These are busy times for the Philippine health sector, with the country gearing up for a long-awaited move to universal health care (UHC) and investment in the private sector accelerating. Specialist and high-tech facilities are being developed, generating investor interest and business opportunities in pharmaceuticals and imported medical equipment.
However, challenges remain, including the expansion of coverage to underpopulated and economically disadvantaged areas, and the growing prevalence of non-communicable diseases (NCDs). Budgets and financing are also being re-evaluated, with the aim of stamping out leakage and fraud in subsidies and reimbursements. Despite these obstacles, 2018 looks to be a year of positive growth in the private and public sectors, with the UHC rollout inching closer and a range of changes ahead for all Filipinos.
Facts & Figures
The country has seen significant improvements in public health indicators in recent years. Life expectancy at birth rose from 65.7 years in the 1990-95 period to 68.6 years in 2010-15. Figures from the World Health Organisation also show that the under-five mortality rate fell from 54 per 1000 live births in 1993 to 31 in 2013. Preliminary results from 2017 indicate the rate has decreased further to 27.
The numbers of hospitals and doctors have also been increasing, but at the same time, the population has expanded far more rapidly. According to the Philippine Statistics Authority (PSA), the total hospital bed capacity rose from 87,133 in 1990 to 98,429 in 2014 – the last year for which figures were logged. However, population growth outpaced this, causing a decline in beds per 10,000 people over the period, from 14.4 to 9.9. The population increased significantly, from 60.7m in 1990 to 92.3m in 2010 and 100.9m in 2015.
Recent years have seen some growth in the medical workforce, although this has also been outstripped by population growth. The total number of doctors in government employment rose from 2967 in 2005 to 3182 in 2015, while the number of nurses increased from 4519 to 6520. Department of Health (DOH) figures for 2014 show that there were only three government doctors for every 100,000 patients – well short of the The private sector offers more health care facilities than the state, with 772 of the 1195 domestic hospitals operated privately in 2015. The largest concentrations are in the National Capital Region, which was home to 48 government and 112 private hospitals that year.
Health expenditure stood at 4.6% of GDP, or 5% of total government expenditure, in 2014, according to PSA statistics. Health also constituted 6.7% of local government expenditure, while 55.8% of all health expenditure was paid out-of-pocket by patients.
The government has since decided to boost health care spending, with the PSA reporting a nominal increase of 10.5% in the state health care budget in 2016. This translates to a rise from P5840 ($115) to P6345 ($125) per capita. This continued with the 2018 budget, which allocated P107.2bn ($2.1bn) to the DOH, up 11.4% from P96.3bn ($1.9bn) the previous year.
Disease Prevention
To combat the rising incidence of diabetes, the country was one of the first in Asia to implement a sugar tax in 2017. NCDs are an increasing cause for concern, now responsible for two-thirds of all deaths. The country still has a relatively high rate of tobacco use – one-third of people aged 15 years and over smoke – and the number of overweight or obese adults has doubled since the 1990s.
A number of communicable diseases remain prevalent, including diarrhoea, bronchitis, pneumonia, tuberculosis and influenza. To combat these, the DOH is pursuing a vigorous food- and water-borne disease prevention programme; vaccination campaigns, such as a free measles, mumps and rubella vaccinations for children; and anti-dengue campaigns in rural areas.
Structure & Oversight
While the health system has public and private segments, the DOH holds ultimate authority in terms of policy development and standards. The department has offices in each region of the country and operates several specialised units, such as the Disease Prevention and Control Unit, the Bureau of Quarantine, the Pharmaceuticals Division, and the Food and Drug Administration (FDA). The DOH also directly manages a number of tertiary medical centres, speciality hospitals and re-nationalised provincial hospitals. The secretary of health is a Cabinet-level position in government, currently occupied by Francisco T Duque III, a physician with substantial experience in health care administration.
The decentralisation of much political authority – enshrined in the 1991 Local Government Code – saw a great deal of responsibility for public health care passed on to local government units. The code gave cities and municipalities autonomy over primary health services, including maternal and child care. It also gave them control of some direct services, through local health care centres linked to barangay (village or neighbourhood) health centres and rural health centres. Meanwhile, the provincial government was given responsibility for secondary hospital care. A system of centres for health development was set up to transmit guidance from the DOH to these levels.
One exception to this three-tier, decentralised structure is the health service of the Autonomous Region of Muslim Mindanao, which has its own health department running primary, secondary and tertiary services within the region. The decentralised approach initially posed considerable capacity issues at the local level, leading to a series of reforms over the years. At present, the health system is gearing up for the latest ambitious reform effort – the introduction of UHC.
Push Towards Federalism
The authorities are also considering adopting federalism – an entirely new system of governance – which may also have implications for the sector’s structure. While the exact shape of a potential future federal system is unknown, it would introduce a state-level system of governance, above the provincial, city and municipal level, with its own budget and, likely, a set of health care responsibilities (see Regions chapter).
