Medicine prices and pricing policies in vietnam

CHAPTER 1 INTRODUCTION 1.1 Rationale and justification of the study Oral diseases, such as dental caries and periodontal diseases are most common chronic infectious diseases. Most caries and periodontal diseases are preventable, as recommended by resolution WHA 53.17 of the Fiftythird World Health Assembly in 2000 (1). However, the consequences of oral diseases are not only affected to oral cavity, but also to other systemic diseases such as diabetes, cardiovascular diseases, or respiratory diseases, preterm and low birth weight (2). There are several bacterial strains in normal flora of the oral cavity. Most of them are pathogens. Bacteria exist mainly inside the dental plaque and dental calculus and on the surface of soft tissue. Dental plaque was formed from mixture of food, saliva and other organic compounds inside oral cavity and it is the main cause of oral

MEDICINE PRICES AND PRICING POLICIES

IN VIETNAM

Tuan Anh Nguyen

A thesis submitted in fulfillment of the requirements for the degree of

Doctor of Philosophy

School of Public Health & Community Medicine

Faculty of Medicine, University of New South Wales, Australia

April 2011

THE UNIVERSITY OF NEW SOUTH WALES

Thesis/Dissertation Sheet

Surname or Family name: Nguyen

Abbreviation for degree as given in the University calendar: PhD

School: Public Health and Community Medicine Faculty: Medicine Title: Medicine prices and pricing policies in Vietnam

Abstract 350 words maximum:

Availability of affordable medicines is one precondition to realizing the fundamental human right of access to essential healthcare Although Vietnam is progressing well with several health-related targets of the Millennium Development Goals being achieved ahead of time, attaining equitable access to affordable medicines remains problematic

In this thesis, a mixed-method approach was adopted in the analysis of medicine prices and polices The literature was reviewed, followed by an analysis of Vietnam‘s pharmaceutical market and legislation A quantitative study of medicine prices, and a qualitative study on how and why high, unaffordable prices occurred, were conducted The findings were synthesized to form policy recommendations

The studies demonstrated that medicine prices in Vietnam were unreasonably high Adjusted for Purchasing Power Parity in 2005, prices in the public sector were 46.58 times the international reference price for innovator-brand medicines and 11.41 times for the lowest-priced generic equivalents Monopoly

of supply was an important cause of high innovator-brand prices More complex, intrinsic features of Vietnam‘s healthcare system were also reported by key stakeholders as driving up prices Economic survival pressures, in an imperfectly competitive market, were said to force both pharmaceutical companies and prescribers to be inextricably linked financially Ethics and personal values however did influence prescribers‘ behaviour and their response to corrupt procedures Overall, intractable, systemic features contributing to high prices included unrealistic low salaries for prescribers, poor economies of scale in domestic production, inefficiencies in the local distribution network, malfunctioning pricing policies and a general lack of transparency and accountability in administrative procedures

A range of policy measures and changes are required to improve access to medicines in Vietnam term recommendations include amendments to pharmaceutical policies, with better enforcement of current regulations Medium-term measures include the public health insurance system taking an active role in price setting, pooling procurement through a national tendering procurement system and reform of the domestic market through rationalization with appropriate capital and technological investment to achieve improved efficiencies and economies of scale Longer-term goals include health system improvements to address poor governance, low remuneration of prescribers, with additional measures to limit the scope for corrupt practices

Short-Declaration relating to disposition of project thesis/dissertation

I hereby grant to the University of New South Wales or its agents the right to archive and to make available my thesis or dissertation in whole or in part in the University libraries in all forms of media, now or here after known, subject to the provisions of the Copyright Act 1968 I retain all property rights, such as patent rights I also retain the right to use in future works (such as articles or books) all or part of this thesis or dissertation

I also authorise University Microfilms to use the 350-word abstract of my thesis in Dissertation Abstracts International (this is applicable to doctoral theses only)

or conditions on use Requests for restriction for a period of up to 2 years must be made in writing Requests for a longer period of restriction may be considered in exceptional circumstances and require the approval of the Dean of Graduate Research

FOR OFFICE USE ONLY Date of completion of requirements for Award:

THIS SHEET IS TO BE GLUED TO THE INSIDE FRONT COVER OF THE THESIS

ORIGINALITY STATEMENT

‗I hereby declare that this submission is my own work and to the best of my knowledge

it contains no materials previously published or written by another person, or substantial proportions of material which have been accepted for the award of any other degree or diploma at UNSW or any other educational institution, except where due acknowledgement is made in the thesis Any contribution made to the research by others, with whom I have worked at UNSW or elsewhere, is explicitly acknowledged in the thesis I also declare that the intellectual content of this thesis is the product of my own work, except to the extent that assistance from others in the project's design and conception or in style, presentation and linguistic expression is acknowledged.‘

Signed

Date

COPYRIGHT STATEMENT

‗I hereby grant the University of New South Wales or its agents the right to archive and to make available my thesis or dissertation in whole or part in the University libraries in all forms of media, now or here after known, subject to the provisions of the Copyright Act 1968 I retain all proprietary rights, such as patent rights I also retain the right to use in future works (such as articles or books) all

or part of this thesis or dissertation

I also authorise University Microfilms to use the 350 word abstract of my thesis

in Dissertation Abstract International (this is applicable to doctoral theses only)

I have either used no substantial portions of copyright material in my thesis or I have obtained permission to use copyright material; where permission has not been granted I have applied/will apply for a partial restriction of the digital copy

Signed ………

Date ……… ………

DEDICATION

This thesis is dedicated to my parents, Dinh Thiem Nguyen and Thi Lien Doan, for nurturing me and teaching me to care about others

on the cooperation, generosity and courage of the sixty study participants who gave their time and shared their valuable opinions and sensitive information in the interviews

