Thailand's rising pharmaceutical price pressures hamper multinational drugmakers' opportunities

The country’s procurement regime continues to favour local pharmaceutical firms.

Escalating pressure on pharmaceutical prices are set to continue threatening the operations of multinational drugmakers in Thailand on the back of the government’s ongoing pricing policies and initiatives to increase cost-efficiency within its public medicine expenditure, according to a report by Fitch Solutions.

The report noted how in December 2018, Thailand’s Commerce Ministry announced its plans to cut medical-related fees including drugs, supplies and service charges on its price control list spurred on by a meeting between the ministry’s officials and representatives from the Public Health Ministry, private hospitals and relevant industry players.

“This is not the first time the government has attempted to control prices,” Fitch Solutions noted. “In 2015, the government tried to help patients manage medical expenses at private hospitals via two measures. First, private hospitals could not set drug prices above label price and had to disclose any mark-up for additional costs. Second, private hospitals had to give patients the option to buy drugs outside by giving them a prescription that could be filled elsewhere.”

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Likewise, in January 2017, former secretary for Thailand’s food and drug administration (FDA) Siriwat Tiptaradol called for the government to demand that pharmaceutical firms declare the production costs of their products, which could then be used by the Department of Internal Trade to ascertain whether the drugmakers’ selling prices were reasonable.

“A draft Drug Bill has already been forwarded by the Thailand FDA with provisions that require firms to submit the cost structure of their products and which allows the authority to reject approvals with a proposed price that it deems not ‘reasonable’ or ‘appropriate’,” Fitch Solutions revealed. “Undoubtedly, the introduction of price controls will exacerbate a tough business environment for multinational drugmakers in Thailand, with health technology assessments already used to rationalise spending and compulsory licenses being advocated as a means of addressing high drug prices.”

The Thai government is reported to have a strong incentive to rationalise spendin given that it contributes substantially to healthcare financing with a majority of its population covered by one of three healthcare schemes. Fitch Solutions highlighted how health technology assessments which are conducted by the country’s Health Intervention and Technology Assessment Program (HITAP) is used as the primary tool in rationalising spending in terms of designing benefit packages and supporting listing decisions on the country’s national list of essential medicines.

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Meanwhile, Thailand’s procurement regime continues to favour local drugmakers which will pose an additional challenge to international pharmaceutical firms. The report noted that government policies grant locally produced generic drugs exclusive access to government contracts, drawing upon state-owned Government Procurement Organisation (GPO) which holds a distinct advantage given that its products are mainly selected for hospital procurements when using government funds.

The report noted that Thailand’s increasing focus on cost-effective expenditure will further promote the generic substitution rhetoric and as a result, generic medicine sales growth may outperform the overall market growth over the long term.

“Thai health authorities have also begun to take steps towards employing generic substitution policies in the pricing process,” Fitch Solutions added. “Over the long term, as is common throughout the Asia region, market growth will decelerate due to increasing cost-containment and initiatives to improve the cost-efficiency of pharmaceutical spending.”