The health sector in the Philippines is undergoing a period of development and reform. The long-awaited move to universal health care (UHC) is now within sight, with the government focused on improving the delivery of public health care and encouraging investment in the sector. While the health system is currently tackling multiple burdens and is limited by human resource constraints, the enactment of the UHC Bill will bring increased funding to the sector and provide greater coverage to the Filipino people. Through increased engagement with the growing private sector, progress is being made towards a more integrated and robust health system that is ready to take on these challenges.
The Philippines had a population of about 107.4m as of the first quarter of 2019. The IMF forecast this to rise to 118.2m by 2023. Although health indicators are generally improving due to better living conditions and increased access to health services, with life expectancy at birth rising from 62.2 years in 1980 to 69.1 years in 2016, significant challenges remain. “Crucial social issues such as drug abuse, poor sanitary living conditions and the lack of sexual education have to be tackled in parallel to the improvement of health services,” Eugenio Jose F Ramos, president and CEO of The Medical City, a private hospital in Pasig, told OBG.
Furthermore, the Philippines currently bears a triple burden on its health system. The country is tackling outbreaks of communicable diseases such as HIV, dengue and measles. Second, like many of its neighbours, it is coming to terms with the increasing prevalence of non-communicable diseases (NCDs), such as diabetes and cardiovascular conditions, which are linked to an unhealthy diet, lack of exercise and smoking, as well as growing mental health concerns like depression and suicide. Lastly, it is dealing with the increasing impact of climate change and natural disasters, which are creating a strain on the health system.
As of April 2019 there had been more than 28,000 cases of measles reported since the beginning of the year, with outbreaks declared in Metro Manila, Central Luzon, and Western and Central Visayas. Moreover, the Department of Health (DOH) reported that there were 40,600 cases of dengue in the first two months of 2019, up 68% over the same period in 2018.
The outbreaks of communicable diseases are partly attributable to low public trust in vaccines. This attitude developed in 2017 after the manufacturer of the Dengvaxia vaccine acknowledged that it may pose risks to individuals who had not been previously exposed. In response to this, the Department of Education is considering rolling out a “no measles vaccination, no enrolment” policy in public schools. Furthermore, the DOH is ensuring the proper implementation of Republic Act No. 10152, otherwise known as the Mandatory Infants and Children Health Immunisation Act of 2011, with the provision of free immunisations to children. It is also working together with the Presidential Communications Operations Office on a campaign aimed at promoting the uptake of vaccinations.
HIV prevalence has also been expanding at a significant rate, with 11,400 new diagnoses in 2018. In December 2018 President Rodrigo Duterte signed Republic Act No. 11166, or the Philippine HIV and AIDS Act of 2018, into law. This ensures the accessibility of health services for the prevention, treatment and management of HIV. It repeals the Philippine AIDS Prevention and Control Act of 1998, replacing it with more current strategies to deal with the growing problem. The law provides free and accessible treatment to all individuals living with HIV, and makes it illegal for companies to deny insurance coverage. In addition, it contains provisions penalising discrimination against people living with an HIV diagnosis.
In addition, the threat of NCDs continues to grow, with the UN Commission of Population and Development warning that the Philippines could become an ageing society by as early as 2030, when the share of the population aged over 60 is forecast to reach at least 14%. This will likely result in further increases in the overall prevalence of NCDs.
In 2018 inflation in health care costs was estimated at 13%, and insurers cited the rising demands resulting from NCDs. In 2016 NCDs were cited as the cause of roughly 446,300 premature deaths, making up about 27% of the total mortality rate. To deal with this, the government has committed to fast-tracking efforts to reduce risk factors for NCDs at the primary care level, under a programme run by the World Health Organisation (WHO). In October 2017 the Philippines also hosted the ASEAN NCD Forum, where stakeholders met to share insights into NCD prevention and control.
Structure & Oversight
The national health system has both public and private components. The DOH provides national policy direction, strategic plans, technical advice and guidelines, and capacity building. Much of the responsibility for primary care has been decentralised to local government units (LGUs) to deliver services and implement programmes and policies.