I owe a debt of gratitude to my supervisor, Associate Professor Rosemary Knight Without her mentorship, support, and depth of knowledge, this thesis would not have been completed Her calm, insights, compassion and elegant language were central to the conceptualisation, design, analysis and reporting of this thesis, as was her vision and ability to approach problems from a global perspective

My co-supervisors, Associate Professor Andrea Mant and Dr Quang Minh Cao were patient, thoughtful and encouraging Their critical comments and feedback were invaluable along every step of this project Their practical and consistent support has kept me going to the end of my PhD journey

Dr Husna Razee was my qualitative co-supervisor, whose experience and knowledge in qualitative research greatly contributed to the qualitative study for this thesis

My special thanks go to Dr Geoffrey Brooks for sharing his excellent knowledge of economics and Australian pharmaceutical policy and practice, and for taking me under his wing as my second father His critical feedback greatly improved the quality of this thesis

Support was also received from Dr Pat Bazeley who assisted me in developing the qualitative coding schemes, steered me through the perils of NVIVO and mixed methods research and fed me from her research farm

I am grateful to Mr Martin Auton (Global project officer - Pricing, Health Action International Global) and Ms Alexandra Cameron (Coordinator medicine pricing project, WHO) for their cross-analysis of the survey data and for giving me valuable comments on the quantitative study for this thesis Great thanks are also due to Mr Wayne Critchley (Former Executive Director, Patented Medicine Prices Review Board Government of Canada) for providing critical feedback on the policy analysis components of the thesis

My colleagues in the School of Public Health and Community Medicine at UNSW also provided great ideas and valuable comments, including Mr Kevin Forde, Dr Niahm Stephenson, Dr Ilse Blignault, Dr Brahmaputra Marjadi, and Dr Joanne Spangaro I would like to thank my former supervisor, Associate Professor Tessa Ho, for her warm encouragement and caring, even when she was not able to supervise me due to her move

to another university Sincere thanks to my fellow PhD students who shared with me both my frustration and happiness, especially Dr Keith Masnick

My wife Thu Ha Dang, my daughter Thanh Mai Nguyen and my son Dang Nhat Minh Nguyen are my life Without their love, encouragement and support, I would not have had the strength and determination to pursue my dream

TABLE OF CONTENTS

DEDICATION III ACKNOWLEDGEMENTS V LIST OF PUBLICATIONS ARISING FROM THIS RESEARCH XIV LIST OF TABLES XV LIST OF FIGURES XVII GLOSSARY/ACRONYMS XVIII ABSTRACT XX

