Drug Whitelist and Pricing

According to some folks, in a “perfect world”, doctors prescribe and pharmacists dispense. Doctors earn only from consultation and pharmacists make a living from drug mark-ups, whether from sales or dispensing. Unfortunately, the world is not perfect. Our colonial masters saw it fit to let doctors and medical clinics dispense medicine to their patients, which actually ran counter to what was happening in the United Kingdom when we were still a colony.

And since then, doctors made a living out of both consultation and the dispensing of drugs here. I stress, it is dispensing and not sales, since we are not allowed to “sell” medicines to persons who were not our patients and only allowed to dispense medicine to persons with whom we have a doctor-patient relationship. And this even applies to Over-The-Counter (OTC) drugs.

Despite the fact that doctors are allowed to dispense medicines and derive some profit from it, it is not a carte blanche. There is always competition from pharmacies and patients have a choice. Patients can always decide to take a prescription from a doctor and get it filled at the pharmacy, especially if the price of the dispensed drug is higher than the pharmacy price. This is already happening as many Singaporeans get their chronic medication prescriptions filled across the border in Malaysia, where medicines are cheaper due to territorial pricing practiced by many pharmaceutical companies.

And before the Competition Commission of Singapore in their infinite wisdom decided to outlaw the SMA’s Guideline of Fees, the SMA actually put out guidelines on how to mark-up medicine prices. The Hobbit has reproduced these withdrawn Guideline on Medicine Fee which was issued in 1998 in the second section of this post (which in turn was reproduced in the June 2001 issue of the SMA News that is available on the SMA website).

But the hard truth remains:- GPs in the private sector have never been able to make a living just from consultation fees alone, and their earnings are significantly augmented by dispensing activities.

So the recent informal discussions between the bureaucrats and various GP leaders and PCNs (Primary Care Networks) have resulted in a lot of angst and unhappiness. The main point of contention is the (draft) Drug Whitelist and the price-caps for each drug in the Whitelist. Those GPs who have seen this list have largely come to the conclusion that if they followed the price-caps, it would result in a very significant loss of earnings for them. The counter-argument is that the loss of dispensing earnings would be offset by various payouts from MOH for managing what are called these “chronic enrollees” appropriately.

Most GPs unfortunately remain unconvinced by this counter-argument. From the GP’s perspective, the reasons for the scepticism are at least three-fold:

• A bird in the hand is worth two in the bush. The GPs are now earning decent margins from dispensing activities, while participating in the treatment of chronic enrollees will definitely lead to an erosion of margins and loss in earnings. The GP has got to earn more money from MOH payouts from other Healthier SG activities to address this loss in earnings. To qualify for these payouts that range from $130 to $180 a year for each chronic enrollee, several milestones have to be reached. These are reasonable milestones from a clinical standpoint, but the reaching of these milestones require the full cooperation of the patient. And as any experienced GP will tell you, patients may not cooperate with you fully for a host of reasons best known to the patient. There is therefore much uncertainty in this.

• There is no guarantee from any other party as to the number of new enrollees each GP will get. Participation is strictly voluntary for the patient. MOH or the clusters will not forcibly assign any new patients to any GP. In the worst-case scenario, a GP may get no new patients and his existing patients are converted into Heathier SG chronic enrollees and hence subjected to strict price-caps when whitelisted drugs are used. In effect, a GP is subjected to unilaterally offering price guarantees without a corresponding guarantee of any significant increase in business volume from other parties. (Unfortunately, repeated expressions of “don’t worry” do not amount to a business guarantee in real life)

• The GPs think they know their business better than anyone else and therefore they think they are right. (The counter-argument suggests that the bureaucrats think they know the GP’s business better). And what is worse, should the GP be right, no one will compensate them for the loss in earnings. In other words, they bear most, if not all of the business risk of this grand endeavour.

In conclusion, to the GP, the price-caps of whitelisted drugs, as it stands now, represents a very high-risk venture with probably a limited potential upside.

