The Philippines' health sector undergoing significant changes

The health care sector is experiencing a time of growth and adjustment. As the government proceeds with its goal of providing universal health care to the population, both the public and the private health sectors as well as pharmaceutical companies are modifying their systems and forward planning accordingly in order to align with governmental, regulatory and societal shifts.

Devolved System

In 1991 the Philippine Congress enacted the Local Government Code, devolving primary and secondary health services delivery from the Department of Health (DoH) to local government units (LGUs). Under this devolution, health care providers are divided along municipal, provincial and regional lines – 79 provinces, 143 cities and 1484 municipalities. LGUs are thus responsible for the provision of health care in their regions as well as the management of public provincial and district clinics and hospitals. Because the archipelago is diverse and the population scattered throughout the islands, decentralisation makes logical sense, but in practice has been marred by unequal access to nurses, doctors and other human and financial resources. A major issue has been the disintegration of the formerly integrated referral system that linked public health services and hospitals, a link that dissolved as the management of health facilities and programmes was shifted to LGUs. This has resulted in patients bypassing district-level health services and hospitals altogether, instead going straight to the DoH hospitals, which clogs and stretches the capacity of the already stressed DoH system.

Towards A Healthy State

Filipinos’ health outcomes have seen dramatic improvement in several areas since the early 1970s, with infant mortality dropping by two-thirds, the prevalence of communicable diseases falling and life expectancy increasing to more than 70 years, according to the Asia Pacific Observatory on Health Systems and Policies.

However, the maternal mortality ratio remains worryingly high at 94 per 1000 live births in 2008, and the country has a high incidence of tuberculosis (TB). Although the target for TB case detection rate has been met, the number of Filipinos with TB is high (the country ranked ninth worldwide for composite TB burden in 2003), and the threat of multiple-drug-resistant TB has increased.

In response, national policies have been put in place in the form of a Maternal, Neonatal and Child Health Programme, as well as a government strategy and action plan to address TB. The health care landscape is made more complex by a two-tiered disease burden. Over the last 50 years, the incidence of non-communicable diseases (NCDs) has steadily risen, and that of communicable diseases has fallen. Communicable diseases now make up the majority of the country’s causes of morbidity, while NCDs have become the leading causes of mortality.

The Philippines annual population growth rate, estimated at 1.9% in 2010, is one of South-east Asia’s highest. Improving family planning, therefore, offers a significant opportunity to close the gap between actual total fertility (three children per woman) versus the desired fertility rate (2.2 children per woman), according to USAID. Adding another layer to the health care system’s current burden, considerable inequities in health care access make health outcomes uneven, both among socio-economic groups and between rural and urban areas.

Development Goals

The Philippines performed well in the UN’s 2000-15 Millennium Development Goals (MDGs), achieving five of eight MDGs. It was judged neutral in one, but did not meet two goals: improving maternal health and achieving universal basic education. Following on the MDGs, work on achieving 17 sustainable development goals (SDGs) has been agreed by nations around the world. But given the Philippines’ limited resources and its lack of success on two of the MDGs, the government has indicated it will focus on just three of the 17 SDGs: improved universal health care, meeting poverty reduction and sustainable education – the last two SDGs being the MDGs it did not achieve. “For our case, because of limited resources and different levels of importance and intensities of problem, we just have to select the ones that are so crucial to our development efforts,” Socioeconomic Planning Secretary Arsenio Balisacan said in an October 2015 press briefing. “The goal we have is to develop specific targets and indicators associated with [the challenges we are facing]; many of these are also our concerns in the MDGs.”

Reform & Regulations

The DoH itself admits that the authority vested in the government’s various regulatory organisations has not yet been fully exercised. Despite a long record of efforts at reforming regulations and the financing and delivery of health services, as well as addressing the system’s inefficiencies and inequalities, implementation of reforms has been challenged by the devolved health systems as well as a large private sector, the combination of which can fragment and vary the quality of the country’s health services.

The government has declared that reliable access to quality medicines is a fundamental part of the human right to health. To ensure that Filipinos have such access, the Philippine Medicines Policy 2011-16 identified five foundations for the use and manufacture of pharmaceuticals in the Philippines. These are safety, efficacy and quality; affordability and availability; rational drug use; accountability and good governance; and health systems support.

Medicines

In addition, the Universally Accessible and Affordable Quality Medicines Act of 2008 declared it government policy to protect public health and to adopt measures to promote and ensure access to affordable quality drugs and medicines for all citizens, while the Food and Drug Administration Act of 2009 provides access to both patented and non-patented life-saving quality medicines. Both of these acts underpin the National Drug Policy, which had as its primary goal attaining and sustaining universal access to medicines by 2015.

