co-payment. Drugs used under CSMBS’ out-patient fee-for-service system, and not listed in NELD, are reimbursed.

KEY CHALLENGES

Absence of Unified Scheme

Theoretically, UHA is for the entire Thai population; however, two other health financing schemes for the government and formal sector private employees operate in parallel wherein the benefits differ from one another. E.g. variance in expenditure per patient, access to healthcare facilities, co-payment regime, and access to special care. It is a challenge for the government to achieve equality in the quality and range of services, which arise due to social health insurance specific policies

Funding Constraints

Due to changing disease profile (e.g. prevalence of chronic diseases and an aging population), Thailand is witnessing increasing cost of healthcare thereby putting burden on UHA, which is entirely funded through taxation. The government needs to look at the cost saving options e.g. payment system for healthcare facilities and procurement of drugs and equipment, to ensure the long term viability of UHA

Opportunities for Healthcare Companies

Healthcare Service Providers

Thailand has a better (as compared with most of the countries in Asia) developed healthcare system with a majority of the healthcare services being delivered by the public network. At present, it appears limited scope for the private providers, as they also are mostly concentrated in the urban centres while there is a greater need (at least at primary and secondary level) in non-urban areas
However, private providers can look for collaboration opportunities in areas/aspect that add value to pre-existing service set-up. For example in the field of mobile healthcare, telemedicine etc.

Medical Device Manufacturers

There is significant growth potential for the medical device companies, as the country’s universal healthcare system continues to support healthcare initiatives. Demand for medical devices is further anchored by the government’s efforts to develop the country into an Asian medical hub
Public hospitals continue to be the main user of medical equipment. Opening of new health facilities would also create demand for equipment and devices

Pharmaceuticals Companies

The government encourages the use of drugs listed in the National List of Essential Medicines, all of which are fully reimbursed by the three major public health insurance schemes
However, the government may review health expenditure pattern and reimbursement policies amid changing demographic profile (i.e. more senior citizens) leading to increased focus on cost-effective healthcare services. This may create better opportunities for generics and low-cost drugs

A Final Word

Thailand’s UHA scheme has largely been a success, and a model for other countries to follow. The scheme provides coverage to a large informal sector, which is a challenging task in itself. The benefit package, which includes curative as well as preventive services, is comprehensive.

The country has demonstrated efficiency in UHA implementation with satisfactory outcomes in terms of meeting healthcare needs of the society, and in attempts towards offering equitable health. A relatively better developed healthcare network and relevant administrative experience helped in achieving the desired results.

Leaving behind the past successes, UHA would be required to gear-up for the challenges ahead. For instance, the country needs to plan for changing disease profile i.e. an increased burden from Non-communicable Diseases (NCDs). This may have cost implications for UHA (and opportunities for the healthcare industry participants) in terms of accommodating suitable interventions and planning for adequate preventive measures at primary, secondary, and tertiary care level. It is expected that the country will witness more activity with respect to qualitative improvement in healthcare services, as compared with geographical expansion of services.

A comparative with other countries in the region should provide a better perspective on the actual potential of Thailand as a prospective destination for devices and drugs companies alike.

28/10/2014by EOS Intelligence EOS Intelligence No Comments

Indonesia – Public and Private Participation in Universal Healthcare

1.6kviews

Under its National Health Strategic Plan (NHSP), Indonesia is continuously focusing on improving the quality and accessibility of its public healthcare system. NHSP (2010-2014) aims to enhance health status through involvement of private sector and civil society. It also focuses on the prevention and cure of health problems faced by the community through availability of comprehensive and equitable health services and health resources, supported by good governance.

This article is part of a series focusing on universal healthcare plans across selected Southeast Asian countries. The series also includes a look into the plans in The Philippines, Cambodia, Vietnam, Indonesia, and Thailand.

The Indonesian government is planning to cover every Indonesian under Universal Health Insurance (UHI) by 2019 under a new scheme called Jaminan Kesehatan Nasional (JKN). As of January 2014, about 120 million Indonesians (government servants, police and army personnel, and poor) were automatically included under this scheme. The government has already allocated about 20 trillion rupiah (US$1.6 billion) to cover health insurance premiums for the poor in 2014.

