EFFECT OF PRIVATIZATION OF GENERAL MEDICAL STORE ON PRICES OF ANTI-INFECTIVES IN MALAYSIA Baber ZU 1, Ibrahim M 2, Bukhari NI 1 1 University College Sedaya International, Kuala Lumpur, Malaysia 2 School of Pharmaceutical Sciences, University Sains Malaysia, Penang Malaysia

Effect of Privatization of General Medical Store on Prices of Anti- infectives in Malaysia Baber Z 1, Ibrahim M 2, Bukhari NI 1 1 University College Sedaya International, Kuala Lumpur, Malaysia 2 School of Pharmaceutical Sciences, University Sains Malaysia, Penang Malaysia Abstract The Objectives of this study were to compare pre and post privatization prices and also to compare current prices with Median International Reference Prices (IRPs). The drug prices per unit were calculated to compare them in different years. When comparing pre-privatization prices (1994) with those of 1995, out of 101 drugs, 60 were on both lists. Out of these 60, the prices of 52 had an average increase of 39.91%. while the prices of 8 drugs decreased an average of 10.71%. When comparing 1997 data with pre-privatization data, out of 59 drugs on both lists, 53 drug prices increased an average of 20.84%.The prices of six medicines decreased an average of 13.63%. When comparing 2003 data, out of 56 drugs on both lists, 46 drugs showed an average increase of 67.19%. The prices of 10 drugs decreased an average of 33.18%. Of 35 drugs matched for comparison of 2003 prices with IRPs, an average increase of 100% was noted. Out of these 35, 2003 prices of 22 medicines were higher than IRPs. Prices of 13 drugs were lower, with an average decrease of 33.08%. Post-privatization pricing tended to increase, suggesting that monitoring, regulation, and control of privatization may be necessary. A detailed investigation will provide guidelines for advocacy

Introduction The objectives of privatization were: to reduce the financial/administrative burden on the government; to improve efficiency and productivity of healthcare sector and to facilitate economic growth. Under the privatization programme in 1994, General Medical Store (GMS), a government body to procure and distribute drugs in public sector was privatized. After privatization, Remedi distributes about 75% of all drugs in the public sector and does enjoy a near monopoly. Data on the impact of privatization of GMS on the distribution costs and its efficiency is scarce. A preliminary study on the issue revealed an increase of 3.3 fold in drug prices without improvement in efficiency of services since privatization.(Izham,1997)

Study Aims To evaluate the detailed effects of privatization on prices of anti- infectives by comparing pre & post privatization prices. To compare current prices ( ) with Median International Reference Prices (IRPs).

All data on drug prices are in Malaysian Ringgits (1RM= US$) except IRP, which are in US$. The drug prices per unit (ml, gm, tab, cap, inj, bottle, tube etc) were calculated to compare them in different years. Percentage differences in each consecutive year were calculated as: Overall percentage growth was calculated for 3 different years 1995, 1997 and Individual post privatization prices were subtracted from that of the pre privatization prices and summated. Positive sum indicates an increase in prices whereas negative sum otherwise. An overall percentage growth rate was calculated by: Weighted increase was calculated by dividing the change in pre and post year prices as reported by Izham et al, Methods

Price changes were also calculated by another reported method (Kolassa, 1993).The original difference was calculated by subtracting the post privatization data from pre privatization data, adding all price changes and then computing the arithmetic means. A respective mean was taken into account for all negative and positive values. IRPs were compared with drug prices of Individual drug comparisons were made by calculating percentage difference of the per unit drug prices. The Post privatization prices ( ) were converted to US dollars to match with that of IRP. Employing SPSS (ver 11.0) a paired sample t- test was used for comparison between two individual groups i.e.1994 with each of 1995,1997, Non-parametric test (Friedman test for k-related sample) was employed to compare the prices within the overall groups. A p value < 0.05 was taken as statistically significant difference.

