UNIVERSAL HEALTHCARE Archives

20/06/2024by EOS Intelligence EOS Intelligence No Comments

IRA: Are Patients Winning at the Cost of the US Pharma Sectoral Growth?

The market reaction to the US Inflation Reduction Act of 2022 is mostly mixed. It is expected to change the pharma industry dynamics in terms of the competitive positioning and product pricing of those companies projected to be negatively impacted by the IRA. The answer to whether the IRA will be able to curb rising healthcare costs in the USA lies in the legislation’s on-the-ground application.

IRA to decrease prescription drug prices via a four-pronged strategy

Prices of prescription drugs in the USA are 2.78 times higher than in 33 other countries analyzed in a 2024 report published by RAND, a public policy think tank.

In pursuit of reducing healthcare costs in the USA, the Biden government passed the Inflation Reduction Act (IRA) in August 2022. One of the major goals of the act includes the reduction of prices of prescription drugs.

This is expected to be achieved through a four-pronged strategy, the mainstay of which involves the US federal government negotiating the prices of some high-priced prescription drugs covered under Medicare.

The second prong includes pharmaceutical firms paying a rebate to Medicare if they raise the price of prescription medicines covered under Medicare by a rate that is higher than the inflation rate.

The monthly cost of insulin for Medicare patients is capped at US$35, as the third prong.

The fourth prong aims to reduce prescription drug prices by capping the out-of-pocket costs of Medicare Part D patients at US$4,000 in 2024 and US$2,000 in 2025.

IRA Are Patients Winning at the Cost of the US Pharma Sectoral Growth by EOS Intelligence

Pharma companies to suffer more due to IRA compared to projected government savings

Under the IRA, large pharmaceutical companies, defined as those with over US$1 billion in net profits, are required to pay a minimum of 15% annual taxes, a financial burden on these companies. Analysts predict that the annual revenue from corporate taxes could be to the tune of US$222 billion. Furthermore, the IRA is expected to save over US$287 billion for ten years from the roll-out, as per the estimates of the Congressional Budget Office (CBO).

Apart from the increased financial burden on some companies, experts foresee potential adverse impact on several pharmaceutical companies based in the USA to a considerable extent.

The pharma companies witnessing the least to no impact are the ones with their primary operations based outside the USA, biologics or large molecule drug producers, and the ones that do not receive government funding for R&D. This is because of the differing timelines under IRA for negotiating the prices of biologics and small molecules. Biologics’ timeline is 11 years after FDA approval, while small molecule drugs are eligible after 7 years. Therefore, Medicare negotiations will begin four years earlier for a small molecule drug that has received approval at the same time as a large molecule biologic drug.

Apart from these adverse effects, such as differential treatment of small molecule drugs compared to biologics under Medicare price negotiation timelines, there are some other negative impacts on the overall US pharma industry, such as diminishing competition among generic drug producers, decreased discovery of new treatments, and new uses of existing drugs.

IRA to affect the revenues of top pharma companies surely but variably

There are differing viewpoints regarding the impact of IRA on pharmaceutical companies’ revenue. One group of experts suggests that Medicare prescription drug negotiations under the IRA will depend on the expiration of the drug’s patent. Other experts expressed their opinion that irrespective of when a drug loses exclusivity, a significant threat to drug revenues comes from the competition entering the market and not from lower negotiated drug prices.

The first group of experts states that lower negotiated prices in 2026 are expected to have a lower impact on medicines projected to witness revenue loss owing to patent expiry around the same time. One such example of a drug losing its exclusivity in the USA in 2025 is Stelara by Janssen Biotech approved for treating psoriasis.

In contrast, pharma companies producing medicines that are expected to witness competition from their generic counterparts after 2026 are projected to lose revenue owing to lower negotiated prices even before the drugs lose exclusivity. However, some companies’ revenue will be affected more than others.

Medicare price negotiations to hit revenues of some drugmakers drastically

The pharma industry’s revenue is expected to decrease by 2% due to the new measures brought about by the IRA, as per a 2022 report by Morningstar, a US financial services firm. Among the companies that will be highly affected are Novo Nordisk, Gilead, Bristol Myers Squibb, AbbVie, and AstraZeneca. In contrast, others, such as Pfizer, Merck, Roche, and Novartis, will not be as much impacted by Medicare price negotiations.

