Effect of privatization of the drug distribution system on drug prices in Malaysia

Summary 

Background

Previous studies on anti-infective and cardiovascular drugs have shown extraordinary price increases following privatization of the Malaysian drug distribution system. Therefore, it was felt that there was a need to undertake a full-scale study to evaluate the effect of privatization of the Malaysian drug distribution system on drug prices.

Objectives

To compare pre-privatization drug prices with post-privatization drug prices, and to compare the prices with international reference prices (IRPs).

Methods

Five hundred and sixty-four drugs were listed in price lists for 1994, 1995–1996, 1997–2000 and 2001–2003. The 1994 data were taken as the pre-privatization prices, and all other lists were considered to be post-privatization prices. The pre-privatization prices (1994) were compared with those in 1995–1996. The prices in 1995–1996 were compared with those in 1997–2000, and the 1997–2000 prices were compared with those in 2001–2003. Furthermore, the 2001–2003 prices were compared with the median IRPs taken from Management Sciences for Health.

Results

The prices increased by 10.42% in 1995–1996, decreased by 3.37% in 1997–2000, and increased by 64.04% in 2001–2003. The increase in prices does not follow any pricing formula but is influenced by free market principles. The commonly used generic drugs showed enormously higher prices compared with the IRPs.

Conclusion

Some of the prices increased several hundred-fold compared with the previous year, showing that no pricing formula has been followed. Increasing prices over the years may lead to higher expenditures and a hurdle to drug accessibility. A rational pricing structure is needed for transparent pricing, and government involvement and the formation of a medicine pricing policy seems vital.

Keywords: Drug prices, Privatization, Malaysia, Drug distribution system, International reference prices