Results A total of 101 anti-infectives were identified in the data, which were almost all of the anti-infective in the overall list of 500 drugs. An overall 21513% increase in drug prices were found in 1995, and 51531% in 1997 whilst a 1.86% decrease was observed in Comparison of pre-privatization prices with those of 1995, out of 101 drugs, 60 matched in both lists. Out of the 60, 52 medicines, prices had an average increase of %, (median: 20.59%; max: doxycycline hyclate 100 mg cap, 998%; min: erythromycin stearate 250 mg tab, 1.25%) while the prices of 8 drugs decreased, average 10.71%, (median: 4.73 %; max: rifampicin 300 mg cap,35.17 ; benzyl penicillin 5 MU, 0. 48%).

Results When prices for year 1997 were compared with pre-privatization data, out of 59 drugs, which matched, 53 drug prices increased by an average of 20.84%, (median: 20.38%; max: rifampicin 150mg cap, 85.27%; min: erythromycin stearate tab 250mg, 1.15%). While the prices of 6 drugs decreased by average of 13.63%, (median: 6.10%; max: rifampicin 300 mg cap,35.15% ; min: streptomycin sulphate 5g inj, 1.38%). Out of 56 drugs which matched in both lists, when 2003 price list was compared with that of the pre- privatization, 46 drugs showed an average increase of 67.19%, (median: 49.15%; max: streptomycin sulphate 1g inj, %; min: metronidazole 200 mg tab, 1.52%). 10 drug prices decreased, average 33.18% (median: 28.13%; max: ampicillin 125mg/5ml suspension, 74.44%; min: cefuroxime 1500 mg inj, 5.59).

Results In comparison between 2003 – IRP prices, 35 drugs matched with an average increase of % (median: 55.94%). Out of these 35, the prices of 22 drugs were higher than IRP (max: streptomycin sulphate 1g inj, %; min: cloxacillin sodium 0. 93%). Prices of 13 drugs were lower with an average decrease of 33.08% (Median: 27.90%; Max: amoxicillin 250mg cap 88.23%; Min: cloxaxillin sodium 125mg/5 ml suspension, 3.82%). A paired sample t test revealed significant differences when pre privatization prices were compared with 1995 post privatization prices (p=0.00) and with 1997 post privatization prices (p=0.00).

Results However when pre-privatization prices were compared with prices, no difference was observed (p>0.05). Similarly when IRP were compared with prices, no difference was observed (p > 0.005). Significant differences were observed when the post privatization groups were compared with pre privatization data and when post privatization groups were compared with each other (p=0.00).

Discussion Privatization of GMS seems to have had a significant effect on the drug distribution system. To our knowledge this study is the first of its kind in Malaysia and gives detailed insights into drug prices. A 21513% increase in drug prices in 1995 (within 1 year of privatization) is a huge increase in drug prices. The increase in drug prices seems to depict an adverse effect of privatization, which further worsened in , where a % increase in drug prices was found after privatization. The rise in price was particularly high in the beta lactam antibiotic group, especially penicillins. Some extraordinary price differences were also observed in the case of antifungals and aminoglycosides. Most of the AntiTB drugs have also shown a price increase. Another interesting case was doxycycline hyclate 100 mg caps where a % increase in price was found in 1995, but the drug prices fell to 8.83% in 1997 and then increased again (27.31%) in

Discussion Inflation can be a contributing factor in elevating drug prices, since most of the pharmaceuticals or their raw materials are imported. Nevertheless a declining trend of drug prices in does not support the above. Indeed, the prices declined during and the prices of some drugs were even lower than 1994 prices. A critical evaluation of privatization is clearly required to see whether the objectives of privatization have met.

Conclusion Post-privatization pricing tended to increase, suggesting that monitoring, regulation, and control of privatization may be necessary. A detailed investigation will provide guidelines for advocacy. Therefore, a standard pricing policy is necessary to serve as a guideline for the pharmaceutical industry as well as for other key players.