CHAPTER 1 INTRODUCTION 1

1.1 BACKGROUND 1

1.2 AIM AND OBJECTIVES 3

1.3 RESEARCH DESIGN AND METHODOLOGICAL CONSIDERATIONS 5

1.3.1 Overall research design 5

1.3.2 The rationale for a mixed methods approach 6

1.3.3 Researcher background and orientation to the study 6

1.3.4 Currency used in this thesis 7

1.4 FLOW OF RESEARCH AND INTERCONNECTION OF CHAPTERS 8

CHAPTER 2 MEDICINE PRICES, PRICING POLICIES AND PATIENT ACCESS: A REVIEW OF THE INTERNATIONAL LITERATURE 11

2.1 INTRODUCTION 11

2.2 NATIONAL MEDICINES POLICIES AND ACCESS TO MEDICINES 12

2.2.1 Rational selection and use of essential medicines 14

2.2.2 Sustainable financing 15

2.2.3 Reliable health and supply systems 16

2.2.4 Affordable prices 17

2.3 MEDICINE PRICES AND THEIR DETERMINANTS 18

2.3.1 The pharmaceutical market 18

2.3.1.1 A market with unique features 18

2.3.1.2 A market with conflicting objectives 19

2.3.1.3 A heterogeneous market 20

2.3.2 Pharmaceutical expenditure 22

2.3.3 The determinants of medicine consumption 22

2.3.3.1 Physicians‘ prescribing behaviour 23

2.3.3.2 Patient demand 24

2.3.4 The determinants of medicine prices 25

2.3.4.1 The costs of research and development, manufacturing and marketing 26

2.3.4.2 Degree of market competition 28

2.3.4.3 Pharmaceutical market intelligence 30

2.3.4.4 Market size and economies of scale 30

2.4 POLICY OPTIONS FOR COST CONTAINMENT OF MEDICINES 30

2.4.1 Overview of price controls 30

2.4.1.1 External price benchmarking 33

2.4.1.2 Internal reference pricing 35

2.4.1.3 Cost plus pricing 36

2.4.1.4 Pharmaco-economic evaluation 37

2.4.1.5 Price negotiations 39

2.4.1.6 Profit ceilings 39

2.4.2 Price controls along the supply chain 40

2.4.2.1 Price controls at ex manufacturer/ex importer level 40

2.4.2.2 Price controls at wholesale and pharmacy retail level 41

2.4.3 Reimbursement measures 42

2.4.3.1 Positive list or formulary systems 43

2.4.3.2 Reference price systems 44

2.4.3.3 Index pricing systems 46

2.4.3.4 Co-payments 46

2.4.3.5 Generic substitution 49

2.4.3.6 Other measures influencing demand 50

2.4.4 Evaluation of pricing and reimbursement policies 51

2.5 STUDIES ON MEDICINE PRICES IN DEVELOPING COUNTRIES 53

2.5.1 International studies 53

2.5.2 Vietnam studies 56

2.5.3 Conclusions 60

CHAPTER 3 VIETNAM’S HEALTH CARE AND PHARMACEUTICAL SYSTEM, AND ITS IMPACT ON MEDICINE PRICES 63

3.1 INTRODUCTION 63

3.2 VIETNAM‘S TRANSITIONAL HEALTH CARE SYSTEM 63

3.2.1 Vietnam‘s health performance 63

3.2.2 Historical background 64

3.2.3 The ―Doi Moi‖ economic reforms 64

3.2.4 Health insurance and subsidization for the poor 65

3.2.5 National Medicines Policy 66

3.2.6 Administrative health care structures 67

3.2.7 An emerging private health sector 69

3.3 DEMAND FOR MEDICINES 70

3.3.1 Epidemiological patterns and lifestyle changes 70

3.3.2 Health care financing 71

3.3.3 Use of medicines 73

3.4 SUPPLY OF MEDICINES 74

3.4.1 Importation of medicines 75

3.4.2 Domestic medicine production 76

3.4.3 Medicine distribution 79

3.4.3.1 Vietnam‘s pharmaceutical importers 81

3.4.3.2 International pharmaceutical distributors and their foreign direct investment logistics companies 82

3.4.3.3 Private pharmaceutical wholesalers and distributors 82

3.4.3.4 Retail medicine outlets and hospital pharmacies 83

3.4.3.5 Hospital tender procedures and practices 85

3.4.3.6 Supply of medicines by medical practitioners 86

3.5 IMPLICATIONS FOR MEDICINE PRICES 86

3.5.1 Ineffective governance 87

3.5.2 A poorly organized and internationally dependent market 87

3.5.3 Market imperfections 88

3.5.4 The role of public health insurance in containing medicine prices 89

3.6 CONCLUSIONS 90

CHAPTER 4 AVAILABILITY AND AFFORDABILITY OF MEDICINES IN VIETNAM 93

4.1 INTRODUCTION 93

4 2 METHODS 93

4.2.1 Sampling 93

4.2.2 Medicines surveyed 94

4.2.3 Data collection and entry 96

4.2.4 Data analysis 96

4.3 RESULTS 98

4.3.1 Medicine availability 99

4.3.2 Medicine prices 99

4.3.3 Affordability 101

4.3.4 Variation across regions 102

4.3.5 International comparison 103

4.3.5.1 Medicine availability 103

4.3.5.2 Medicine prices 104

4.3.5.3 Affordability 107

4.4 DISCUSSION 107

4.5 CONCLUSIONS 111

CHAPTER 5 MEDICINE PRICING POLICIES IN VIETNAM 113

5.1 INTRODUCTION 113

5.2 METHODS 113

5.3 RESULTS 114

5.3.1 Context of medicine pricing regulations in Vietnam 116

5.3.2 The price declaration and publication of medicine pricing policies 118

5.3.2.1 The reasonableness of declared prices and published prices 118

5.3.2.2 Other declaration and publication provisions 121

5.3.3 Other pricing provisions 122

5.4 DISCUSSION 123

5.4.1 The reasonableness of declared prices and published prices 123

5.4.2 Declaration and publication provisions 125

5.5 RECOMMENDATIONS 127

5.6 CONCLUSIONS 128

CHAPTER 6 ROOT CAUSES OF HIGH MEDICINE PRICES IN VIETNAM 129 6.1 INTRODUCTION 129

6.2 METHODS 129

6.2.1 Method selection 129

6.2.2 Participant recruitment 130

6.2.3 Interview instruments 131

6.2.4 Ethical issues 134

6.2.5 Data collection and analysis 135

6.2.5.1 Data collection 135

6.2.5.2 Data analysis 136

6.2.6 Data presentation 137

6.3 RESULTS 138

6.3.1 Participant characteristics 138

6.3.2 Factors influencing medicine prices 139

6.3.2.1 Patent and monopoly 139

6.3.2.2 Market intelligence 140

6.3.2.3 Market size and economies of scale 140

6.3.2.4 Source and quality of medicines 141

6.3.2.5 Informal payments 142

6.3.2.6 Other components of the final price of medicines 144

6.3.2.7 Ineffective control by government 146

6.4 DISCUSSION 147

CHAPTER 7 WHY AND HOW INFORMAL PAYMENTS OCCUR 151

7.1 INTRODUCTION 151

7.2 OPPORTUNITY FOR CORRUPTION 151

7.2.1 Discretion 152

7.2.2 Transparency 153

7.2.3 Accountability 155

7.2.4 Enforcement 157

7.3 PRESSURES FOR CORRUPTION 160

7.3.1 Pharmaceutical market related factors 160

7.3.1.1 Product related factors 160

7.3.1.2 Sales representatives related factors 162

7.3.1.3 Regulation related factors 162

7.3.1.4 Survival in the market 163

