CORRUPTION AND HIGH MEDICINE PRICES IN VIETNAMCORRUPTION AND HIGH MEDICINE PRICES IN VIETNAMA QUALITATIVE STUDYA QUALITATIVE STUDY

Tuan Anh Nguyen, Rosemary Knight, Andrea Mant, Minh Quang Cao, Husna Razee

Our medicine price survey (WHO/HAI approach)

Median price ratio of Innovator Brands and Lowest Priced Generics in different categories and sectors in Vietnam in 2005

Medicine type

Public procurement prices Public sector prices to

outpatients

Private sector prices to

outpatients

Public sector prices to

inpatients

Adjusted for official exchange rate in 2005

Adjusted for Purchase Power Parity of VND in 2005

IBs 8.29 46.58 44.61 38.88

LPGs 1.82 11.41 8.30 8.59

IBs: Innovator brands. LPGs: Lowest priced generics. VND: Vietnamese currency

BACKGROUNDBACKGROUND

METHODSMETHODS• In-depth interviews: 43 (37 individuals and 6 groups) • Combination of purposive and snowball sampling

– Initial informants: • Pharmaceutical industry: (Manufacturers; importers - wholesalers;

retailers - private pharmacies)• Government medicine pricing authorities

– Additional informants:• Prescribers and hospital pharmacists

• Data management and analysis: – All interviews: Recorded, transcribed, coded using NVivo 8 – Two stage analysis:

• Thematic analysis• Theoretically informed analysis

Model of interaction of reported factors causing high medicine prices in VietnamFDI: Foreign Direct Investment, WE: Western Europe, NA: North America

FINDINGSFINDINGS

Competition

Off-patent

products &

branded generics

Off-patent

products &

branded generics

Distributed by domestic

traders

Distributed by 3 FDI logistics companies

via their Vietnamese counterparts

Monopoly of suppliers

High retail prices of

medicines

High retail prices of

medicines

Patented innovator

brands

Patent Relative price inelasticity of demand

High wholesale

prices

No regulated retail mark-

ups

Information asymmetry

WE/NA source of medicines

Perceived high quality of medicines

Monopoly of

prescribers

Market intelligence

Market intelligence

Economies of scale

Economies of scale

Asian source of medicines

Asian source of medicines

Perceived low quality

of medicines

Perceived low quality

of medicines

Informal paymentsInformal

payments

Ineffective government control

Example of medicine price components for Example of medicine price components for one generic medicine one generic medicine

Cost, insurance, freight (CIF) price,

17%

Fixed costs such as

operation cost, salary etc, 14%

Mandated import fees, 2%

Cost to manipulate CIF price, 2%

Relationship building expenses, 5%

Kickbacks to hospital pharm dept, 5%

Commissions for prescribers, 40%

Profit, 15%

Cost, insurance, freight (CIF) price Fixed costs such as operational cost, salary etc

Mandated importation fees Cost to manipulate CIF price

Relationship building expenses Kickbacks to hospital pharm dept

Commissions for prescribers Profit

Why and how informal payments

occur?

Individual factors

Systemic factors

Professional ethics

Personal values

Reputation

Employment

Knowledge & skills

Self-interest maximization

Pharm. market factors

Pharm. market factors

Healthcare processes

and structures

Healthcare processes

and structures

Socio-cultural factors

Socio-cultural factors

Product related factors

Sale reps related factorsSurvival in the

market

Remuneration system

Taxation system

Tender system

Role of private sector

Societal norms

Prevalence of corruptionRegional

differences

Discretion Transparency Accountability Detection and enforcement

Poor governancePoor governance

Advancement opportunity

‘‘Trade-off’ model explaining corrupt behaviorTrade-off’ model explaining corrupt behavior

GovernanceGovernanceAssetsAssets Financial reward from

corruptionFinancial reward from

corruption

Professional ethics

Personal values Transparency

Accountability

Enforcement

Self-interest maximization

Salary

Employment

Remuneration system

Advancement opportunity

Opportunity for corruptionOpportunity

for corruption

RationalizationRationalization

Pressure for corruption

Pressure for corruption

Corruption in Vietnam’s

health sector

Corruption in Vietnam’s

health sectorNote: ‘Corruption’ in this context means

‘misuse of entrusted power for private gain’

Discretion

Prevalence of corruption

Societal normsReputation Knowledge &

Skills Normalization of corruption

Policy implicationsPolicy implications• Problems: Corruption – collusion between pharmaceutical

industry and physicians, the root causes of high med prices

• Solutions: To prevent collusion, 2 preconditions must be met:

– Prescribers confronting the trade-off: losing assets and financial gain

– Prescribers’ assets outweighing potential financial gain from corruption

1. Improve governance: Government

– appropriate controls on discretion: Clarifying decision making process via SOPs; dividing tasks; strengthening information systems

– transparency, accountability and enforcement: E-health; A contractual arrangement with individual medical practitioners

– Development of service delivery markets with automatically enforced accountability reform in health financing: government budget assigned to beneficiaries rather than healthcare providers

Policy implicationsPolicy implications2. Reduce financial gain from corruption: Pharmaceutical suppliers

– Quality of medicines: Bioequivalent requirement for drug registration

– Rationalization of local drug production and distribution network by tightening the criteria for license application and renewal:

• Good practices: GDP, GSP, GPP

• Minimum legal capitalization regulated gradually increased shorten the supply chain by removing all unproductive intermediaries

– Ethical criteria for drug promotion: developed and implemented as legislative regulation with strict sanctions for violations

– Promotion of pharmaceutical industry self-regulation: marketing code of conduct

Policy implicationsPolicy implications

3. Increase prescribers’ ‘assets’

– Enhancement of higher standard of professional ethics: strengthening medical ethics content in the undergraduate curriculum;

– Development and enforcement of health professional code of conduct:

– Enhancement of knowledge and skills: continuing education programs

– Most important is the establishment of a sufficient direct remuneration system, separate from ‘kickbacks’ and commission for pharmaceutical sales

AcknowledgementsAcknowledgements

• Ministry of Education and Training, Vietnamese government for providing a scholarship to TA Nguyen to undertake this study.

• The ICIUM 2011 organizing committee for providing a scholarship to TA Nguyen to attend this conference.