Since 2013, Peru’s health sector has been undergoing significant change as the country works to improve a system characterised by fragmentation, decentralisation and limited financing. The ongoing reform of Peru’s health sector has enabled the country to make significant strides to increase coverage and access to health care services among all socio-economic groups. However, with a significant infrastructure gap and substantial human resources shortages, the challenges facing the public health sector are enormous.
Elected in 2016, Peru’s new president, Pedro Pablo Kuczynski, is expected to build on the achievements made by former President Ollanta Humala, whose government initiated a wave of investment in health infrastructure. President Kuczynski hopes to expand access, improve quality and modernise Peru’s health system, a task that will demand increased levels of public spending at a time when the government grapples with a slowdown in economic growth. Meanwhile, though the private sector has not been immune to the deceleration of economic growth, the market continues to attract significant investor interest.
The passage of the Universal Health Insurance law in 2009 represented a milestone for the Peruvian health care system. Among other things, the law enshrined the right to health care and made coverage under a health insurance scheme mandatory. It also established a basic coverage scheme, known as Paquete Esencial de Aseguramiento en Salud (PEAS), which includes a list of conditions with priority coverage, such as prenatal and paediatric care. This was complemented by the creation of a special fund, the Fondo Intangible Solidario de Salud (FISSAL), to cover high-cost conditions. In 2013 a comprehensive reform package was introduced to strengthen health care regulations, expand access to health care services and address the infrastructure gap. To make universal access a reality, in 2015 coverage under Integral Health Insurance (Seguro Integral de Salud, SIS) from the Ministry of Health (Ministerio de Salud, MINSA) was extended to expectant mothers and newborns whose parents were uninsured. In 2015 alone more than 520,000 newborns became affiliated with SIS, which provides treatment and preventative care for children up to five years of age, including highly specialised care.
As more Peruvians became affiliated with SIS, coverage was upgraded and matched with budgetary increases. Between 2011 and 2015 the SIS budget tripled from PEN570m ($168.9m) to PEN1.7bn ($503.9m). The launch of Plan Esperanza in 2012 – a public programme that covers cancer patients with financing from FISSAL – has also dramatically expanded access to costly oncological treatment among vulnerable groups. According to MINSA, free coverage for oncological conditions has increased dramatically, from 17% in 2011 to 64% by 2015.
These measures allowed Peru to make significant progress at expanding coverage across all social sectors. According to the Superintendencia Nacional de Salud (Susalud), as of June 2016 nearly 26m Peruvians had some type of health coverage, representing 82.45% of the country’s population, a significant increase from 64.5% in 2011. The majority of these – nearly 60% – are covered under SIS, which as of June 2016 had a total of 16.25m affiliates, according to Susalud.
The second-largest provider is the Social Health Insurance, (Seguro Social de Salud, EsSalud). Under the purview of the Ministry of Labour and Promotion of Employment, EsSalud covers employees in the formal economy as well as independent workers, through a contributory scheme. As of September 2016 nearly 10.9m Peruvians were covered under EsSalud, 43.6% of whom were dependants. The country’s armed forces are covered under a third health insurance scheme – Sanidades de las Fuerzas Armadas (FFAA) – administered by the Ministry of Defence. Peru’s police force is covered under a similar scheme, Sanidad de la Policía Nacional Peruana (PNP), overseen by the Ministry of Internal Affairs. According to Susalud, together the two plans had 526,000 affiliates as of June 2016.
The steady expansion of Peru’s middle class, following nearly two decades of sustained economic growth, has also allowed for a gradual increase in private health insurance penetration rates, giving more Peruvians access to private options, known locally as health service providers (entidades prestadoras de salud, EPS). As of the second quarter of 2016, Peru’s EPS system covered around 2.17m Peruvians, including dependants. Pacífico Seguros was the market leader, with 801,987 affiliates, followed by Rímac at 758,541, Mapfre with 348,376 and Sanitas Perú and at 267,880.