7.3.2 Healthcare processes and structures 166

7.3.2.1 The tender system 166

7.3.2.2 The information system 168

7.3.2.3 The taxation system 168

7.3.2.4 The role of the private and public sectors 170

7.3.2.5 Remuneration systems and financial pressure 170

7.3.2.6 Workplace pressures 172

7.4 RATIONALIZATION OF CORRUPTION 174

7.4.1 The normalization of corruption 174

7.4.1.1 The prevalence of corrupt practices 174

7.4.1.2 Other social norms 175

7.4.2 Self-interest maximization 176

7.4.2.1 Professional ethics 176

7.4.2.2 Personal values 177

7.4.2.3 Knowledge and skills 178

7.4.2.4 Advancement opportunity 178

7.4.2.5 Reputation 179

7.4.2.6 Employment 180

7.5 DISCUSSION 180

CHAPTER 8 DISCUSSION AND POLICY RECOMMENDATIONS 185

8.1 INTRODUCTION 185

8.2 REVIEW OF THE RESEARCH OBJECTIVES 185

8.3 SYNTHESIZED RESULTS OF THE RESEARCH 187

8.3.1 Vietnam‘s medicine prices and availability problems 187

8.3.2 Reasons for unaffordable medicine prices in Vietnam 188

8.3.2.1 Selection of medicines 188

8.3.2.2 Use of medicines 188

8.3.2.3 Pharmaceutical pricing regime 189

8.3.2.4 Pharmaceutical procurement system 191

8.3.2.5 Patent and monopoly issues 192

8.3.2.6 Government taxes and duties 193

8.3.2.7 Financing 194

8.3.2.8 Pharmaceutical distribution network 194

8.3.2.9 Corrupt Practices 198

8.4 POLICY RECOMMENDATIONS 200

8.4.1 Rational selection and use of essential medicines 200

8.4.1.1 Rational selection 200

8.4.1.2 Rational use 201

8.4.2 Affordable prices and sustainable financing system 201

8.4.2.1 Strengthening the current pricing regime 201

8.4.2.2 Adoption of a national generic medicines policy 205

8.4.2.3 Improvement of public sector procurement of medicines 206

8.4.2.4 Reduction or elimination of duties and taxes 207

8.4.2.5 Use of WTO/TRIPS flexibility 207

8.4.3 Supply and distribution system 208

8.4.4 Systems improvement to minimize the opportunity for corruption 208

8.5 CONTRIBUTION OF THE THESIS 210

8.6 CONCLUSION 211

REFERENCES 215

APPENDIX 1: MEDIAN PRICE RATIO OF INDIVIDUAL INNOVATOR BRAND MEDICINES IN THE PUBLIC PROCUREMENT SECTOR, PUBLIC SECTOR, PRIVATE SECTOR, AND OTHER SECTOR (NOT-FOR-PROFIT PUBLIC SECTOR) IN VIETNAM IN 2005 239

APPENDIX 2: MEDIAN PRICE RATIO OF INDIVIDUAL LOWEST-PRICED GENERIC MEDICINES IN THE PUBLIC PROCUREMENT SECTOR, PUBLIC SECTOR, PRIVATE SECTOR, AND OTHER SECTOR (NOT-FOR-PROFIT PUBLIC SECTOR) IN VIETNAM IN 2005 241

APPENDIX 3: MEDICINE PRICING POLICY IN VIETNAM: DOCUMENTARY ANALYSIS FRAMEWORK 243

APPENDIX 4: SAFETY AND RISK MANAGEMENT STRATEGY 246

APPENDIX 5: INFORMED CONSENT 247

LIST OF PUBLICATIONS ARISING FROM THIS

RESEARCH

Nguyen AT, Knight R, Mant A, Cao QM, Auton M (2009) Medicine prices,

availability, and affordability in Vietnam Southern Med Review, 2 (2): 2-9

(Chapter 4)

Nguyen AT, Knight R, Mant A, Cao QM, Brooks G (2010) Medicine pricing policies:

Lessons from Vietnam Southern Med Review, 3 (2): 12-19

(Chapter 5)

Nguyen AT, Knight R, Razee H, Mant A, Cao QM (2010) Root causes of high

medicine prices in Vietnam – A qualitative study Pharmacy Practice (Internet), 8

(Suppl.1): 50-51

(Chapter 6 and Chapter 7)

LIST OF TABLES

Table 2.1 Factors influencing prescribing behaviour by level of analysis 24 Table 2.2 Prices of 100 tablets of Zantac 150mg in 1998 (in US dollars) 57 Table 4.1 Basket of 42 medicines surveyed in Vietnam in 2005 94 Table 4.2 Mean availability and ranges for IBs and LPGs by sectors for 42

medicines surveyed in 2005 in Vietnam 99 Table 4.3 Median price ratio of IBs, LPGs in public procurement sector,

public sector, private sector, and other sector (not-for-profit public sector) in Vietnam in 2005 100 Table 4.4 Median price ratio of IBs, LPGs on the current Essential Medicine

List in the public procurement sector, public sector, private sector, and other sector (not-for-profit public sector) in Vietnam in 2005… 101 Table 4.5 Mean percentage availability of individual lowest-priced generic

medicines in Vietnam, in comparison with the average of country-level mean percentage availability of individual lowest-priced generic medicines in the WHO Western Pacific Region……… 104 Table 4.6 Median price ratios of the public procurement prices, public patient

prices, private patient prices for LPG medicines, and private patient prices for IBs in Vietnam in comparison with those

in the Western Pacific Region in 2004 106 Table 4.7 Number of days‘ wages of the lowest-paid unskilled government

worker needed to purchase a course of treatment in Vietnam

in comparison with those in the Western Pacific Region in 2004 107 Table 5.1 Legislative and sub-legislative documents from January 1989 to

March 2008 influencing medicine prices in Vietnam 115 Table 5.2 Price declaration provided to the Drug Administration of Vietnam

by the registrant Company A for medicine X 121 Table 5.3 Summary of preconditions of declaration and publication

mechanism used in Vietnam pricing regulations 122

Table 6.1 Characteristics of participants 138 Table 7.1 Matrix of intervening factors for corrupt practices in the model 183

LIST OF FIGURES

Figure 1.1 Overall research design 5 Figure 2.1 WHO‘s access framework 14 Figure 2.2 Marketing costs in comparison with other costs in the OECD

pharmaceutical industry, 1973-89 27 Figure 3.1 Structure of the health care system of Vietnam 68 Figure 3.2 The pharmaceutical supply chain in Vietnam 74 Figure 4.1 Differences in affordability of a treatment for an acute respiratory

infection and a one-month treatment for a chronic peptic ulcer between therapeutic classes, types of medicines and sectors in Vietnam 102 Figure 4.2 Mean percentage availability of lowest-priced generic medicines in

Vietnam, in comparison with the average of country-level mean percentage availability of lowest-priced generic medicines in the World Bank low-income group and the WHO Western Pacific Region (WPR)……… 103 Figure 4.3 Median price ratio in public procurement for LPG medicines in