One of the features of the Indonesian UHI is the participation of the private sector wherein a number of hospitals and clinics have signed-up under the JKN.

When implemented fully, UHI is expected to create significant demand for companies operating in the industry, as the scope of the services is bound to increase. However, uncertainties exist regarding the smooth transition of the social health insurance mechanism from the current (prior to 2014) multiple-scheme-based system to a single system. The foundation design and the support infrastructure would determine the long term success of UHI.

INFRASTRUCTURE

Key Stakeholders

Indonesia has a decentralized administrative system since early 2000s wherein each of the 33 provinces is divided into districts and each district is further divided into sub-districts. District Governments are the direct authority in prioritizing the sectors (including health) for development

Healthcare Service Delivery

Public healthcare service delivery is based on a hierarchical referral system, which includes primary health clinics (PHC), district and provincial hospitals (secondary care) and specialty hospitals (tertiary care). Secondary health care is further classified as (Kabupaten (rural) and Kotamadya (urban)
Depending on the range and quality of healthcare services, hospitals are classified in to four categories
- Level D – District-level hospital headed by a General Practitioner (GP) and provides some basic inpatient care. These are just one step above the primary health center
- Level C – District-level hospital, which provides four basic specialties (surgery, internal medicine, pediatrics, and OBGYN services) and three supporting specialties (anesthesia, radiology, and pathology)
- Level B – Provincial level hospital providing more specialist services as compared with level C hospitals. Specialist medical clinics, including pulmonary clinics and eye clinics, and medical supporting care are also included
- Level A – These are described as ‘Centers of Excellence’ with sophisticated equipment with state-of-the-art facilities. This level includes specialist hospitals, such as Maternal and Child Hospital, Cancer Hospital, Coronary Hospital

KEY CHALLENGES

Capacity Constraints

Indonesia faces capacity constraint in terms of the number of hospitals as well as resources (qualified doctors, nurses and other staff). Public healthcare system is characterized with high occupancy rate at hospitals, and the situation is likely to worsen as more people come under the coverage of the government-sponsored health insurance scheme

Though a three-tier referral system exists, there is a lack of integration resulting in the by-passing of the lower-tier facilities and overcrowding at the secondary and tertiary level

Uneven Concentration of Healthcare Personnel

Indonesia has 25 health workers per 10,000 people (against WHOs minimum benchmark of 23); however, most of them are concentrated in urban centers, leaving rest of the country (especially the rural area) without sufficient number of health personnel

Healthcare professionals need to be compensated adequately to create a pool of resources large enough to meet the demand of a healthcare system catering to about 250 million people

DESIGN

Beneficiary Classification

Prior to the implementation of UHI in January 2014, certain sections of the population were already covered under different schemes, such as:

Askes (for civil servants and pensioners)
Jamkesmas (poor and near poor)
Jamsostek (private formal sector workers)
Jamkesda (district-level schemes for near-poor)

Healthcare Insurance Financing

Expenditure on public healthcare services under UHI is provided through taxation revenues and member contribution
Formal sector employees (both public and private) will pay 5% of the salary as premium wherein the employer will makes 4% contribution. Informal workers, the self-employed and investors, will pay monthly premiums of between Rp 25,500 (US$2.15) and Rp 59,500 (US$5.1) each
The government would be paying for the premiums of the rest of the groups (mentioned in ‘Beneficiary Classification’)

Payment System

For primary health care, the payment system is to be based on monthly capitation (based on registered users), and the Diagnosis-related group (DRG) system (to classify hospital cases into groups to determine cost) would be applicable for hospitals
Amount under DRG system will be fixed on the basis of negotiations with the hospital associations in various regions

Benefits

The UHI covers comprehensive benefits, including the treatment of commonly occurring illness, such as influenza as well as expensive medical treatment, such as heart surgery, dialysis, and cancer therapies