Some 15% of global branded drug sales come from Medicare in the USA, as per Morningstar estimates. Therefore, the impact of the IRA on pharmaceutical companies depends on their reliance on Medicare sales, price adjustments, high-cost specialized drugs, and extended patent protection.

Medicare prescription drug negotiations are projected to impact pharma companies the most among all IRA measures, although this impact might not be uniform across the players. On the other hand, Medicare negotiations are projected to save the government approximately US$100 billion through 2031. The pharma companies facing the highest revenue losses include Novo Nordisk, Gilead, and AstraZeneca.

When the Medicare price negotiation measures start to roll out in 2026, two drugs of Novo Nordisk, namely, Ozempic and Rybelsus, that are approved to treat type 2 diabetes, are expected to witness an 8% decline in their projected revenue through 2031, as per Morningstar. Gilead’s Biktarvy, which treats HIV-1 infections, is expected to be subject to price negotiation in 2027 and thereby face a projected revenue loss of 7% through 2031. On similar lines, Calquence (to treat mantle cell lymphoma) and Tagrisso (to treat non-small cell lung cancer) drugs of AstraZeneca are expected to lose 6% revenues through 2031 owing to Medicare price negotiations.

In contrast, considering the existing portfolios, Pfizer, Merck, Bristol Myers, and BioMarin are expected to witness no revenue loss due to Medicare negotiations.

Medicare inflation caps to impact major pharma companies negatively

Another important IRA measure is Medicare inflation caps. This measure involves drug producers paying penalties for increasing drug prices beyond the inflation rate. It is expected to result in US$62 billion in government savings through 2031.

Around March 2023, the US federal government, along with the Centers for Medicare & Medicaid Services (CMS), released a list of 27 drugs whose prices were increased by their manufacturers at a higher rate than the inflation rate. This list included AbbVie’s Humira (to treat Crohn’s Disease) and Astellas Pharma’s and Seagen’s Padcev (to treat urothelial cancer). Gilead Sciences, Johnson & Johnson, and Pfizer are among other impacted companies by Medicare inflation caps. Pfizer had the most drugs on the list, with a total of five.

Bristol Myers Squibb is one of the pharma companies that is expected to be highly impacted by Medicare inflation caps. The company’s drugs, such as Eliquis (to treat or prevent blood clots), Opdivo (to treat melanoma), Orencia (to treat rheumatoid arthritis), and Yervoy (to treat various cancer types) are among the medicines that are expected to face revenue loss owing to inflation caps. Other drugs on the list include Novo Nordisk’s drugs such as Novolog and Levemir (both for type 1 diabetes) and Victoza (for type 2 diabetes), Johnson & Johnson’s drugs such as Imbruvica (to treat certain cancers) and Xarelto (to treat or prevent blood clots), along with Novartis’s Sandostatin (for severe diarrhea and flushing related to metastatic carcinoid tumors).

In contrast, Merck is not expected to face any revenue loss due to inflation caps, while GSK, Regeneron, Roche, and Sanofi are projected to witness minimal revenue loss as these companies have not raised the prices of their drugs beyond the inflation rate.

IRA to potentially reduce competition from generics

According to the IRA, following the price negotiations of some of the branded drugs, manufacturers of the generic versions of such drugs will have less scope to charge a reduced price for those drugs. This would disincentivize the generic drug producers to manufacture generic versions of the already low-priced branded drugs.

EOS Perspective

The IRA represents a substantial change in the US legislation that strives to make healthcare more affordable to Americans through increased access to more reasonably priced prescription medicines.

However, IRA can be expected to affect small-molecule drugmakers more negatively than biologics. Moreover, some pharmaceutical companies are projected to feel the pinch more than others in terms of revenue losses.

Companies such as Merck, Bristol Myers Squibb, and the pharmaceutical association PhRMA have filed lawsuits against some provisions of the IRA, stating that they are unconstitutional. Bristol Myers Squibb and J&J are planning to appeal after the US court dismissed the IRA lawsuits. These pharmaceutical companies are trying to find ways to circumvent the negative impact of the legislation.

IRA is also expected to negatively impact R&D and medical innovation. This is evident from the fact that biopharma companies have reduced their R&D efforts in the neuroscience space, especially since a lot of development work in this space involves small-molecule drugs. Moreover, as IRA exempts only one orphan drug from price negotiation, investments in R&D for orphan drugs are likely to get deprioritized. Many pharmaceutical companies are reconsidering their R&D planning and investment strategies to counter the effect of IRA.

