CORRUPTION AND HIGH MEDICINE PRICES IN VIETNAM
A QUALITATIVE STUDY
Tuan Anh Nguyen, Rosemary Knight, Andrea
Mant, Minh Quang Cao, Husna Razee
BACKGROUND
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
Adjusted for official
exchange rate in 2005
Public sector
prices to
outpatients
Private sector
prices to
outpatients
Public sector
prices to
inpatients
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
METHODS
• 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
FINDINGS
Patented
innovator
brands
Patent
Monopoly
of suppliers
Competition
Offpatent
products
&
branded
generics
Distributed
by
domestic
traders
Distributed by 3 FDI
logistics companies
via their Vietnamese
counterparts
High
wholesale
prices
Relative price
inelasticity of demand
No regulated
retail markups
WE/NA
source of
medicines
Perceived
high quality
of medicines
Monopoly
of
prescribers
Information
asymmetry
Market
intelligence
Economies
of scale
Asian
source of
medicines
Perceived
low quality
of medicines
Informal
payments
High retail
prices of
medicines
Ineffective government control
Model of interaction of reported factors causing high medicine prices in Vietnam
FDI: Foreign Direct Investment, WE: Western Europe, NA: North America
Example of medicine price components for
one generic medicine
Cost, insurance,
freight (CIF) price,
17%
Profit, 15%
Commissions for
prescribers, 40%
Fixed costs
such as
operation cost,
salary etc, 14%
Mandated
import fees, 2%
Cost to manipulate
Kickbacks to hospital
CIF price, 2%
pharm dept, 5%
Relationship building
expenses, 5%
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?
Professional
ethics
Pharm.
market
factors
Individual
factors
Personal
values
Reputation
Knowledge &
skills
Employment
Advancement
opportunity
Systemic
factors
Healthcare
processes
and
structures
Transparency
Remuneration
system
Taxation system
Tender system
Role of private
sector
Socio-cultural
factors
Self-interest maximization
Discretion
Product
related factors
Sale reps
related factors
Survival in the
market
Accountability
Poor governance
Detection and
enforcement
Societal norms
Prevalence of
corruption
Regional
differences
‘Trade-off’ model explaining corrupt behavior
Self-interest maximization
Governance
Assets
Discretion
Professional
ethics
Personal
values
Transparency
Reputation
Knowledge &
Skills
Accountability
Employment
Advancement
opportunity
Enforcement
Opportunity
for corruption
Remuneration
system
Rationalization
Salary
Pressure for
corruption
Financial reward from
corruption
Societal norms
Normalization of corruption
Prevalence of corruption
Corruption in
Vietnam’s
health sector
Note: ‘Corruption’ in this context means
‘misuse of entrusted power for private gain’
Policy 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 implications
2. 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 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
Acknowledgements
• 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.