Vietnam in comparison with those in the World Bank low-income group and the WHO Western Pacific Region 105 Figure 6.1 The staged approach to price components 133 Figure 6.2 The pharmaceutical management cycle 134 Figure 6.3 Example of the component price structure of an imported medicine

sold in the hospital market 144 Figure 6.4 Model of interaction of factors causing high medicine prices in

Vietnam 149 Figure 7.1 A new theoretical framework of corruption in Vietnam‘s health

sector 181 Figure 7.2 The Trade-off model of corrupt behaviours in the collusion between

prescribers and pharmaceutical companies in Vietnam 182

CIF Cost Insurance and Freight

CPI Consumer Price Index

CHS Commune Health Station

DTC Drug and Therapeutic Committees

EML Essential Medicines List

FDI Foreign Direct Investment

DAV Drug Administration of Vietnam

GDP Gross Domestic Product

GMP Good Manufacturing Practice

GP General Practitioner

GPP Good Pharmacy Practice

GSP Good Storage Practice

HAI Health Action International

INN International Non-proprietary Name

IP Intellectual Property

LPG Lowest-Priced Generic

IRP International Reference Price

MOF Ministry of Finance

MOH Ministry of Health

MOIT Ministry of Industry and Trade

MPR Median Price Ratio

MSH Management Sciences for Health

NDP National Drug Policy

NMP National Medicines Policy

NPB National Pricing Bureau

NSAID Non-steroidal anti-inflammatory drug

OECD Organization for Economic Co-operation and Development OTC Over – The – Counter

PBS Pharmaceutical Benefit Scheme

PPP Purchasing Power Parity

PPRI Pharmaceutical Pricing and Reimbursement Information PPRS Pharmaceutical Price Regulation Scheme

QALY Quality Adjusted Life Years

R&D Research and Development

TRIPS Trade Related Intellectual Property Rights

US United States of America

USD United States Dollar - Currency

VAT Value Added Tax

VCAD Vietnam Competition Administration Department

VND Vietnam Dong – Currency

VHW Village Health Worker

VSS Vietnam Social Security

WHO World Health Organization

WPR Western Pacific Region

WTO World Trade Organization

ABSTRACT

Availability of affordable medicines is one precondition to realizing the fundamental human right of access to essential healthcare Although Vietnam is progressing well with several health-related targets of the Millennium Development Goals being achieved ahead of time, attaining equitable access to affordable medicines remains problematic

In this thesis, a mixed-method approach was adopted in the analysis of medicine prices and policies The literature was reviewed, followed by an analysis of Vietnam‘s pharmaceutical market and legislation A quantitative study of medicine prices, and a qualitative study on how and why high, unaffordable prices occurred, were conducted The findings were synthesized to form policy recommendations

The studies demonstrated that medicine prices in Vietnam were unreasonably high Adjusted for Purchasing Power Parity in 2005, prices in the public sector were 46.58 times the international reference price for innovator-brand medicines and 11.41 times for the lowest-priced generic equivalents Monopoly of supply was an important cause

of high innovator-brand prices More complex, intrinsic features of Vietnam‘s healthcare system were also reported by key stakeholders as driving up prices Economic survival pressures, in an imperfectly competitive market, were said to force both pharmaceutical companies and prescribers to be inextricably linked financially Ethics and personal values however did influence prescribers‘ behaviour and their response to corrupt procedures Overall, intractable, systemic features contributing to high prices included unrealistic low salaries for prescribers, poor economies of scale in domestic production, inefficiencies in the local distribution network, malfunctioning pricing policies and a general lack of transparency and accountability in administrative procedures

A range of policy measures and changes are required to improve access to medicines in Vietnam Short-term recommendations include amendments to pharmaceutical policies, with better enforcement of current regulations Medium-term measures include the public health insurance system taking an active role in price setting, pooling procurement through a national tendering procurement system and reform of the

domestic market through rationalization with appropriate capital and technological investment to achieve improved efficiencies and economies of scale Longer-term goals include health system improvements to address poor governance, low remuneration of prescribers, with additional measures to limit the scope for corrupt practices

Chapter 1 Introduction

Health is recognized as a fundamental human right by international treaties and governments all over the world (WHO, 2001) In health care systems, medicines always play a crucial role Ensuring the availability of affordable medicines, therefore, is one of the preconditions for realizing this human right Providing access to affordable essential medicines in developing countries has become one of the Millennium Development Goals (i.e MDG 8E) (United Nations, 2008) However, it is estimated that one third of the world‘s population lack reliable access to essential medicines because they are too expensive (WHO, 2000a) The figure increases to 50 per cent in the poorest countries of Africa and Asia (WHO/WTO 2001)

Vietnam, as a developing country in the Western Pacific and South East Asia (World Bank, 2010), is no exception, with access to affordable medicines reportedly being problematic The aim of this thesis is to research medicine prices and pricing policies in Vietnam The thesis studies include a review of the relevant international literature, followed by an analysis of Vietnam‘s health care and pharmaceutical system and its impact on medicine prices A quantitative study of medicine prices examines the empirical evidence and is followed by an analysis of the legislative and regulatory framework that underpins medicine pricing policies An innovative qualitative study is conducted on how and why high, unaffordable prices occur in Vietnam The findings from the component parts of the thesis are synthesized to form policy recommendations, designed to ensure affordable medicines for Vietnam‘s population

1.1 Background

Vietnam‘s progress in health care is greater than would be expected from its development level Several health-related targets set under the Millennium Development Goals have been attained well ahead of time (World Bank, 2006) Yet Vietnam‘s total spending on health was between five and six per cent of gross domestic product (GDP) from 2000 to 2005 (WHO, 2008) Government health spending accounts for only a quarter of total expenditure, and the remaining three-quarters is drawn from

direct patient out-of-pocket payments (Lieberman & Wagstaff, 2009; Lindholm & Thanh, 2003; WHO, 2008) Some studies have reported that to meet health care costs, many poor households in Vietnam have to reduce essential consumption, sell assets and incur debt, threatening their future livelihood (Ladinsky et al., 2000; Segall et al., 2002)