IRA is clearly not a win-win strategy for all stakeholders. Pharmaceutical companies are mostly at the losing end, while patients could be winners. Considering all the positives and negatives of IRA, only time will tell the actual impact of the legislation on the overall pharmaceutical industry.

06/06/2024by EOS Intelligence EOS Intelligence No Comments

Denmark – A Trailblazer in Digital Health Innovation

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The COVID-19 pandemic has spurred the need to embrace new digital tools and technologies within the healthcare sector. There has been a significant increase in the use of technology to provide care, resulting in improved health outcomes. In Europe, Denmark has made significant progress and is at the forefront of the digital health transformation with a 99% digitalization rate. Over the last few years, Denmark has strived to digitalize further its healthcare infrastructure, testing and leveraging technologies such as AI and robotics to implement them at full scale across the country. In this transformation, the Danish digital health system can be a source of valuable lessons, uncovering various opportunities it presents for health tech companies.

Demark’s digital health: Harnessing power from a robust public infrastructure

Denmark’s healthcare system is among the most expensive worldwide, with 10% of GDP allotted for healthcare expenditures and 90% publicly funded through taxes. The health infrastructure is highly digitalized, with almost 99% of healthcare communication done electronically.

The national e-health portal, Sundhed.dk, launched in 2003, plays a key role in Denmark’s digitalization, offering a comprehensive platform catering to both healthcare professionals and citizens alike. Sundhed.dk provides safe and secure access to an individual’s personal health records (from hospitals), medication information, vaccinations, laboratory results, appointments, and referrals. The portal is user-friendly and is regarded as one of the superior models for public healthcare information exchange worldwide.

Over the last 20 years, the Danish government has supported and invested in various digital health initiatives, rolled out several IT services, and strengthened its digital healthcare infrastructure. In 2007, the country introduced E-record, through which individuals can access their medical information from EHR systems using the Sundhed.dk portal. The government also launched Shared Medication Record, which has records of patients’ prescriptions, details of the doctor who prescribed the medicines, and information pertaining to where the medications were picked from. During the COVID-19 pandemic, the “My Doctor” app was introduced to facilitate video consultations between GPs and patients. These digital initiatives contribute to improved care coordination and increase the patient’s trust in the system.

Denmark – A Trailblazer in Digital Health Innovation by EOS Intelligence

Unraveling the blueprint: Denmark’s digital health success story

Well-formulated digital health strategies address the needs of patients and healthcare workers

Many countries develop digital health strategies, which are frequently focused solely on technical aspects, steering away from addressing the actual needs of patients and healthcare professionals. Moreover, these policies often function as plain vision documents with no clear description of action plans or the roles and responsibilities of various stakeholders.

In contrast, Denmark’s digital health strategy is well-formulated and primarily focused on addressing the needs of patients and healthcare workers. It provides a clear vision of how digital technology can help meet their needs. In addition, the strategies highlight the importance of cross-sectoral collaboration, detailing focus areas and specific initiatives that must be jointly executed. For instance, it clearly mentions how the health and education sectors should work together to promote digital health literacy.

Denmark’s well-crafted digital health policies are a cornerstone of its successful digital health transformation. Since 1999, the country has been updating these strategies every four years, ensuring ongoing review and modernization of its digital health infrastructure.

Governance models aid in the speedy integration and implementation of digital healthcare tools

Denmark follows a regional governance model instead of the top-down approach, controlled by the state (national) government. The states and municipalities are responsible for developing and implementing their own health IT solutions in alignment with the national strategy.

Further, the government has established several steering groups to aid in implementing and disseminating digital health initiatives for rapid digital uptake. For instance, Connected Digital Health in Denmark, a cross-governmental organization, manages, coordinates, and ensures the implementation of various action plans mentioned in the national digital health strategies.

In addition, the government also regularly engages in public-private partnerships to boost its digital capabilities. The country’s strong governance is considered one of the critical success factors for the digital health transition.

Common IT standards help in effective healthcare data exchange

Many countries have deployed digital health technologies; however, integration remains sparse, resulting in a fragmented digital landscape. Integrating patient information siloed across multiple healthcare segments is crucial for establishing a high-quality digital health infrastructure. The adoption of common IT standards helps facilitate this data exchange and integration.