The Generics Act of 1988 required the production of medicines identified by their generic names and required providers to write out prescriptions using generic terminology. The act has been credited with spurring the creation of a market for generic pharmaceuticals, shifting the balance of power from physicians to pharmacists and consumers. Consumers now have a choice of drugs to purchase, and many are choosing generics because they save as much as 85% versus the price of brand-name medicines. The Generics Act and the emergence of many private sector retail drugstore chains focused on generic medicine have expanded access to quality drugs. Competition has pressured even the long-established pharmacies to carry generics. Poor households who in the past have struggled to obtain such medicines have greatly benefited. This is because the majority – approximately 90% – of drug purchases are made out of-pocket and bought at the point of need, and since, historically, the Philippines has had one of the highest retail prices of drugs in Asia, poor patients have been unable to afford some medicines. “The new generics retailers are crucial in enhancing health care accessibility for the poorest sectors of society. In the past, the large established drugstores concentrated on expensive branded medicines, and mom and pop shops significantly increased the costs of supposedly cheaper drugs due to lack of competition in the market,”Teodoro Ferrer, president of Generika Drugstore, told OBG.

The Food and Drug Administration registers drugs, medical devices, in-vitro diagnostic reagents and cosmetics, among other substances. A licence to operate is required for importing, manufacturing, packaging, distributing, retailing or exporting any of these substances. Health maintenance organisations (HMOs) have long requested to be regulated by an appropriate government regulatory body, in order to overturn HMOs’ bad reputation caused by bad actors such as “fly-by-night” HMO operators.

On November 12, 2015, they finally had their demands met when an executive order was signed transferring regulatory control of HMOs from the DoH to the Insurance Commission (IC). All HMOs will now have to comply with requirements to instil greater operational efficiencies – including qualification and disqualification of HMO directors, officers and personnel – as well as provide better transparency and accountability of their operations.

“Becoming a regulated industry, especially that which is as volatile as ours, will send the right signals and drum up foreign investment interests given the enhanced confidence in the health sector and the overall HMO industry,” Carlos D. Da Silva, executive director of the Association Of Health Maintenance Organisations of the Philippines Incorporated. (AHMOPI), told OBG. “Legitimate HMOs should not fear regulation as it levels the playing field, opens up equal opportunities for players to excel and healthy competition will redound to better-quality and cost-effective products in the marketplace.”

Universal Health Coverage

In 1995 the movement towards a single-payer, premium-based financing insurance system was signalled by the establishment of the National Health Insurance Program, managed by Philippine Health Insurance Corporation (PhilHealth).

A 2010 reform effort aimed at achieving universal coverage aimed to increase the enrolment of poor families in PhilHealth, offer a more comprehensive benefits package, and reduce or eliminate co-payments. In November 2014, President Benigno Aquino signed Republic Act 10645, which granted automatic coverage of the full range of PhilHealth benefits to Filipino citizens aged 60 and over, with the national government paying their premiums. As of February 2015, PhilHealth membership was estimated at 81.63m beneficiaries, or about 82% of the country’s population of nearly 100m.

The government’s ultimate goal is to attain universal coverage by covering the remaining 18% of Filipinos who are not enrolled. It intends to achieve this by making registration easier, removing the need for certain documents, multiplying points of access and encouraging group enrolment.

Criticisms levelled at PhilHealth include its limited breadth and depth of coverage, which have resulted in high levels of out-of-pocket (OOP) payments. However, policies have been implemented to reduce the financial risk of becoming ill, such as expanding PhilHealth to cover more poor Filipinos, enhancing the benefits package and reforming provider payment systems to contain costs.

Acquisitions & Consolidation

The health care sector in the Philippines has seen active growth in mergers, alliances and acquisitions in the past year. A notable example is Metro Pacific Hospital Holdings, the health care arm of the Metro Pacific Investment Corporation (MPIC) Group of companies, which has been on something of a buying spree recently. In line with the company’s plans to acquire about a dozen hospitals in the country by 2019 to expand MPIC’s nationwide chain of private hospitals beyond Manila, it has purchased nine secondary and tertiary hospitals across the country. MPIC’s latest acquisition, the West Metro Medical Centre, will receive capital to complete an annex that will increase the hospital’s capacity from 110 to 190 beds, making it the largest private hospital in the Zamboanga Peninsula.

Meanwhile, the Philippines’ oldest conglomerate, the Ayala group of companies, has signalled its intention to set up close to 12 tertiary hospitals nationwide. During the company’s stockholders’ meeting in April 2015, Ayala president and CEO Fernando Zobel de Ayala said it is planning to increase its exposure in the health care sector in a bid to further growth. The health care business could be the next “major new growth area” for the conglomerate, Zobel said. Over the next five years, the conglomerate’s health care arm aims to build a chain of hospitals and satellite clinics under the QualiMed brand, including 10 QualiMed hospitals operating in mixed-use communities and 10 clinics located in various retail developments. In a related development, Spanish health insurance provider Sanitas Internacional has approached AHMOPI for possible collaborative initiatives, including the possibility of establishing an extensive network of high-quality health care providers throughout various regions of the Philippines.