Medicine expenditure accounts for a large component of total health care costs In 2005, Vietnam spent USD 3.18 billion on health (USD 1 = VND1 15,907.00), of which 53.3 per cent was for medicines, an almost threefold increase in absolute terms from 2000 (WHO, 2008) Rising prices for medicines have been reported to account for most of this increase (World Bank, 2007) From 2003 to 2004, prices of some medicines soared fourfold (Bộ Tài chính, 2004), and the medicine and health component of the consumer price index (CPI) increased by 13.8 per cent, almost double the CPI (GSO, 2009a) Maintaining medicine prices at affordable levels, therefore, would appear to be of critical importance to improving access to essential medicines in Vietnam

Prior to 1989, the Vietnam government heavily subsidized the health care system All health care services and medicines were supplied free of charge (Witter, 1996) A strict medicine price control strategy was in place (Simonet, 2001) Medicines, from central and local sources, were sold only via the public sector with one uniform price set by government throughout the country (MOH of Vietnam, 1987; The Council of Ministers, 1987) On 5 November 1987, joint Circular 28-TT/LB of the State Price Committee and the Ministry of Health was issued This provided a measure of flexibility in medicine pricing by permitting local sources to have a different designated price level within a price bracket set by the Ministry of Health

In 1989, the Vietnam government made important heath sector reforms The provision

of free medicines dispensed through the public health care system was replaced by a system of direct payment by patients (Larsson, 2003) Former restraints on the production and sale of pharmaceuticals were liberalized and private medical and pharmacy practices were legalized (Chalker, 1995) With the shift to free market pricing for medicines without government control, medicine prices were set as high as the market would bear, leading to higher medicine prices in Vietnam than in some other

1

Vietnam Dong: Vietnamese currency

countries, including developed nations such as Australia and New Zealand (Bala et al., 1998; Kuanpoth, 2007)

To remedy this problem, the Vietnam government introduced legislation to stabilize medicine prices Vietnam‘s Ministry of Health commenced drafting the first Pharmaceutical Law in 1997 This was finally enacted on 14 June 2005, after almost a decade of consultation, discussion, drafting and development The new law provided a comprehensive legislative framework for all aspects of the pharmaceutical sector, including specific medicine-pricing provisions A public health insurance system was also introduced Under these arrangements, health insurance coverage increased rapidly The level of reimbursement received for medicines under this program was a major factor easing the burden of increasing prices for medicines

Notwithstanding the significance of legislative measures, medicine prices in Vietnam have kept growing (Inspectorate of the MOH of Vietnam, 2007) Prices to patients for some medicines were up to ten times their imported prices (Trương Ngọc, 2007) Low compliance with medicine pricing regulations was also reported, with some medicines being sold at prices of up to 300 per cent more than the original declared price at the Vietnam Drug Administration (Inspectorate of the MOH of Vietnam, 2007)

Nevertheless, too little is known about the actual prices people pay for medicines in

Vietnam and how these prices are set and their impact Patients, and even government authorities dealing with medicines, often do not know what the lowest prices are and how they vary (Creese, 2003) In this context, the present research was conducted to provide comparable, evidence-based information on medicine prices and their impact, to better inform policy makers how to ensure affordable access to medicines for all of Vietnam‘s population

1.2 Aim and objectives

The overall aim of this research is to explore the factors influencing the price of medicines in Vietnam, and to develop feasible policy recommendations to achieve more affordable medicines in Vietnam Specifically, the thesis has the following objectives:

i) To analyze how demand and supply of pharmaceuticals in Vietnam impact on medicine prices;

ii) To assess the price, availability and affordability of a sample of medicines in Vietnam;

iii) To assess the effectiveness of medicine pricing policies that the Vietnam government has put in place to date; and

iv) To identify underlying factors causing high medicine prices in Vietnam

1.3 Research design and methodological considerations

1.3.1 Overall research design (Figure 1.1)

Medicine prices and pricing policies in Vietnam

To assess the effectiveness of the government‘s medicine pricing policies

To identify underlying factors causing high medicine prices in Vietnam

1 Briefly consider the

main features of Vietnam‘s

health care system

2 Review the process,

1 Explore the different price components when a medicine moves along the supply chain

2 Identify the dominant components of medicine prices and the underlying causes

To analyse the impact of

pharmaceutical demand and

supply in Vietnam on

medicine prices

To assess the price, availability, and affordability of medicines in Vietnam

Analyze the prices, availability and affordability of a sample of medicines in Vietnam

Aim To recommend feasible solutions for affordable medicine prices in Vietnam

ts Review of literature and

publicly available data

from the Vietnam

Government

Documentary analysis

Qualitative in-depth interviews

Medicine prices survey

methodology developed by the WHO/HAI

Synthesis of the findings from the four studies to develop policy recommendations

regulations and laws

2 Consultations with Vietnam medicine pricing authorities

Informants from Vietnam‘s pharmaceutical industry, government medicine pricing authorities and other stakeholders involved in the medicine supply chain

The Vietnam medicine prices and availability survey

1.3.2 The rationale for a mixed methods approach

A mixed-methods design was adopted in this study for three reasons The first was the nature of questions the study sought to answer, which is the most important basis for determining the approach to a project (Creswell, 2003) This study sought to analyse medicine prices in Vietnam, and to explain those prices, thus lending itself to the use of both quantitative methods for measurement and qualitative methods for explanation