Denmark has been using these standards since 1990 for electronic health data communication as well as improving workflows between public hospitals, general practitioners, private healthcare entities, specialists, laboratories, and home care services. The early development of these standards significantly increased electronic communication within the healthcare sector, contributing to the high level of digitalization of the Danish healthcare sector.

Strict testing protocols ensure digital health tools are user-friendly

The user-friendliness of digital technologies is considered one of the major factors for early e-health adoption. Denmark undertakes several initiatives to ensure that digital health tools and technologies are user-friendly and easy to use. For instance, the country collects feedback from healthcare stakeholders about their experience with various digital health solutions, checks if they are user-friendly, and uses the input received to develop new solutions.

The country has also implemented strict testing protocols for telehealth solutions by evaluating their performance on mobile devices and testing the products with a range of end users, including the elderly and people with disabilities.

Government’s focus on educating and training healthcare stakeholders helps them to use digital tools effectively

Denmark educates and trains healthcare workers to use digital tools appropriately. According to a 2020 Deloitte report, nearly 76.8 % of Danish clinicians mentioned that they are well-trained and supported in using digital health tools and solutions.

Local governments and hospitals in Denmark collaborate with tech professionals to provide support, education, and training on using digital solutions such as EMRs, telemedicine platforms, and shared IT standards for healthcare data exchange. Digital health literacy of front-line healthcare workers is one of the core objectives of the country’s digital health strategy.

Unlocking opportunities: Denmark’s digital health sector for health tech companies

According to Statistics Denmark, the percentage of the Danish population aged 75 or above is expected to double from 7.8% in 2017 to 14.4% in 2047. In addition, the country faces a severe labor shortage, with projections suggesting that by 2035, Denmark might have a shortage of 14,500 healthcare workers. These factors are expected to put increased pressure on the Danish healthcare system.

In order to tackle these challenges, Denmark’s government continues to invest in advanced innovative technologies and digitalization strategies. In 2018, the country launched a digital health strategy titled “A Coherent and Trustworthy Health Network for All: 2018-2024”, aiming to modernize the healthcare infrastructure further. Under this initiative, the country aims to expand telemedicine solutions, increase virtual care visits, and automate the administrative and clinical workflows within the Danish healthcare system. This initiative is creating opportunities for startups and companies offering health tech solutions in the areas of telemedicine, video consultations, remote patient monitoring, hospital automation, and diagnostics.

Danish government seeks to expand telemedicine solutions for various segments of the patient population

Denmark has been using telemedicine services since 2012, beginning with home monitoring solutions for Chronic Obstructive Pulmonary Disease (COPD) patients. The country seeks to further expand the rollout of telemedicine solutions for patients with COPD, chronic diseases, heart failure, comorbid conditions, and pregnant women facing complications. In December 2023, the government of Denmark invested about US$72 million to expand telemedicine solutions for these patients, offer digital rehabilitation courses, and increase the number of virtual consultations through GPs.

Various governmental organizations in Denmark have been looking to partner with companies providing innovative remote monitoring and virtual care solutions to facilitate home treatment.

For instance, in 2021, in collaboration with the local government, Trifork, a Denmark-based digital health company, developed a telemedicine solution called Telma for severe COPD patients. The solution provides COPD patients with medication, measuring tools, and devices to track pulse and oxygen levels at home. The Telma app transmits this data in real time and facilitates communication between healthcare professionals and patients through video consultations, thus lessening the need for frequent hospital visits.

Similarly, in 2022, two Denmark-based health tech companies, Copenhagen Center for Health Technology (CACHET) and Cortrium, forged a research collaboration to develop a novel technology to monitor a patient’s heart rhythm remotely. This allows heart failure patients to receive prompt medical care without visiting a hospital.

The Danish government is also looking to provide telerehabilitation services amidst the rising mental health issues across the country. In 2021, the government established the Centre for Digital Psychiatry to develop, test, and implement several nationwide digital services. In March 2023, the Center initiated a research project with Monsenso, a Danish mobile health company, to provide personalized digital treatment for patients with depression.

A rise in telemedicine programs catering to various segments of the patient population is expected in the forthcoming years. This surge in demand fuels the growth of companies offering telehealth solutions nationwide.