This increased coverage has had a noticeable, positive impact on a number of key health indicators. According to the World Health Organisation (WHO), between 2011 and 2016 chronic malnutrition among children under five years of age decreased by 37.3% to 14.4%, while child mortality rates fell from 55 per 1000 live births to 17. In the same period, the incidence of new cases of tuberculosis declined by 52%. Moreover, neonatal mortality dropped by 51% between 2008 and 2015, falling from 16.2 deaths per 1000 live births to eight. Meanwhile, prenatal care by qualified staff increased from 87.3% in 2013 to 95.7% by 2015, leading to a substantial decline in maternal mortality, which fell from 185 deaths per 100,000 in 2008 to 89 by 2015. Overall, life expectancy increased from 75 and 70 years for women and men, respectively, in 2008, to 78 and 73 by 2015.
Nonetheless, significant challenges remain. While the country has made important advances to lower the rate of communicable diseases, the rate of non-communicable diseases, in particular chronic and life-style related conditions, has risen sharply since the 1990s. Today, cancer is the second leading cause of death in the country, with 45,000 new cases every year, according to the Instituto Nacional de Enfermedades Neoplá sicas. Two in every five children are overweight, one in 10 Peruvians has diabetes, one in five has high blood pressure and one in 10 suffers from a chronic kidney condition, according to minister of health, Patricia García. Mental health conditions are also on the rise, with approximately 4m Peruvians affected.
Decades of underinvestment have also given way to a significant infrastructure gap, estimated to reach PEN60bn ($17.8bn), according to authorities. As coverage expanded, the increase in demand for services put added pressure on an already strained public system, characterised by overburdened facilities, insufficient infrastructure and a lack of equipment and medical consumables. With 15 beds per 10,000 inhabitants, Peru is well under the WHO’s recommended 27 beds per 10,000 inhabitants. According to local media, about 12,000 health facilities lack adequate equipment and some 1000 of those should be replaced completely.
In addition to insufficient infrastructure, Peru’s health system is further constrained by a significant human resources shortage. According to MINSA, there are 8074 specialist doctors for approximately 31m Peruvians. To meet current demand levels more than 16,000 additional doctors are needed. Specialists make up only one-third of the total body of health professionals, the number of which is between 40,000 and 42,000.
The fields where the deficit is highest include paediatrics, gynaecology, surgery and anaesthesiology, among others. Rural areas are disproportionately affected by the lack of infrastructure, medical consumables and human resources. The majority of qualified staff is in urban centres, with the capital Lima, accounting for more than half (56%) of active health professionals.
While the shortage is partly fuelled by limited places at universities, difficult working conditions have also made the health professions less attractive. Indeed, discontent among health workers demanding better conditions and remuneration has led to a series of protests in recent years. A significant brain drain is another factor perpetuating the shortage of professionals. According to the Medical Association of Peru, more than 1000 doctors leave the country on an annual basis in search of better working conditions.
The challenging state of Peru’s public health is linked to very low spending levels. At 2.2% of GDP currently, public health expenditure is particularly low, with the figure rising to 5.5% if private spending is also included, but still below the Latin American average of 7.5%. On a per-capita basis, spending reached $656 in 2014, compared to a regional average of $1100.
The decentralised nature of the health system has also inhibited better articulation of national policies and standards, as well as the implementation of effective cost-saving measures within the public system such as joint purchases of medicine and medical consumables. Each service provider operates its own separate network of facilities, with cost and quality of care differing substantially between providers.
The reform package sought to increase coordination within the health care system by establishing integrated networks enabling SIS affiliates to receive care at facilities administered by other public providers, in particular EsSalud, the FFAA or the PNP. Between 2012 and 2015 more than 52,000 affiliates of EsSalud received care in other public facilities, primarily for low-complexity procedures, while EsSalud provided medium to highly specialised care to more than 2000 SIS affiliates. SIS was also given the writ to subcontract services to the private sector wherever the public sector was unable to meet demand. Since 2012 around 95,000 services have been provided by the private sector on behalf of SIS.
