Healthcare: Who is subsidising whom?

In Political economy, Political governance, Public Administration on 12/10/2011 at 8:30 am

So, we the people, are going to get more help from the government; and in particular the Health Ministry will do more to help those suffering from chronic illnesses. My friend who suffers from a chronic illness will be hoping the government walks the talk.

He tells me that the cost of buying “unsubsidised” medicine in Johor Bahru is more or less the same as the same “subsidised” medicine bought from SingHealth via a polyclinic. As the price of the medicine bought from SingHealth is roughly half that charged by a private clinic here, he thinks that is why the govmin claims it is “subsidising” the medicine bought from SingHealth.

He thinks maybe the government’s medicine procurement policies are inefficient. How come a profit-making M’sian pharmist chain can match SingHealth’s prices? Or maybe that the government is paying the drug makers more so that they will make pills here and invest in R&D facilities here.

In other words, are polyclinic patients subsidising rich MNCs so that the government can boast of its success in attracting drug companies to set up pill-making plants and R&D facilities here? Their presence here, incidentally, boosts GDP growth and, indirectly, the bonuses of ministers and senior civil servants.

S’poreans have long asked where’s the subsidy in public housing? The government ties itself in knots, trying to explain where is the subsidy. So much so that many S’poreans don’t believe that there is such a subsidy.

So here’s another “subsidy” that should be queried by the public.

On a wider point, ordinary S’poreans should join the Opposition and activists in querying how the government defines any “subsidy”. We are unlikely to get straight answers, but the questioning ensures that they know that we are not daft.

  1. While the govt will offer all sorts of carrots (tax incentives, training/manpower grants, discounted land) to attract these projects, I know for a fact that they will not agree to any procurement agreements. In the ’80s Steve Jobs insisted that S’pore govt buy Apple computers in return for Apple setting up its plant here, but no deal.
    I suspect the cost difference between the meds could be due to other factors – higher overheads in Sg (rental costs, all that mgmt bloat at MOH/SingHealth/NHG/NUHS) and perhaps M’sia is getting patent-infringing generics from India while Sg is buying the original from big pharma.

  2. Asking ordinary Singaporeans to join the Opposition and activists to query how the government defines “subsidy” is a tall order. And made more improbable by the continued presence of the Internal Security Act.

  3. […] Vote for Change – Thoughts of a Cynical Investor: Healthcare: Who is subsidising whom? – CRISIS COMMUNICATIONS IN THE ERA OF SOCIAL MEDIA: Singapore General Elections 2011: Not an […]

  4. SG buying originals from big pharma. This is not totally true, they are providing originals not totally true, But Why? Should we need pay more costly medicine with what they call subsidy.
    I hope they will serious review the prices of their supplys and suppliers. Especially POLY CLINICS should review their sources of suppliers.

  5. Irony…sick?

    Who is actually subsidizing all those pensions and perks for the PAP ministers then?

    And they think they are better…all are blood money…phui on all of these parasites!

  6. If only your friend retire in JB (Batam also can) like what KBW advise, then he will be enjoying life. Instead he is taxing remaining brain cells on postulating about corporate practices, pharma industry, supply chain distribution, govt healthcare involvement and governance etc. Better for your friend to apply remaining brain cells towards mahjong to ward off dementia.

    Btw, having “real” subsidies means much higher govt expenditures, which means higher taxes — GST, ERP, COE income tax, corporate tax, stamp duties, property tax, less HDB “market subsidy”, etc etc. Maybe should start by increasing income tax and property tax from 2012 onwards.

  7. I can’t confirm but I have read past reports which describe how pharmaceutical companies charge different rates to different country, based on GDP level or standard of living measures. Classic case of producer maximization.

    The justification is that these companies would only invest in R&D for new drugs if there is supernormal (patent) profit to be earned. Hence, without prospects of insane return, no company would take the risk to invent new drugs. And when the patent expires, cheaper generic alternative would naturally emerge and future patient population will benefit greater.

    Chicken and egg story.

  8. The reason why the cost of medicine is higher in singapore is because of volume.

    Small population small volume the companies have to charge more to justify their businesses here

    Higher volume more efficient use of productive capacity of the manufacturing plant. Lower volume less efficient therefore higher cost.

    High cost and overheads and therefore businesses requires higher margin for operations

    It has less to do with. Government policies more to do with a small population.

  9. […] – ~from: Thoughts of a Cynical Investor~ […]

  10. Hello atans1, just dropping by your site today. As usual another thought provoking post there.

    4 out of 6 commenters on this post believe that there is a good reason why the same drugs cost more in SG compared to our neighbours in JB. The 30/70 division seems about right, but I feel it is the 70% are too trusting.

    To these 4 commenters specifically, we do not know specifically if 1) unit cost is higher, 2) overheads are higher, or 3) unit selling price is higher? Perhaps all of the above.

    When medicine in SG is claimed to be ‘subsidized’ but ends up costing higher than unsubsidized ones in JB, you have to wonder: who is being subsidized, the patient, the business or the property owner?

  11. I am not a supporter of the current government and it’s policy, but I am also not keen to believe that this is a single dimension problem, or specifically, that our government influences the pricing of medical treatment/ drugs in a big way for self profiteering.

    Different products sell at different prices, in different countries, for different reasons. Medicine is a highly specialized product line which enjoys inelastic demand (How many of us are willing to consume drugs from Malaysia?). These are observable facts (or theory if you are unwilling).

    Who do you think have a greater say in pricing? Consumer, government or producer? Pure economics say we probably have to pay more than Malaysians for medicine. Is that really hard to believe?

    As the consumer, I know it when I am being screwed. But more importantly, we need to know who is doing the screwing. If we are talking about housing, I’m with you.

    • You shouldn’t be trying to think up why this is so. There is asymaterical info. Govmin has info, we don’t.

      It should be for the govmin to give us enough info on how it defines its subsidy (or any subsidy) so that we can make a judgement.

  12. Below is a website to give you some insight to the subsidy of medicine

    Read the part before conclusion. however I believe the information us not updates but it is useful if you want to know how the system works.

    Basically medications are divided into standard and non standard. The standard medicine are those items that are subsidized. There is a list 1 and list 2. They have different subsidy. The non standard drugs are not subsidized but I’d the volume is big they will go through the tender process.

    There is no way to subsidize medicine and not allow the drug companies to earn more.

    Basically non stanfar

    • Actually some of us here want to know why, after subsidizing medicine and letting businesses earn more, citizens/residents still pay more than our neighbours in JB.

      It is not a given that drug companies will surely earn more from a government subsidy on medicine. Just as old NKF’s public donations did not flow directly to kidney dialysis patients. I recall KPMG worked out the direct subsidy to the patient was 10 cents for every dollar of donation. Where has the subsidy gone to this time?

      You need to relook your assumptions. I recommend learning arithmetics.

  13. Hi jonas
    Maybe you also should look at your assumptions.

    Do you know if the comparison is done with drugs from standard list1 2 or a non standard drug? What I gather from your post is a deep distrust for the government. Why don’t we gather some information and then make a judgement.

    Another interesting question to answer is how much subsidy is enough.

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