The long-awaited UHC Bill was signed into law in February 2019 (see analysis), bringing into reach the DOH’s goal of ensuring every citizen is able to receive affordable and quality health care. The rules and regulations that will be implemented are expected to be made available later in the year, setting the stage for the transformation of the Philippine health system in terms of financing, coverage and service delivery. In particular, the UHC system should lead to the strengthening of primary care services and the empowerment of community health centres, as all Filipinos will be entitled to an extensive range of preventative, curative and rehabilitative health services such as free check-ups.
In the hope of detecting and treating health conditions early, there are also provisions for ensuring more remote areas have adequate access to doctors and health practitioners. Beverly Lorraine Ho, chief of the research division for the Health Policy Development and Planning Bureau, told OBG, “The UHC Bill represents a shift towards primary health and away from a focus on hospitals and curative care. There is also a greater clarification of responsibilities between the DOH, the LGUs and the Philippine Health Security Corporation (PHSC), which should foster greater accountability.” However, fully realising the UHC Bill comes at a cost.
Lawmakers are estimating that approximately P257bn ($4.8bn) will be needed in order to implement it in the first year alone, while a further P280bn ($5.2bn) will be necessary in the second. These figures do not entirely account for consistent funding over the coming years. Funding for the UHC system is expected to come from the Philippine Amusement and Gaming Corporation, the PHSC, the Philippine Charity Sweepstakes Office, and the so-called “sin taxes” that are placed on all tobacco and alcohol products.
The Philippines also implemented Republic Act No. 10354, or the Responsible Parenthood and Reproductive Health Law, which provides for the reproductive health rights of all citizens. Although the law passed in 2012, it faced some challenges before it could be executed, with the Supreme Court issuing a temporary restraining order to the DOH, and to the Food and Drug Administration. In January 2017 these restrictions were lifted. President Duterte issued Executive Order No. 12, which stated that the law should be strictly implemented in order to meet the needs of all modern family planning. As a result, reproductive health services reached 568,500 people in 2017.
Initiatives are also under way within the House of Representatives’ Committee on Health, establishing the National eHealth Systems and Services Act to facilitate the use of cost-effective and secure information and communications technology in the sector. The goal is to improve access to digital information for health professionals in real-time decision-making, and increase the uptake of electronic medical records, which would also assist health practitioners. Furthermore, it could potentially be used in the longer term in the development of effective preventative health care programmes.
Moreover, in January 2018 two new accounting standards took effect that could impact the industry: Philippine Financial Reporting Standard (PFRS) 15 Revenue from Contracts with Customers and PFRS 9 Financial Instruments. PFRS establishes a single comprehensive framework for revenue recognition to apply consistently across transactions, industries and capital markets, based on a five-step model to be applied to all contracts with customers. PFRS 9 introduces the expected credit loss model for impairment.
Public Health Sector
The public health sector in the Philippines is financed through a tax-based budgeting system. In 2018 the budget for the DOH was approximately P106.1bn ($1.9bn), up from P95.3bn ($1.8bn) in 2017. Public health financing goes towards regional and apex hospitals, while LGUs fund primary and secondary health services.
In the 2019 budget the health sector received an annual funding boost of P21.5bn ($399.9m), with P15bn ($279m) of this allocated towards the Health Facilities Enhancement Programme, which aims to upgrade hospitals run by the DOH and improve rural health units (RHUs) and barangay (village) health stations. This programme not only aims to improve infrastructure, but also to ensure that health centres are equipped and empowered to handle changing circumstances, such as preparing RHUs to deal with the increasing incidence of NCDs by providing treatment packs for hypertension and diabetes. Since 2007 total health expenditure has increased consistently. In 2017 total expenditures amounted to P712.3bn ($13.3bn), an increase of 8% from 2016, and contributed 4.5% of overall GDP. However, not all of this was spent on the public system. In fact, approximately 54.5%, or P372.8bn ($6.9bn), of this spending came from out-of-pocket (OOP) payments from households, most of which was allotted to pharmacies and private general hospitals.