Labour Distribution

The Philippines produces a huge number of health care sector workers; indeed, it is a major exporter of health workers worldwide. The Professional Regulations Commission licences approximately 2600 physicians, 67,000 nurses, 3900 midwives and 1400 medical technologists per year.

However, some rural and poor areas suffer from critical health worker undersupply because these workers are unevenly distributed around the country. Most health workers are concentrated in urban areas such as Metro Manila and other large cities. Attracting and retaining staff in under-served areas is therefore a significant challenge, and opinions differ on whose responsibility it is to address this. “If doctors are assured of a career and salary in provincial areas, which hospitals can strengthen though hardship adjustments or incentives, there will be more be human capital willing to move outside of Metro Manila,” Dr. Edwin Mercado, president and CEO of Qualimed Health Network, told OBG. “Currently, it is not viable to build beds for the provincial market, and most developers continue to concentrate on urban centres.”

Indicative of this urban-rural mismatch – and difference in opinion – is the question of whether the country is currently suffering from a lack of physicians. In early 2014, the Philippine Medical Association (PMA) warned the country would suffer from a shortage of physicians as the population inches towards 100m. While the generally accepted ratio for a healthy populace is one doctor per 100 people, the Philippines has only 70,000 active PMA members, PMA president Leo Olarte asserted.

The secretary of health, Enrique Ona, disputed PMA’s claim, however, citing not a shortage but a “maldistribution” of physicians in the country caused by most doctors preferring to practice in urban areas. Ona cited a DoH incentive programme under which doctors are assigned to rural areas were paid P54,000 ($1198) to P60,000 ($1320) a month, while admitting that in rural areas, doctors may earn as little as P25,000 ($555) during the same time period. Olarte blamed the decrease in doctor numbers on the 1991 devolution to LGUs and called for the reversion of the health sector to DoH supervision because “health is not a priority for many local leaders”. But in Ona’s reply, he said the DoH was trying to address gaps in incentives for doctors practicing in rural areas, and that local government officials could help solve the problem by offering them incentives.

Facilities

Health facilities in the Philippines include government and private hospitals, and primary and tertiary health care facilities such as clinics and specialty care units. According to the DoH, the private sector comprises 50% of the country’s health system. The hospital network is a hybrid public-private system. The 2012 Philippines Health Service Delivery Profile found a total of approximately 1800 hospitals in the Philippines, of which 40% were public and 4% were DoH (public) hospitals.

The national government funds DoH and local government hospitals, while spending from PhilHealth, private health insurance, HMOs, and OOP payments combine to fund the rest of the system. Five hospitals – Asian Hospital and Medical Centre, Chong Hua Hospital, The Medical City, St. Luke’s Medical Centre and Makati Medical Centre – hold accreditation from the Joint Commission International.

Quality is an issue at public health sector facilities across the country. In terms of funding, infrastructure, facilities, technology, patient safety and support services, public facilities often struggle to measure up to those of foreign counterparts in South-east Asia and further abroad, according to a report by the World Health Organisation. Exceptions to this rule include tertiary hospitals such as the Philippine Heart Centre, the National Kidney and Transplant Institute – one of Asia’s leading kidney and liver transplant hospitals – and the Lung Centre.

To address a number of quality issues, the government has instituted measures to improve the conditions of public health facilities – especially public hospitals – by partnering them with appropriate private-sector entities. These public-private partnership (PPPs) take various forms, including technology transfer, training, funding and optimising operational efficiencies.

A notable example of such a PPP is the La Union Medical Centre joint venture for access to medical equipment. Under this agreement, private investors provided a haemodialysis machine and other laboratory equipment to the centre. The investors pay the necessary staff, rental and other costs, and share 15% of the revenues with La Union Medical Centre. This approach has also been adopted by the Southern Philippines Medical Centre (SPMC), a tertiary referral hospital in Davao City. Lacking in funding to acquire modern medical equipment to SPMC, the hospital management implemented a PPP under which private partners publicly bid to consign medical equipment such as dialysis machines, computed and digital radiography machines and haematology, chemistry and immune-assay analysers. Further modernisations have arrived in the country with the recent launching of several specialty centres at the Cardinal Santos Medical Centre. These include the Brain and Spine Institute; the Diabetes, Endocrinology, Metabolic, and Nutrition Centre; the Pain Management Centre; and the Complementary and Alternative Medicine Centre. However, the priority for the government must be to make high-quality and modern health care affordable and accessible for the country’s growing population.