My Chinese teacher once said this to my class – people may risk their lives to take part in very lucrative but illegal businesses (like drug-trafficking), but no one will take part in businesses that will in all probability lose money.

As the current design of the whitelist stands, the patient stands to benefit a lot while MOH meets all its KPIs and strategic goals. Unfortunately, it appears that one rather important aspect has been not taken into adequate consideration, which is how the GPs benefit from this.

Because we GPs are simple folks thinking simple strokes), it’s rather simple to see what is important to the GP, (assuming quality healthcare is given to their existing patients already):

1. Do you give me assured business leading to increase business volume and revenue?
2. Do you increase my earnings?
3. Does participating in your scheme cost me much (Not just money, but in terms of time and effort as well)?
4. How much business risk do I bear in this endeavour?
5. Do I keep my business and professional autonomy?

Of course, we don’t expect all of these above considerations to be in our favour and there is a lot of give and take. For example, if you guarantee me extra business at no business risk, I don’t mind sacrificing some of my autonomy and even investing a bit here and there to upgrade my practice, say, on the IT side.

But if I cannot be assured of an increase in earnings and yet have to put in a lot of effort, such as keeping two sets of stocks and dispensing records as well as financial accounts for Healthier SG and non-Healthier SG patients for the same whitelisted drug, (as is what is being proposed now), then it is quite likely that I will decline to participate. Especially when I am stuck in my 680 square-foot HDB shophouse practice and I really, really have no space or manpower for this kind of fancy logistic and accounts management. (This hobbit has this strong suspicion that whoever came up with this has never been to a HDB estate to see a GP in his/her life and this person should be sent to Tengah New Town to oversee a setting up of a GP practice as part of his private sector and/or community engagement posting).

Therefore, I would rather keep my bird in my hand than to go for the two in the bush. As it is, my bird is a rather small one already, (compared to my specialist colleagues), I cannot afford to lose this one little bird while hoping to find others in the bush. In other words, I am very risk-adverse.

Finally, there is a saying by Lao-tzu (attributed as the founder of Taoist philosophy) that goes like this, “If the water is too clear, there is no fish”. Perhaps the water is indeed too clear with the Drug Whitelist and price-caps, and the fish are unwilling to come out and be seen.

Indeed, if you compare the price-caps, allowed percentage markups and margins of the Drug Whitelist with the withdrawn 1998 SMA Guideline on Medicine Fee, you will realise in many cases, the 1998 Guideline offered a better deal for even the very low-cost medicines then than what is allowed 25 years later, for the GPs treating chronic-tier enrollees. And it bears remembering that in the nineties, my bowl of mee pok only cost $2 in Houseman Canteen, SGH.

SMA Guideline on Medicine Fee (Issued in 1998, Withdrawn in 2007)

a) The price of medicine to the patient should be comparable to what he would have to pay, if he were to choose the prescription at a pharmacy instead.

b) Prices comparable to those charged at a pharmacy are an acceptable upper limit. When this is not known, the following are some suggested acceptable alternatives:

1. When the price of the medicine is listed in a drug index such as DIMS, the list price of the single-user pack size can be used.
2. When the above is not available, the list price quoted by the manufacturer or the distributor can be used. When this list price is not available, up to 1.25 times the nett price for the single-user pack size is acceptable.
3. Where neither the list nor nett prices of the single-user pack size is available (e.g. bulk-packed medicine). Up to twice the per-unit cost of bulk-packed medicine is acceptable.
4. For very low-cost medicine, a rounding up to 10 cents per tablet/capsule, $1.50 per 5g of cream, or $1.50 per 30ml of mixture, is acceptable. Alternatively, a rounded-up charge of $2 per each medicine dispensed for up to a week, is acceptable.

c) The patient retains the right to choose whether to fill the prescription in the clinic, or externally at a pharmacy.