“Local government hospitals do not have enough funding from their local government, and their constituents are forced to go to private hospitals even if they cannot afford our services,” Victoria Vergel de Dios, president of VRP Medical Centre in Manila, told OBG. “Private hospitals are required to provide emergency care for indigent patients, and this results in millions of unpaid promissory notes,” she said. However, perceptions of public health care is likely to improve as more resources are directed towards it with the implementation of the UHC system.
Over recent years demand for public care has been eclipsed by the private sector. In 2016 the public and private health sectors had a combined 1224 hospitals, around 2587 rural and local health centres, and 20,200 health care providers in barangays.
The growing demand for the private sector is becoming increasingly evident. The sector’s share of total hospital beds rose from 46% in 2003 to 53% in 2016. In 2017 private general hospitals were the second-largest source of OOP household health care expenditures in the country, reaching P97.5bn ($1.8bn), or about 26% of total OOP payments. While private options continue to be desirable for many wealthy Filipinos, their appeal has yet to successfully reach overseas medical tourists.
“The private hospitals in Metro Manila can compete with almost any other country when it comes to value for money, but their ability to expand and compete with their neighbours is limited by negative foreign perceptions of both the Philippines and the inefficiency of Manila’s airport,” Maria Corazon Consunji, president and CEO of the Makati Medical Centre in Manila, told OBG.
Investment opportunities in the private sector are increasing, and about 50 European firms in the health care and medical technology industry are exploring related business opportunities. These range from medical waste management to laboratory equipment, and e-health to pharmaceuticals, with trade between the Philippines and Europe in health care and medical technologies exceeding €1.1bn in 2017.
Private providers are hopeful that increasing demands on the public sector will create opportunities to fill supply-side gaps. “The public sector will be unable to implement UHC alone, so private firms will have to help,” Corazon Consunji said. “A rationalisation of investment will be required, and services will need to be divided between public and private entities in a coordinated and well-planned manner to boost efficiency.”
The number of personnel working in the industry is also increasing. However, ongoing regional disparities mean some areas remain underserved. According to the WHO, in 2017 there were 90,300 nurses in the Philippines, 40,775 doctors, 43,044 midwives and 12,413 medical technologists, with most working in the public sector. Metro Manila has the highest density of nurses, with 12.6 nurses per 10,000 people, while the lowest density is in the Bangsamoro Autonomous Region in Muslim Mindanao, which has 4.2 nurses per 10,000 people. In fact, the main indirect cause of death in the Philippines is not being seen by a doctor or specialist. The Medical Scholarship and Return Service Programme was set up to deal with such shortages – one which results partly from the migration of health professionals overseas – by requiring medical students to serve within the country for two to five years.
The enactment of the UHC Bill has raised questions about whether the Philippines has enough personnel to implement the necessary reforms, particularly outside urban centres. “There is a lack of available doctors for the expansion of primary care infrastructure in rural areas, as most medical students aim for specialisations in Metro Manila,” Ramos told OBG.
However, speaking at the UHC forum in April 2019, Mario Villaverde, undersecretary of the DOH, insisted the department has a human resources management plan to ensure the equal distribution of health workers around the country and the creation of additional human resources in order to meet rising demand.
PHSC, formerly known as PhilHealth, is the national health insurance provider in the Philippines, providing all Filipinos with access to health services. Membership is either direct through premium payments or indirect for those who are subsidised, including senior citizens and people with disabilities. In 2017 PhilHealth covered 92% of the population, with nearly 40% of its membership subsidised by the government for premium payments, amounting to P52.95bn ($9.9bn). Coverage rose to 98% of the population in 2018, with 104.5m people having access to health care services. In 2019 Republic Act No. 7277, or the Magna Carta for Disabled Persons, was amended to provide automatic coverage to all people with disabilities.
In 2018 the public insurer’s finances saw a turnaround, up 4400% to end the year with a net income of P11.6bn ($215.8m). Premium income was recorded at P132.5bn ($2.5bn), up 23%. These numbers were attributed to higher rates of premiums, improvements in collection measures and consistently increasing investment. For example, a new “e-claim” system has recently been implemented, which allows for the online monitoring of claims. In total, the public insurer paid out P121bn ($2.3trn) in health benefits in 2018.