AI presents several opportunities for innovation and collaboration within the healthcare segment

Denmark actively seeks to integrate AI into its healthcare system, especially in diagnostics, presenting numerous opportunities for AI-based health companies to thrive. The country has established research and innovation centers across the country focusing on AI for uses such as identifying at-risk stroke patients, helping radiologists interpret scans, and assisting in other diagnostics.

In 2021, Denmark established the Radiology AI Test Center (RAIT) to accelerate the development and implementation of medical AI applications in the country. Through RAIT, private companies can test and validate their AI-based technologies in Denmark. For example, in 2021, through the RAIT program, several Danish hospitals in Copenhagen partnered with US-based imaging AI startup Enlitic to evaluate an AI-based algorithm to read chest X-rays. Similarly, in 2023, RAIT partnered with Cerebriu, a Denmark-based health tech company, to use AI to improve MRI imaging of the brain.

Investments in advanced digital technologies modernize healthcare infrastructure

As Denmark endeavors to digitalize its hospitals, ample opportunities arise for companies specializing in robotics and mobile health to improve hospital and clinical workflows, among other areas.

Some steps have been taken to digitalize hospitals. For instance, the Centre for Clinical Robotics (CCR), a research and innovation center for healthcare robotic technology in Denmark, aims to leverage robotic technology for various hospital processes, such as food service, cleaning, medication dispensing, clinical sample collection, etc.

Another interesting instance is the pilot project between Systematic, a Denmark-based software company, and physicians at the Aalborg University Hospital. Systematic has developed a communication platform called Columna Flow Clinical Tasking, which facilitates direct communication among the physicians at the Aalborg Hospital. The solution offers a real-time overview of the patients, including their medical conditions and the workload of hospital clinicians on duty. This empowers physicians to prioritize patients and efficiently allocate tasks during peak hospital hours.

EOS Perspective

The Danish health system is poised for an even more profound digital transformation in the coming years, aiming to improve patient accessibility and convenience. Denmark’s healthcare market is already highly digitalized, which provides a robust foundation for further digital transformation and innovation.

Home care and telemedicine, health data interoperability, AI-based diagnosis, healthcare automation, personalized medicine, and preventative health are likely the key focus areas for the next phase of digital health transformation.

Further, the country is looking to elevate patient care through its super hospital program, which involves consolidating smaller hospitals into larger, higher-capacity units. The aim is to provide superior medical care at lower costs. Technology will play a key role in improving healthcare delivery and patient outcomes in these hospitals, with applications across logistics, clinical decision support tools, diagnostic tools management, and patient engagement, among other areas.

These initiatives can be expected to make the Danish health system even more robust. The system is expected to move from a doctor-centric to a patient-centric care model, where patients would be actively involved in taking care of their own health. The country’s meticulously crafted digital health strategies, well-established digital infrastructure, and technology-proficient population lay a solid foundation to usher in the next wave of innovation.

As Denmark persists in its commitment to build a healthcare system fit for the future, there are abundant opportunities for health tech companies to thrive and drive innovation within the Danish healthcare industry.

06/03/2024by EOS Intelligence EOS Intelligence No Comments

Soaring Healthcare Costs in the USA: Is Greed Winning Over Welfare?

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Americans have been struggling with access to affordable healthcare for years, with thousands of stories of an unexpected illness driving a patient to bankruptcy. Meanwhile, the USA spends much more than European nations on healthcare but covers the smallest percentage of the healthcare costs. Wasteful spending, excessive administrative costs, no limit to medicines prices, lack of a single unified interface system, and passive attitude by the government are all building blocks of a wall separating Americans from the quality and affordable healthcare system expected from any developed country.

According to a 2020 article published by Harvard, the annual cost of healthcare in the USA was around US$3.5 trillion, of which around 33% is believed to have been squandered. Simultaneously, healthcare costs are soaring, contributing significantly to several issues around the delivery and affordability of healthcare in the USA. The same Harvard article revealed that about 40-44% of Americans decided to omit or postpone medical treatment, tests, or care owing to their high costs. Although the USA has the highest national healthcare expenditure, the country registers one of the lowest life expectancies among the developed economies. Additionally, around 10% of the population does not have health insurance.

