Rising medical costs in Malaysia: A complex challenge


MANY factors have led to Malaysia’s rising medical costs over the past decade. 

International Medical University’s professor of health economics, policy and management Datuk Prof Syed Mohamed Aljunid Syed Junid said this includes changes in supply and demand, doctors’ fees and the adoption of new equipment and technology. 

He said the cost components of medical services, including drugs, materials, equipment and investigations, have increased over the years. This has significantly contributed to the overall rise in healthcare expenses. Other factors, such as increasing drug costs and the adoption of more advanced equipment and technology, have also played a significant role. 

In terms of demand, the medical cost increase is linked to population health. Patients with chronic noncommunicable diseases (NCDs) require substantial healthcare resources, driving up costs. 

About one-third of patients have hypertension and roughly 75% of the elderly population have some form of comorbidity. Additionally, many Malaysians prefer to consult specialists over general practitioners (GPs), often seeking the best possible treatment. 

Dr Syed Mohamed said nowadays, with all the government facilities overcrowded, people tend to use private healthcare. 

Dr Syed Mohamed says nowadays, with all the govt facilities overcrowded, people tend to use private healthcare

“Even if a patient does not have chronic NCDs but is suffering from an acute condition, they will travel to a private hospital, despite the high cost, for speedier service,” he told The Malaysian Reserve (TMR). 

He noted that healthcare inflation in Malaysia is approximately three to four times higher than the general inflation rate. As a result, medical costs can rise significantly faster than the average person’s ability to pay, without some form of financial risk protection. 

To manage rising costs collectively, the healthcare sector has mechanisms to pool and distribute risks, allowing the population to manage clinical and financial risks. 

Meanwhile, Malaysian Medical Association (MMA) president Dr Azizan Abdul Aziz said approximately 60% to 70% of the population rely on public healthcare facilities. With public health services significantly subsidised by taxpayers, it gives them the reputation of being cost-effective. 

“To enhance transparency, the government should disclose the extent of these subsidies required to deliver care to the public, encompassing capital expenditure (capex). 

“This would enable the public to gain a comprehensive understanding of the financial aspects of the healthcare sector,” she told TMR. 

On healthcare spending trends, Dr Azizan said private hospitals are predominantly owned by government-linked companies (GLCs), government-linked investment companies (GLICs), foreign corporations and local conglomerates. 

She questioned the government’s authority to engage in negotiations with them. 

“While professional fees are subject to regulation, the operational expenses of hospitals are not. 

“To genuinely commit to reducing healthcare expenses, the government should initiate controls on real estate rental and land prices to keep costs in check,” she said. 

Govt Initiatives and Regulatory Actions 

Dr Syed Mohamed said government initiatives regarding the issue of rising medical costs are very little at the moment. 

On the supply side, he said there is minimal government intervention to encourage doctors to follow best practices, such as selecting cost-effective drugs and procedures. 

These best practices are not consistently monitored or enforced. For example, even with a list of government-recommended drugs, public clinics sometimes prescribe non-listed drugs, leading to higher costs. 

Furthermore, the government’s strategic procurement approach, which aims to secure services from providers capable of delivering high-quality care at affordable rates, is still in its early stages. 

Dr Syed Mohamed also highlighted that Malaysia currently lacks a nationwide healthcare financing programme and suggested for the government to consider implementing one. 

With this in place, individuals would not need to make direct payments to service providers when seeking healthcare. 

Instead, the scheme would set prices and cover costs. This approach would give scheme agencies greater influence when procuring services. 

Sharing this view, Dr Azizan suggested that the government concentrate on preventive measures. 

“By emphasising prevention, the expenses related to treatment can be notably diminished. Preventing illnesses is considerably more cost-effective than treating them,” she added. 

On the Health Ministry’s (MoH) Health White Paper (HWP), Dr Syed Mohamed said the ministry should focus on its primary functions, which encompass policymaking, regulatory activities and the provision of highly specialised services. 

“Meanwhile, other healthcare facilities should operate independently, self-sustaining and under the administration of separate agencies,” he said. 

The HWP tabled in June 2023 outlines a comprehensive plan for systemic and structural reforms to address challenges and ensure the country’s healthcare system’s sustainability, equity and resilience. 

It also sets the stage for a transformative journey in healthcare reform, with the ultimate goal of creating a more resilient and future-proofed healthcare system for the well-being of all Malaysians. 

One of the pillars in the paper is on Ensuring Comprehensive and Affordable Services, where a crucial reform entails a substantial increase in healthcare investment, targeting Universal Health Coverage and safeguarding individuals from financial risks during illnesses. The introduction of a dedicated health fund and value-based payment models aims to reduce out-of-pocket expenses. 