PHSC executives have publicly stated that the corporation’s strong performance in 2018 demonstrates its readiness for an enhanced role under UHC. In addition to managing the new health care card that will allow patients access to public facilities under UHC, PHSC will continue to play a key role in crafting the supplementary coverage provided by health maintenance organisations (HMOs) and other private insurers, as well as properly accrediting privately developed facilities. Christian Argos, CEO of health care provider Maxicare, told OBG that as UHC is rolled out HMOs can adjust their business strategies to focus on people who prefer the option of private care, rather than corporate clients who formerly used HMOs to provide coverage for employees. In fact, the HMO model is moving from a business-to-business approach to a more business-to-consumer focus by offering customer-centred services. This is achieved with the help of innovative and affordable options in which digitalisation will play a key role.
The Philippine pharmaceutical market was estimated to be the third largest in ASEAN, after Indonesia and Thailand, according to the Pharmaceutical Healthcare Association of the Philippines, reaching value output of P164bn ($3.1bn) in 2018. In 2008 the government passed Republic Act No. 9502, also known as the Cheaper Medicine Act, which sought to improve market competition and the availability of generic medicines. There is relatively high demand for low-cost generics in the Philippines, with generic prescriptions rising by 7% between 2011 and 2014.
One effective means of making pharmaceuticals more accessible to those in need is the Botika ng Barangay project, which establishes drug outlets managed by community organisations or LGUs, making non-prescription generic drugs more freely accessible to people in rural areas. The implementation of UHC is likely to benefit the makers of generics – who make up around 60% of the market in terms of sales – as it will require drug outlets to always have in stock the generic version of every drug. As a result, Fitch is forecasting that the generic medicine market will increase at an annual compound growth rate of around 5.7% between 2017 and 2022, by which time annual sales will reach P97.3bn ($1.8bn). According to industry players, generics firms will likely predominate in the primary care segment, with international firms likely to focus on niches such as vaccines, research and development, specialist treatments and establishing new patents.
Challenges for Pharmaceuticals
A potential risk for generic drug producers is that the free provision of pharmaceuticals under UHC could erode profit margins. “Pharmaceutical companies will have to work with the government to figure out a mutually beneficial way of providing free drugs under the UHC system,” Rajan Kumar, general manager at Novo Nordisk Pharmaceuticals Philippines, told OBG.
Furthermore, the Food and Drug Administration’s rules and regulations present numerous challenges for international pharmaceutical companies. Government taxes are 12-13% across the whole distribution chain, with tax cuts only available at the consumer level. Additionally, industry players have expressed concern that the introduction of a price ceiling for medicines – a policy that is under government consideration – could negatively affect innovation. Non-tariff barriers with neighbouring states also present a challenge for the industry, with slow regulatory processes delaying the launch of new medicines. As a result of the regulatory bottleneck, the turnaround time for a new product entering the market can be between two and four years, according to research from the EU-ASEAN Business Council. Overcoming these challenges will be necessary in order to foster further cooperation between the government and the private sector, and boost investment in research and innovation.
Although the Philippines is experiencing health burdens on multiple fronts, with communicable diseases, NCDs and the environmental effects of climate change, the response from the government has been swift. Efforts are under way to contain and prepare for all possible situations. Challenges remain regarding access to health in rural areas and retaining medical personnel, but the new UHC Bill should gradually alleviate some of these concerns.
While implementation of UHC will help to integrate the different elements of public health care provision, the authorities will also need to look for other ways to strengthen the sector against ongoing challenges. “It is important that the government leverage the latest technologies and innovation to support the efficient implementation of UHC. Encouraging partnerships on a multidisciplinary level between the government, the private sector, industry and universities will also be key to improving health care access for the Filipino people,” Jozica Habijanic, country manager for pharmaceuticals company Roche Diagnostics Philippines, told OBG.
Given its current share of the market, the private sector is already active in the delivery of UHC, and the new legislation is likely to create even more opportunities for its involvement. In particular, further investments in the e-health segment will be needed to ensure health care professionals have access to real-time information and electronic medical records for decision-making.
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