This problem is so deep-rooted and widespread that the issue of healthcare costs was referred to as the “tapeworm of American economic competitiveness” by investor Warren Buffet. Almost 67% of the US population wishes the federal government to regulate healthcare prices in the country. Yet, despite it being such a grave problem, the US government does not seem to be taking any (visibly) constructive measures to resolve it. While significant political aspects are certainly at play, a deep dive into the cost drivers of the US healthcare system might shed some light on the complexity of this issue.

Soaring Healthcare Costs in the USA – Is Greed Winning Over Welfare by EOS Intelligence

Healthcare administrative costs hold the lion’s share of total healthcare expenditure

One of the major components of healthcare costs in the USA is the annual cost of healthcare administration at US$1,055 per capita, according to a 2021 estimation by the Peterson Foundation. The US spending on healthcare administrative purposes is by far the highest globally. Compared with Germany, the second-highest spender on healthcare administration at US$306 per capita, the stark difference of US$749 per capita speaks volumes about the current situation in the USA. The country also registers the world’s highest share of administrative costs in total healthcare costs, at around 15-30% annually. Wasteful administrative spending is estimated to contribute about half of that share (7.5% to 15% of the country’s total healthcare spending), translating to anywhere from US$285 billion to US$570 billion in 2019.

The USA spent around US$950 billion in 2019 on healthcare administration, which translates to 25% of the national healthcare expenditure (NHE) that year. A significant part of the excessive administrative expenditure is billing and insurance-related costs (BIR), including overhead costs for medical billing and services such as claim submission, claim reconciliation, and payment processing. Profits made by the insurance companies account for the highest share of BIR costs. Healthcare providers also get part of these administrative costs for note-taking and record-keeping during the medical billing process. According to an article published by Harvard in 2020, there are occupations in US healthcare that do not exist elsewhere, such as medical-record coding to claim-submission specialists. Further, the article claims that in other countries, such as Germany and Switzerland, where multiple payers and private providers exist, healthcare administration costs less than 50% of the USA equivalent.

As per 2019 McKinsey research, the USA could decrease healthcare administrative expenditure by 30% through automation and streamlining of the BIR processes. Claims processing software enables automation of BIR processes, however, only 15% of US hospitals employ such software, as per Definitive Healthcare tech data.

Healthcare services costs, including physicians’ salaries, empty patients’ pockets

A 2018 JAMA study revealed that physician salaries in the USA were higher than in other developed countries. A survey by Medscape in 2021 revealed that physicians earned the most in the USA compared to other developed countries. On average, the annual income of physicians in the USA was US$316,000, followed by Germany (US$183,000) and the UK (US$138,000).

As per 2019 Commonwealth Fund research, Americans are much less likely to consult a doctor in case of a health issue, at half the rate compared to other developed countries. This can be attributed to the fact that the cost of healthcare services is considerably higher in the USA vis-à-vis other developed nations. According to a 2017 report, the average cost of a coronary artery bypass graft (CABG) surgery in the USA was US$78,100, whereas the same procedure cost only US$11,700 in the Netherlands. While the procedure cost is already far lower, in the Netherlands, patients will likely have the procedure cost fully covered by insurance without any co-payment. The USA also reported higher costs for outpatient procedures such as MRI scans and colonoscopies compared with other developed countries.

Skyrocketing prescription drug prices further inflate healthcare costs

As per OECD, in 2019, the average spending on prescription drugs by an American was about US$1,126 per capita, which was over double that in other developed nations. As per CMS, prescription drug spending in the USA by the federal government is expected to grow by 6.1% through 2027.

The growth in prescription drug spending could be attributed to increased focus on specialty pharmaceuticals and precision medicine. Specialty medicines are experimental therapies for treating cancers, autoimmune diseases, or chronic conditions. Some specialty medicines employ genetic data to provide highly targeted, personalized therapy. Owing to the complex nature of these drugs, they are generally expensive to develop and distribute.

For instance, a novel specialty drug called Hemgenix to treat hemophilia B is the most expensive drug ever approved by the FDA. The price of a single infusion of this gene therapy is around US$3.5 million. No healthcare providers have submitted a claim for Hemgenix so far in 2023.

Apart from specialty medicines, pricing strategies for drugs in general play a significant role in soaring healthcare costs in the USA. Drug producers set a list price based on their product’s estimated value, and the price list can be increased by the producers as they see fit. In the USA, there are few regulations to curb producers from increasing drug prices in this way.