The second reason was the complexity of the issues under investigation Medicine prices are complex and influenced by a diversity of factors (WHO & HAI, 2008) Medicine pricing policies range from direct price controls (maximum fixed prices, negotiated prices, international price comparisons and price cuts or freezes) to indirect approaches (profit regulation or reference or index pricing) (Mrazek & Mossialos, 2004) They may impact on medicine expenditure directly (e.g through price changes)

or indirectly (e.g through medicine use changes) (Aaserud et al., 2006) Meanwhile, many researchers contend that complex phenomena ―cannot be fully understood using either purely qualitative or purely quantitative techniques‖ (Teddlie & Tashakkori,

2003, p 17) Therefore, a mixed-methods approach was chosen as appropriate to obtain

a comprehensive and complete understanding of the complex problems being studied

Using the definition and classification of mixed methods designs provided by Creswell (2003), a sequential explanatory model was employed in this study It comprised an initial quantitative phase conducted to obtain empirical data on medicine prices and availability, followed by a second phase of gathering qualitative data to better understand the quantitative results This approach is the final reason for a mixed methods design of this study

1.3.3 Researcher background and orientation to the study

In qualitative research, the researcher is a special instrument for data collection, analysis and interpretation (Patton, 1990) A rigorous qualitative study therefore requires reflexivity and honest reporting of the role of the researcher (Liamputtong & Ezzy, 2005) Accordingly, a brief account is given here of the author‘s background, including

my relationships with key stakeholders, and the lens through which I designed the study, analysed and interpreted the qualitative data

I am a pharmacist with a Master of Pharmacy degree from Vietnam, specializing in pharmaco-economics and pharmaceutical management After five years working for multinational pharmaceutical companies in Vietnam, I became a researcher and university lecturer with a special focus on pharmaceutical marketing, pharmaceutical policy and medicine prices I had ten years working in the pharmaceutical sector (both industry and university) and this makes me known to a number of stakeholders in Vietnam‘s pharmaceutical market, many of whom are my friends or my former students When they became participants in this study, they treated me as a peer and confidant, rather than an outsider

Subsequently, I was invited by the Drug Administration of Vietnam to work as a drug appraisal specialist on the legislative sub-committee The sub-committee advises the Minister of Health on the granting of marketing licenses for medicines in Vietnam From this work, I gained insights into the pharmaceutical sector from the perspective of government and a pharmaceutical regulation authority This professional experience, together with my postgraduate studies led me to question whether medicine prices in Vietnam were influenced by the macro-environment (e.g broad government policies) or the micro-environment (e.g the company, suppliers, consumers, competitors, etc.) or both, and to what extent each element interacted with the other These questions in turn led to my research on medicine prices and pricing policies in Vietnam, of which the qualitative study forms one important component It is acknowledged that the researcher‘s professional background and experience in this field could potentially lead

to an element of investigator bias However, it could equally be argued that the insider knowledge gained by the researcher facilitated access to sensitive information and an understanding of what was required to be credible with all stakeholders, especially government

1.3.4 Currency used in this thesis

To facilitate better understanding, all money values in Vietnam Dong in this study were converted to the equivalent value in US dollars using the appropriate exchange rate As

a guide to relativities, the exchange rate (at February 2011) of USD 1 as equivalent to VND 20,000 is used, unless specifically indicated such as the purchasing power parity (PPP) adjustments for VND used in Chapter 4

1.4 Flow of research and interconnection of chapters

The thesis is organized into the following eight chapters:

Chapter 1, Introduction, provides the overall rationale for the thesis, introduces the

research topic and objectives, and positions the overall design of the research and methodological approaches This includes an outline of the researcher‘s background and perspective that informed the research Finally, the chapter outlines the thesis structure

Chapter 2, Medicines prices, pricing policies and patient access: a review of the

international literature, provides an overview of the international, academic

peer-reviewed literature and the ‗grey‘ policy literature, along with coverage of the work of major international organizations such as WHO and OECD on medicine prices, policies and their impact Specific research relating to Vietnam is also briefly reviewed in this chapter

Chapter 3, Vietnam‟s health care and pharmaceutical system, and its impact on

medicine prices, describes the Vietnamese health care and pharmaceutical system An

analysis is given of the process, characteristics and intrinsic features of both the demand and supply sides of the pharmaceutical market and implications for medicine prices

Chapter 4, Availability and affordability of medicines in Vietnam, assesses the prices,

availability and affordability of a sample of medicines in Vietnam, using established WHO/Health Action International methods and compares the results with those of other similar countries

Chapter 5, Medicine pricing policies in Vietnam, analyses the features, strengths and

weaknesses of the legislation and regulations determining medicine pricing policies in

Vietnam, and their impact on prices

Chapter 6, Root causes of high medicine prices in Vietnam, explores the contributing

price components arising as a medicine moves along the supply chain, identifying the dominant components and the underlying root causes of high medicine prices as reported by study participants

Chapter 7, Why and how informal payments occur, explores the reasons for corrupt

practices in Vietnam‘s health care and pharmaceutical sector, with particular reference

to the impact on affordable medicine prices A new theoretical explanatory model is proposed to account for the findings of the qualitative study, in relation to corruption

Chapter 8, Discussion and policy recommendations, sets out the main findings from

each chapter and then draws together the final conclusions and policy recommendations

Chapter 2 Medicine prices, pricing policies and patient

access: a review of the international literature

2.1 Introduction

In this chapter, the international literature on affordable medicine prices and corresponding pricing policies is reviewed A broad range of sources is used: the academic peer-reviewed literature that is both relevant and available; the ‗grey‘ policy literature on medicine prices and policies, including government directives and legislation; as well as research studies and seminal documents from influential international organizations, such as the World Health Organization (WHO) and the Organization for Economic Co-operation and Development (OECD) The scope of the literature review is intentionally wide and ostensibly all inclusive, to reflect the multi-dimensional nature of the problem of patient access to affordable medicines This approach also provides a broad platform of ideas and research upon which appropriate policy recommendations can be formulated to improve health outcomes in Vietnam The chapter is organized into six sections with this introduction section being the first