President Kuczynski hopes to bring Peruvians one step closer to universal coverage, with plans to reach 95% coverage by the end of his presidential term in 2021. The administration has pledged to improve quality standards and working conditions for health staff, strengthen childhood care and increase public health spending to 4% of GDP by 2021. This, along with private spending, would bring total health expenditure to 6% of GDP and closer to the regional average. The health budget increased by 2.4% in 2017, reaching PEN13.8bn ($4.1bn), with PEN1.78bn ($527.6m) earmarked for childhood development and PEN1.74bn ($515.7m) allocated toward improving infrastructure, in particular 32 hospitals and 25 health centres.
Since assuming office, Kuczynski’s government has passed new regulations to enforce PEAS. Since January 2, 2017 private insurance companies must offer PEAS as their most basic plan. A series of legislative decrees issued in March 2017 are also set to significantly modernise management processes and improve quality of care. Legislative Decree No. 1303 seeks to optimise tele-health initiatives across the country, in a bid to overcome distance and the deficit of human resources, particularly in hard-to-access areas. Meanwhile, Legislative Decree No. 1306 initiated the digitalisation of medical records, with the establishment of a central National Registry of Clinical Records.
Users will be able to quickly and safely access records, enabling medical professionals to make better-informed decisions on patient care. The measure represents a step toward overcoming the system’s segmentation, an important objective for the current administration.
Bridging The Gap
The new government is looking to build on the achievements made by the previous administration to bridge the sector’s infrastructure gap. During Humala’s administration, PEN8.4bn ($2.5bn) was allocated to improve hospital infrastructure. Between 2011 and 2016, 168 health facilities, including 29 hospitals, became operational and over 300 projects are currently being developed, including 153 hospitals. MINSA has developed a long-term development plan for the 2016-25 period, which aims to bring 468 health establishments into operation, with a focus on facilities that will provide primary and secondary levels of care.
To help speed the development of infrastructure, Law 30167 allows the private sector to participate through public-private partnerships (PPPs). “The government’s push to enhance PPPs in the health sector opens excellent market opportunities for private investors, given the lack of a wide range of competitive health services in Peru”, Edgardo Malpartida, general manager of Clínica Limatambo, told OBG.
The state investment agency ProInversión is preparing to adjudicate three projects, representing an investment of approximately $424m. An additional eight private initiatives are being reviewed. The request for proposals is expected to take place in 2017 with adjudication scheduled for 2018. The projects fall under the bata gris (grey coat) modality, in which the private sector participates in the provision of non-medical services, in particular the construction, equipment, operation and maintenance of facilities.
All three projects belong to EsSalud. The $170m Instituto del Niño y Adolescente in Lima, with 281 beds, will offer highly complex services for youth up to 17 years of age, with a 20-year concession period. The other two projects include a $110m high-complexity hospital in Chimbote, Ancash, and a 342-bed high-complexity hospital in Piura, representing an investment of $144m.
Since 2012, the private sector has also been able to participate in infrastructure projects under the Works for Taxes programme, which allows companies to pay a portion of their tax bill through public works, making funding available to projects more quickly. Though the sector has been slow to attract investment via this means, in October 2016 Proinversión announced that MINSA had adjudicated the first two projects for hospital facilities under the programme to Compañía Minera Antamina. The mining firm will invest PEN77.6m ($23m) to build and equip a hospital in Huari, Ancash, replacing the existing one, with a five-year concession period. The second project entails the replacement of a hospital in Llata, Huanaco, representing an investment of PEN67.1m ($19.9m), with a five-year concession period.
For its part, the private sector is feeling the effects of the deceleration of the economy at the national level, which is stifling growth in the number of new health insurance affiliates within the EPS system. Even so, demand for health services continues to rise at a steady pace, with increasingly more Peruvians switching from EPS insurance coverage to pre-paid plans and other types of insurance schemes on offer from health providers. “After average growth of about 8% in previous years, the rise in the number of new patients slowed to 0.5% in 2015, recovering to 3% by the end of 2016,” Sebastián Céspedes, general manager at Clínica Ricardo Palma, told OBG. “The market has yet to return to the growth rates we had become accustomed to in previous years. Therefore, we are cautiously optimistic for 2017.”