Chronic diseases add fuel to the fire of escalating healthcare costs

As per the CDC, six out of ten adults in the USA have a chronic disease or condition. The most common chronic diseases or conditions in the USA include heart disease, stroke, cancer, diabetes, chronic kidney disease, and chronic obstructive pulmonary disease (COPD). Furthermore, according to 2022 research published in the National Library of Medicine, of the population 50 years and older, the number with at least one chronic disease is estimated to increase by 99.5% from 71.522 million in 2020 to 142.66 million by 2050.

There is a robust correlation between the prevalence of chronic diseases and rising healthcare costs. As per a report from the American Action Forum, the USA spends about US$3.7 trillion annually for the treatment of chronic health diseases and the consequent loss of economic productivity. Routine office visits, prescriptions, outpatient treatments, or emergency care account for most of this healthcare spending in the USA.

Expanding geriatric population contributes to rising healthcare costs

According to the US Census Bureau, 21% of the US population is expected to be 65 years or older by 2030. The growing aging population is expected to drive healthcare costs in the USA in two ways: through Medicare enrollment growth and the increase in the prevalence of more complex and chronic conditions. Medicare had over 65 million beneficiaries as of March 2023, a number that is expected to increase by 2030 dramatically. This enrollment growth will impact NHE since Medicare is a publicly funded program. As per the CMS, in 2020, the USA spent US$900.8 billion on Medicare, and the CMS expects that Medicare spending will surge by 7.6% annually through 2028.

The elderly population is vulnerable to chronic conditions such as hypertension, high cholesterol, diabetes, coronary heart disease, and Alzheimer’s disease, among others. According to the National Council on Aging, 80% of older Americans have a chronic condition, and 77% of older adults have two or more chronic conditions. These chronic conditions will require ongoing treatment or long-term care at a nursing home or assisted living facility. These outcomes will account for increasing healthcare costs and overall national healthcare expenditure in the USA.

Greed over welfare

Corporate avarice is another factor said to be responsible for the rising healthcare costs in the USA. Insulin list price in the USA is 10 times higher than that in Canada. Not only pharma companies but also renowned hospitals charge more for the same service compared with less renowned hospitals. This applies to various services, from complex surgeries to simple X-rays.

Price regulation is the only solution to this problem that could be implemented with enough political will. The US state of Maryland has introduced this regulation for hospital services, while most European countries have regulated the prices of pharmaceuticals. However, implementing price regulation would mean that the compensation of the top management executives or the CXOs would decline, or the budget for R&D would reduce. This causes much resistance among top management executives to arrive at a constructive decision of choosing between self or service. However, the fact that patients delay treatment because of rising prices speaks strongly in favor of introducing at least some level of price regulation.

EOS Perspective

Standardization is one of the key ways to decrease administrative costs. Just for comparison purposes, checking out of a grocery store is easy because all products possess bar codes, and all credit card machines are the same or uniform. Similarly, mobile banking and inter-banking are straightforward since the Federal Reserve has set standards for how banks should interface with each other.

However, the American healthcare system has been immune to such a standardization. Every health insurer needs a different bar-code-equivalent and payment-systems submission. In addition, it is tough to send electronic medical records (EMRs) from one hospital to another because there is no mandate by the federal government for them to be in compatible formats. Additionally, this lack of standardization benefits many healthcare providers, as they strive to avoid the interchange of EMRs to prevent patients from switching doctors.

Standardization is possible only when prominent stakeholders are involved in it, agree to it, and decide they need it. The largest stakeholder in the US healthcare system is the federal government. Buying capacity and administrative control to compel payers and providers to adopt billing and interface rules to standardize the process lies within the federal government’s responsibilities.

Similarly, a price cap regulation needs to be brought about in the pharmaceutical sector. Price regulation is the only way to lower the prices of prescription drugs. Apart from this, the federal government needs to implement price cap regulation in healthcare services such as X-rays, MRIs, CT scans, etc.

It is the government that should introduce regulations that put caps on drugs and services prices, at least in certain product and service groups. It is the government that should establish the infrastructure to materialize standardization and introduce a deadline by which all interactions must be standardized.