The second section provides an overview of national medicines policies which have three main objectives: improvement of access to essential medicines; assurance of medicine quality; and promotion of rational use of medicines A description of the WHO access framework follows This framework represents a useful international approach, providing an overview of some strategies to improve access to essential medicines in the Western Pacific Region, the region in which Vietnam is placed by the WHO

The third section focuses on medicine prices as an important determinant of affordable access to medicines It begins with an overview of the pharmaceutical market‘s characteristics A discussion follows on pharmaceutical expenditure as a function of medicine prices and the quantity of medicines consumed Finally, the section ends with

a review of the determinants of medicine consumption and prices

The fourth section is devoted to pharmaceutical pricing and reimbursement policies It provides a classification of policy options for cost containment and a review of the impact of pharmaceutical pricing and reimbursement policies on meeting health policy goals

The fifth section reviews studies of medicine prices and policies, with a focus on developing countries and with particular reference to Vietnam The chapter ends with the final section of conclusions

2.2 National medicines policies and access to medicines

Many countries have encountered significant problems in seeking to improve patient access to quality medicines These problems have included lack of access due to high prices and low affordability, poor quality, and irrational use The basic national medicines policy focused on improved access, quality and rational use of medicines, but individual countries were encouraged to develop their own locally appropriate national medicines policy In 1975, the WHO began to develop practical guides for member states in formulating national medicines policies The first guidelines were published in

1988 (WHO, 1988) They were updated in a second edition, issued in 2001 This edition focused on national medicines policy processes, strategies and options The aim was to ensure that safe and effective medicines of good quality are available and affordable to the population at large and that their use is rational and clinically appropriate

‗A national drug2

policy is a commitment to a goal and a guide for action It expresses and prioritizes the medium - to long - term goals set by the government for the pharmaceutical sector, and identifies the main strategies for attaining them It provides a framework within which the activities of the pharmaceutical sector can be coordinated It covers both the public and the private sectors, and involves all the main actors in the pharmaceutical field‘ (WHO, 2001, p 4)

2 The term ‗drug‘ was the terminology adopted at the time It has now been replaced by ‗medicines‘ in the current literature However, a number of countries, including Vietnam, still use the term ―drug‖ in relation

to their policies

However, access to medicines continues to be one of the biggest challenges confronting the global political agenda (WHO-EMRO, 2007) The United Nation‘s Millennium Development Goal 8E is to provide access to affordable essential medicines in developing countries (United Nations, 2008)

Access to medicines is a complex subject and is perceived, defined and measured in many different ways WHO‘s definition, incorporated in the Working Group on Access

to Essential Medicines of the UN Millennium Project, defines access to medicines as the percentage of the population who have ―access to a minimum of 20 of the most essential drugs‖, that are continuously available and affordable at a health facility or medicine outlet, within one hour‘s walk from the patient‘s home (UN Millennium Project, 2005,

p 27) This definition of access to medicines is conceptualised in terms of both financial and geographical access It is also used to assess the Millennium Development Goals indicator for access to medicines This definition of accessibility assumes that the efficacy and quality of medicines are assured, and that required knowledge and guidance are available to ensure proper use of these medicines (WHO-EMRO, 2007) Lack of access to medicines in developing countries relates to two classes of medicine

(UN Millennium Project, 2005) The first is a lack of access to new medicines This can

be because of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement that blocks access to newer essential medicines It can also arise because there are insufficient commercial incentives for the global pharmaceutical industry to develop new medicines to treat diseases associated with poverty, given the market-

driven nature of the industry The second is a lack of access to existing medicines

because of patients‘ inability to pay for them This reason is deemed ―the most frequently cited cause of inadequate access to medicines‖ in developing countries (UN Millennium Project, 2005, p 26) It is estimated that about 10 million lives per year could be saved by improving access to existing medicines and vaccines (WHO, 2004a)

A useful four-part framework has been developed by WHO and adopted by WHO‘s key partners as a tool to evaluate and improve access to essential medicines Figure 2.1 shows the interconnection between these four parts, which are considered inseparable and of critical importance To improve access to essential medicines, all four determining factors must be taken into consideration

Figure 2.1 WHO’s access framework Source: (WHO, 2004a, p 2)

2.2.1 Rational selection and use of essential medicines

According to WHO (2004a), from the thousands of medicines available in the market, fewer than 50 different ones are routinely used by individual health professionals This

is because a limited range of medicines can treat most common health problems for the majority of the population If a country with scarce resources carefully selects a small number of medicines that are the best combination of efficacy, safety and cost-effectiveness to meet priority health care needs, there could be ―better health care, better drug management, better use of financial resources and thereby greater access to care‖ (Quick, 2003, p 1)

This approach is underpinned by WHO‘s essential medicines concept (WHO-EMRO, 2007) Since first produced in 1977, the WHO Model Lists of Essential Medicines have been adopted by most WHO Member States (Executive Board WHO, 2001 cited in Laing et al., 2003, p 1723) In the Western Pacific Region, 27 out of 37 countries and areas (including Vietnam) have adopted the model as a basis for development of national lists of essential medicines (EMLs) (WHO-WPRO, 2005) Nevertheless, implementation has proved challenging The problems include: lack of confidence in the concept of essential medicines; misconception about essential medicines (e.g that they are cheap, of low quality and efficacy); lack of incentives for production and distribution of essential medicines; and the rare use of EMLs for medicine procurement, reimbursement or prescribing (ibid.)

Having national EMLs, however, is not sufficient to ensure their rational use (Laing, et al., 2003) Rational use is also influenced by the actions and attitudes of health care