Co-payment (Reimbursement) System

At present no co-payment regime has been planned at the point of care. Healthcare services are to be fully reimbursed to the healthcare facilities on behalf of the patients

Reimbursement System for Drugs

Drugs specified under the formulary list are covered under the social sector health insurance plan. As mentioned above, the drugs used for the treatment are covered by the zero-co-payment system

KEY CHALLENGES

Concern about Quality

There are apprehensions that the quality of health services may suffer under the current provisions of the universal healthcare schemes
- According to the Indonesian Medical Association, the government is paying substantially low amount for the poor, which may not be able to cover expensive treatment, such as cancer therapies. Hospital may struggle to cover costs due to lower reimbursement rates, which may discourage private hospitals from participating in the UHI. This would lead to overburdened state-run hospitals (and hence erosion of quality)

Ensuring Comprehensive Coverage

A large population comprising informal sector is yet to be covered under UHI. It would be a challenge for the government to motivate this section of population to be a part of the scheme. Contribution from the informal sector in the form of premium is crucial, as the Indonesian UHI would primarily draw its finances its expenses through it (along with the contribution from the formal sector employees)

Addressing the Grey Areas

There is lack of clarity about the role of private insurance after the implementation of UHI, as several private employers who have obtained private insurance for their employees may end-up paying double premium

Opportunities for Healthcare Companies

Healthcare Service Providers

The current set-up does not provide enough incentives for the private sector healthcare providers; however, the UHI policy envisages a space for private players. Also, the government has indicated about increasing the premium paid for the poor gradually, therefore private clinics and hospitals have significant opportunities to increase their business as well as to fill the resource gap in the Indonesian healthcare system

Medical Device Manufacturers

Irrespective of the implementation of the UHI, there was significant growth potential for the medical device companies due to years of under investment in the hospital equipment and devices such as MRI, Tomography scanners, mammography etc. A wider UHI coverage would require purchase of such equipment, to cater to the increasing demand
It is expected that new health facilities would come up in the regions where the newly insured population resides i.e. outside Java and other large cities. This would boost the demand for equipment and devices

Pharmaceuticals Companies

UHI is expected to create additional demand for medicines, as the population that was previously unable to purchase medicines comes under the coverage. Demand for generic medicines is expected to increase, as the government focuses on procuring low-cost medicines to keep the cost of UHI down

A Final Word

Considerable ground needs to be covered before Indonesia realizes the goal of 100% healthcare access coverage. The current state of the healthcare infrastructure as well as the healthcare benefits that have been designed (for the population under coverage as of January 2014) pose challenge in creating a working (and efficient) UHI system.

Success of UHI primarily hinges on the inclusion of informal sector population. Introducing an informal sector-specific mechanism for the premium contribution, attractive enough to ensure participation, would be the key in this direction. More clarity about the role of private insurance will help towards creating a system capable enough to cater to 250 million plus population.

Size of the Indonesian healthcare market already presents ample opportunities for pharmaceutical as well medical device manufacturers. 100% coverage under UHI will further boost the prospects of these firms. The expected expansion of healthcare infrastructure beyond the developed regions (cities) is likely to create demand for equipment as well as medicines.

Existing capacity constraints in the public healthcare system may augur well for the private health care service providers. As of now, given the geographical challenges and regional disparity in healthcare services, the goal of 100% coverage under UHI looks a distant dream without the participation of private sector. Therefore a workable payment system needs to be devised to ensure greater participation of the private sector players.

Who We Are

Connect With Us

Work With EOS

Who We Are

Connect With Us

Work With EOS

LIFE SCIENCES

Traditional Chinese Medicine: Ready for the Global Stage?

FDI Regulations in Indian Pharmaceutical Sector: A Game-changer?

Government Trumps Pfizer Deal

Pfizer-Allergan Deal – What’s in Store for Allergan

Universal Healthcare Is Needed, but Isn’t Enough – Assessment of Public Health Insurance Targeted at Vulnerable Populations in South America