Pharma

In 2010, the most recent year for which data is available, the country’s total pharmaceutical market was worth P124.6bn ($2.8bn), not including procurement by LGUs, and public expenditure on pharmaceuticals was estimated at between P4bn ($88.8m) and P5bn ($111m), excluding PhilHealth. In 2010, there were 27,595 licensed pharmacies and 49,667 licensed pharmacists operating in the Philippines. In line with the government’s focus on generics, the Philippines’ domestic pharmaceutical firms – such as GV International, Natrapharm, United Laboratories and Pascual Laboratories – have made in-roads into the generics market, slowly overcoming Filipinos’ mistrust of generic drugs. Spotting an opportunity, foreign generics firms such as Taiwan’s Orient Europharma and Pakistan’s Getz Pharma have been expanding their Philippine operations. To compete with the generic markets, many foreign pharmaceutical firms have reduced prices on branded drugs, in some cases by up to 60%, according to Asia health sector consultancy Pacific Bridge Medical.

Telemedicine

Modern technological solutions have arrived to urban and rural areas of the country via the National Telehealth Centre, which is led by the University of the Philippines Manila and the National Institutes of Health. The centre is tasked with implementing telehealth programmes across the country. One of these is the National Telehealth Service Programme, under which physicians in remote and rural areas are able to send SMS or e-mail “teleconsults” to specialists in tertiary hospitals such as the Philippine General Hospital. In the private sector, one Philippine company, Globe Telecom, is offering such medical consultations with KonsultaMD, a telemedicine hotline staffed by licensed Filipino physicians. The service is popular not only among patients in rural areas, but also with busy professionals and for emergency situations. Patients using KonsultaMD pay a monthly subscription fee for access to the service. Additional telemedicine advances include the St. Luke’s Medical Centre’s “MedConnect” app, which enables patients to book appointments, access laboratory results, pay bills online, schedule check-ups, contact its emergency room and access health and wellness information. Together these telemedicine initiatives have been quickly adopted throughout the country. Competition between the private sector and the government programme has spurred growth in this relatively new, but important segment of the health industry.

Health Tourism

Despite being very price-competitive compared to other South-east Asian countries, the Philippines’ health tourism industry is both under-marketed and underdeveloped. The reasons for this are mostly to do with transport – poor air connections, costly airfares and poor transport infrastructure within the country – but they are no means insurmountable. The global health tourism market earned revenues of $9.6bn in 2014, and this is expected to more than double this to $20.5bn by 2019, according to a report by international consultancy Frost & Sullivan. But the Philippines is at the bottom of Asia’s medical tourism market chart. According to Frost & Sullivan, Thailand has the region’s highest market share per patient, followed by India, Singapore and South Korea.

The combination of the country’s five JCI-accredited hospitals, deep pool of skilled physicians, and English-speaking nurses and relatively inexpensive health care should make it a globally competitive market for health tourists compared to that of its South-east Asian health tourism competitors. “In terms of clinical outcomes, the leading hospitals in the Philippines are competitive in an international setting. As a result, the country is positioned to take advantage of medical tourism opportunities given the country is endowed with natural tourism destinations,” Dr. Edgardo Cortez, president and CEO of St. Luke’s Medical Centre, told OBG. Some of the obstacles to be overcome are highlighted by the situation faced by the Asian Cancer Institute (ACI) in Manila, which has declared its interest in attracting medical tourists to its patient centre. “We are looking to design a medical tourism programme as we see the need for it, and we are the first fully integrated cancer facility in the Philippines with advanced radiotherapy equipment,” Andres Licaros, president and CEO of Asian Hospital and Medical Centre, told news outlets in September 2015. However, ACI has to wait for the Department of Tourism (DoT) before it can move ahead with its plans.

Outlook

Getting to universal coverage is going to require more local and national government coordination. PhilHealth can help by continuing its focus on financial protection, currently being bolstered by the TseKap coverage package. Meanwhile, PPPs can offer valuable returns in the form of technological support as well as skills transfer. Marketing the Philippines’ competitive edge over its rivals is key to getting the attention of the growing number of medical tourists worldwide, but so far this is not being done in any meaningful way. A coordinated effort by the DoH and the DoT, or a dedicated government medical tourism agency, to raise awareness of the country’s medical tourism resources is urgently needed to jump-start this lucrative industry.

Finally, an in-depth analysis and reform of the pharmaceutical sector is necessary to lift the financial burden of medical spending on the average household. This will not come easily, but with coordination and continued higher national and foreign investment, the health care sector can build on its strengths to become one of South-east Asia’s finest.

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The Report: The Philippines 2016

Health chapter from The Report: The Philippines 2016

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