However, to date, the federal government only considers providing insurance – particularly Medicare and Medicaid – to people as its role rather than looking out for the entire healthcare system as a unit. This mentality needs to change if healthcare costs are to be brought down.

28/06/2018by EOS Intelligence EOS Intelligence No Comments

Modicare: Which States Matter the Most?

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Dubbed as ‘Modicare’ (named after the Indian prime minister), India’s National Health Protection Scheme (NHPS) is being considered as the world’s largest government funded healthcare scheme. The scheme is expected to benefit 500 million people by providing them with cover for secondary and tertiary care hospitalization. While the recent press around the scheme focuses largely on the implementation and funding challenges, we are looking at Modicare from the perspective of opportunities it will bring to the table for healthcare industry players.

Announced during the 2018 union budget, NHPS is a government-funded secondary and tertiary healthcare plan aimed at 100 million financially vulnerable families, referred to as Below Poverty Line (BPL) families, in India. Expected to be launched on 2nd October 2018, NHPS will replace the existing central-government-operated Rashtriya Swasthya Bima Yojana (RSBY), which provides an annual insurance cover of INR30,000 (~US$460) for a family of maximum five members, and is operational in only 15 (out of total 29) Indian states. The new scheme will offer insurance cover of INR500,000 (~US$7,700) per family.

NHPS is expected to provide secondary and tertiary healthcare access to more than 40% of the Indian population, which was earlier deprived of it due to financial constraints. This will create a new healthcare market, giving boost to the entire healthcare ecosystem in India. Companies across the entire healthcare value chain, including medical education providers, healthcare service providers, construction firms, pharmaceutical and medical devices companies, etc., are expected to witness ample growth opportunities. One can expect increased investments in the Indian healthcare sector by private companies as well as foreign investors.

Since the scheme is aimed primarily at making healthcare affordable and accessible for BPL population, opportunities will be up for grabs for companies to tap and expand their reach in areas where the BPL population resides in India. Based on the currently available scheme details, we have tried to identify top five states in India that are ripe for opportunities with the expected launch of the new scheme.

EOS Perspective

Taking into account various factors, including red tape, electricity supply, political stability, etc., as well as the current state of healthcare infrastructure and BPL population, we project the states of Uttar Pradesh (UP), Bihar, Telangana, Madhya Pradesh (MP), and West Bengal (WB) will be most attractive for healthcare industry players.

Uttar Pradesh offers greatest opportunities on the basis of a large BPL population residing in it. The state boasts of a robust road infrastructure and a stable political climate. UP has legacy issues related to administrative challenges, however, the state has taken major steps in cutting the red tape.

Madhya Pradesh is the leading state in India in terms of ease of doing business. The state has electricity surplus, with good road infrastructure, and reasonably priced real estate (as compared with the remaining four states), making it an ideal destination to invest.

One of the largest BPL populations resides in Bihar, a fact that makes it one of the most attractive markets expected to be created after the introduction of NHPS. However, the administrative bottlenecks and lack of infrastructure (as compared with the other four states) may act as constraints for the market players in realizing the full potential.

Telangana, a newly formed state, offers excellent opportunities due to a reasonably large BPL population. The state has performed well on administrative reforms front, and it is expected to improve infrastructure (including electricity availability) in the future, to make it more attractive.

West Bengal has shown remarkable improvement in the field of administrative reforms (in cutting of the red tape), to make it one of the most attractive destinations for any industry. It has to focus more on further improvement in the infrastructure to make it a natural choice for the industry players to invest in the state.

In the end, the realization of the opportunities will depend on smooth as well as quick implementation of the scheme across India. At the outset, NHPS offers promising future for healthcare industry across the nation in general, and the five highlighted states in particular.

Ranking Methodology

EOS assessed attractiveness (in terms of opportunities for healthcare industry players) of all Indian states on the basis of a scorecard
States were ranked on selected parameters, i.e. size of the market and other factors (termed as ‘market enablers’) that are likely to influence decision-makers to prefer one state over another while planning to invest to tap the opportunities created post the launch of NHPS
Maximum score (awarded for first rank) for each parameter was fixed based on its relative importance (weightage); scores awarded for subsequent ranks (on each parameter) were a percentage (decreasing in accordance with the rank) of maximum score
The final score (and hence the overall rank) was the summation of individual scores on all parameters

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

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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.

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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?

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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

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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.

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