Until now, Peru’s private health care market had grown at double-digits, attracting significant investment, both domestic and foreign. According to Guillermo Garrido-Lecca, general manager at Pacífico Salud EPS, between 2013 and 2016 the private sector invested an estimated $980m in infrastructure, services and equipment. The investment was channelled primarily to the construction of new clinics and the expansion and remodelling of existing facilities in urban centres. This was accompanied by gradual market consolidation, as the largest insurance groups began establishing their own networks of clinics and medical centres.
A significant amount of the investment has come from Credicorp, owner of Pacífico Seguros, for the establishment of its SANNA network of facilities, which includes five clinics and four medical centres. Grupo Beca, owner of Rímac Seguros, is another important player in Peru’s private health care market. The group is known for its Clínica Internacional network, which includes four clinics and eight medical centres in Lima, Trujillo and Arequipa. Even so, the market continues to offer significant opportunities, as providers seek to respond to rising demand for health care services, particularly in the areas of oncology, paediatrics and dermatology. Recent years have seen an increase in the establishment of more specialised clinics, such as Pacífico Seguro’s Oncocare, as well as integrated care clinics. Mexican IGSA is the latest player to announce plans to invest in health infrastructure in Peru. It plans to bring $500m to the development of several infrastructure projects. Of that amount, $250m has been earmarked to build treatment centres for renal conditions in partnership with the public sector. “Peru offers all of the public policies and all the necessary guaranties for foreign enterprises to come and invest,” Javier Sánchez Muñoz, IGSA’s general director, told local media. IGSA entered the Peruvian market three years ago and has invested $12m in two facilities; a $3m kidney disease treatment centre and a $9m sports medicine clinic, the first of its kind in Peru.
In March 2016 the government issued Decree Nos. 011-2016-SA and 013-2016-SA to regulate biologic originators and biosimilars. The new legislation established requirements for the registration of biological products, including biosimilars, following the recommendations of the WHO and the European Medicines Agency (EMA). The need for pre-clinical and clinical testing will be determined by the Directorate General of Pharmaceuticals, Inputs and Drugs ( Dirección General de Medicamentos, Insumos y Drogas, DIGEMID) on a case-by-case basis, and an assessment will be conducted for products already approved by EMA, with high pharmacovigilance standards or products pre-qualified by the WHO, in less than 120 business days. The new legal framework is expected to increase competition in the local market and benefit consumers by expanding access and lowering prices. According to Health Action International, prices of cancer and HIV drugs could see a reduction of between 30% and 60%. The changes are also likely to stimulate steady growth in the biotechnology market, encouraging more companies to develop and launch biological drugs in the country. According to DIGEMID, imports of biotechnological products more than doubled between 2011 and 2015, increasing from $42.8m to $91.3m, with their share of total pharmaceuticals imports increasing from 9.1% to 14% in the same period.
As of February 2016, 277 biotechnological products were registered, with 65% of these originating from high pharmacovigilance countries, followed by Latin America (17%), and China and India (13%). The public sector, in particular EsSalud, accounts for the vast majority of the country’s purchases of biotechnological products.
While Peru has made significant strides to make universal coverage a reality, reaching the remaining roughly 20% of the population without coverage or access, particularly in rural areas, will require innovative strategies. Though more planning is needed, current initiatives, like tele-health service and the digitalisation of medical records, represent significant steps in the right direction and promise to significantly improve quality and access, particularly in remote areas of the country, in the medium-to-long term.
Within the private sector, though the rate of investment could see a slight deceleration in the near term, the outlook for the sector remains positive, with demand for faster and higher-quality care expected to continue, albeit at a somewhat slower rate. Despite increased risks of currency devaluation, drug pricing pressure and generic competition in the short term, the pharmaceuticals industry is also expected to continue to grow in the next few years, driven by expanding coverage and a strengthened regulatory framework.