Duopharma is also manufacturing oncology drugs at its HAPI plant in Shah Alam to expand the availability of affordable cancer therapies

Pharmaceutical Perspective 

Malaysian Pharmacists Society president Amrahi Buang highlighted several primary factors that have led to the increase in medical costs. These include free markets in private facilities, no price control of medications and medical devices, fixed doctor fees that are bundled with medicines and lack of transparency. 

Meanwhile, Duopharma Biotech Bhd Group MD Leonard Ariff Abdul Shatar said the cost varies depend- ing on the organisations within the healthcare value chain. 

These include electricity costs where the government has increased the imbalance cost pass-through surcharge, increasing electricity cost of RM8 million to RM10 million per annum. 

Apart from that, human resources costs increased by between RM7 million and RM8 million per annum — attributed to the wage threshold for overtime which has doubled to RM4,000 per month since January 2023. This has added to the full-year impact of the increase in minimum wage to RM1,500. 

Lastly is the raw materials and freight rates. While there was a reduction in raw material costs, subsequent developments such as the ringgit’s weakness have increased pressure on Duopharma’s operational costs. 

Moving forward, the group plans to expand its consumer healthcare (CHC) product portfolio, largely driven by the group’s Flavettes Effervescent and diversifying into high-value biologics and niche products. 

Healthcare inflation in Malaysia is approximately 3 to 4 times higher than the general inflation rate. As a result, medical costs can rise significantly faster than the average person’s ability to pay, without some form of financial risk protection (pic: MUHD AMIN NAHARUL/TMR)

Transparency and Middlemen 

MMA disagrees with the current form of medicine price transparency, as GPs provide professional services. 

“Healthcare is not a retail business. It involves professional consultation and medicines are prescribed after careful and thorough medical evaluation. 

“Healthcare is highly regulated and there are professional standards to uphold. GPs are only allowed to dispense medicines to their registered patients,” Dr Azizan said. 

Meanwhile, Amrahi said there is no price control in medicines although the MoH makes an effort to share the prices on its website. On top of that, he said, private healthcare facilities are under the control of the Private Healthcare Facilities Act 1998. 

However, community pharmacies are not under the said Act as they are already under the control of five existing pharmacy-related laws — Registration of Pharmacists Act 1951, Poisons Act (Amendment) 2022, Sales of Drug Act 1952, Dangerous Drugs Act 1952 and Medicines Advertising and Sales Act 1956. 

Furthermore, he reiterated that middlemen in the medicines’ supply chain cause price differences along all distribution channels across the country. 

“Businessmen are pulling the strings rather than the practitioners,” he said. 

On the other hand, Duopharma commended the government’s effort to develop a price transparency mechanism that would require companies to reveal the selling prices of crucial medicines. 

However, although the drug price controls may create savings for patients in their healthcare expenses, it may also have an impact on industry earnings and investments down the line, which can impact the overall economy. 

“We believe that the policy will have to consider the cost pressures faced by pharmaceutical companies (and the healthcare value chain) when setting the price range,” Leonard Ariff said. 

Dr Azizan said while the government acknowledges the escalation of healthcare expenses, there is a notable lack of action when it comes to overseeing intermediaries, who impose unjustifiable administrative fees of 10%-15% on GPs and employers. 

She also noted that while the government discusses the escalation of healthcare expenses, it seems to be hesitant in addressing the issue of regulating third-party administrators in healthcare. 

Meanwhile, Amrahi acknowledged the issues related to overuse of healthcare services, unnecessary tests, as well as overprescription of medications which contribute to cost increases. 

Leonard Ariff says Duopharma has been taking steps to manage changes in the pricing regulation

Ensuring Affordable Access to Medical Care 

As a supplier to government-run hospitals and clinics, Leonard Ariff said Duopharma’s pricing structure is pre-determined by MOH’s Approved Products Purchase List (APPL). 

Furthermore, the increased operational costs would have to be taken into account for any revision. 

“We have been taking steps to manage changes in the pricing regulation. 

“We have been diversifying from our existing product portfolio focus and venturing into high-value biologicals and niche products as well as expanding our geographical footprint,” he said. 

To ensure affordable and wider access to medical care and products, Duopharma is also manufacturing oncology drugs at its highly potent active pharmaceuticals (HAPI) plant in Shah Alam to expand the availability of affordable cancer therapies. 

Addressing rising medical costs in Malaysia is a multifaceted challenge, requiring a comprehensive approach that involves preventive measures, cost control and increased transparency. 

As the government and healthcare industry work to find solutions, the ultimate goal is to create a resilient and sustainable healthcare system that benefits all Malaysians. The road ahead may be complex, but the focus remains on delivering accessible and affordable healthcare services to the nation’s population.

  • This article first appeared in The Malaysian Reserve weekly print edition