Various professional bodies supplement the DOH and work in close collaboration with it. The Philippine Hospital Association is a not-for-profit agency representing medical facilities, the Philippine Medical Association represents licensed physicians, the Philippine Nurses Association is a representative body for qualified nurses and the Association of Philippine Medical Colleges represents medical schools accredited by the Board of Medicine. These bodies are regulated by the government’s Commission on Higher Education.
Training is, indeed, an acute issue, as the Philippines suffers from a so-called brain drain of qualified staff. Salary differentials are often the major motivating factor for professionals leaving the country. “Nurses will feel more compelled to leave the Philippines if hospitals and health maintenance organisations do not raise their salaries to be competitive relative to the region,” Rosalie R Montenegro, president and CEO of Makati Medical Centre, told OBG. This issue is being tackled via the Medical Service and Return Service Programme Act, being evaluated by Congress, which grants scholarships to study medicine in return for a period of mandatory service in government hospitals.
PhilHealth
Another notable entity in the sector is the Philippine Health Insurance Corporation ( PhilHealth). Established in 1995 and charged with administering the National Health Insurance Programme, PhilHealth has both a mandatory role in providing health education and a regulatory role as an accreditation and quality control authority for health facilities. When it began, PhilHealth replaced a programme known as Medicare, which had been instituted to provide health insurance coverage for all government employees and, beginning in 1998, all registered private sector employees. These two groups comprise the beneficiaries of PhilHealth’s “regular” programme.
However, there are large numbers of people active in the informal economy, who therefore remain outside the regular health insurance programme. Figures from the PSA for 2015 suggest that of the 101.5-strong population, 40.7m were employed, yet only 7.7m were in the formal sector. The exact breakdown is likely to vary between different demographic groups.
Successive governments have thus tried to bring more of these informal workers into the formal economy, and under health and social security coverage. By 2017 PhilHealth reported that some 93% of the population was employed in the formal economy. This means the informal sector and disadvantaged people, along with their dependants, have largely been brought into the system. Indeed, PhilHealth statistics show that around 29% of members are indigent, and 22% are from the informal economy.
In September 2017 the UHC reform passed through the first stage of the legislative process in the House of Representatives. With President Rodrigo Duterte having largely based his campaign on bringing UHC to fruition, sector players are optimistic that a proposed Enhanced UHC Bill will pass through Congress in 2018.
UHC
The proposed legislation addresses both demand- and supply-side issues, as well as health care financing. Under the proposed bill, PhilHealth will be reformed as the Philippine Health Security Corporation (PHSC), becoming the national sole purchaser of health care services. All Filipinos will be eligible for the scheme, with UHC membership divided into contributory and non-contributory categories. The former category is for those in employment above a certain income who pay into the scheme, while the latter is for low-income and otherwise disadvantaged Filipinos. This group will have its PHSC premiums paid for out of taxes, according to the DOH.
The creation of just two categories simplifies the current six-category system, made up of formal economy workers, informal economy workers, low-income and in-need citizens, sponsored members, senior citizens and lifetime members. Under the UHC reform, all members will be entitled to the same basic services, rather than variable coverage based on category.
The UHC Bill also sets up the Health Technology Assessment Council. An advisory body to the secretary of health, the council will oversee the examination of medical technologies for efficacy, safety and cost-efficiency, as well as any related social and ethical issues.
Improvements to health technology assessment could address some key challenges in the current system. Under PhilHealth people seeking care have their basic medical needs covered, but more sophisticated technologies or medications must often be paid for out-of-pocket unless patients have additional, private coverage. This co-payment system has several drawbacks: the coverage of treatments and medications is a matter of great concern to patients and health care providers alike. This makes the provision of an up-todate list of tested technologies crucial, with health technology assessment enabling faster accreditation of new drugs, procedures and equipment.
Controlling the list of treatments and technologies is also crucial to establish a more cost-effective reimbursement system. In the past, examples of up-casing – when doctors boost the seriousness of a diagnosis in order to get greater coverage for the patient – or fraud might occur, with false diagnoses and even the creation of so-called paper patients.
Changes Under PHSC
PHSC is considering instituting reimbursements based on diagnosis-related groups, where a rate is set for treatment of a particular diagnosis. This would replace the system of all case rates currently in use, which does not offer diagnosis-specific funding. The new system will include mandatory regular submissions of cost data from all medical facilities, enhancing cost control. The role of the PHSC as the sole purchaser may also lead to better value for money, as this will simplify the purchasing system, with the PHSC able to replace the multiple purchasers at the provincial, city and municipal levels.
In this context, another proposed measure is to authorise government-run facilities to allocate their income as they see fit to enhance their capacity and improve the quality of their services. Currently, the majority of state hospitals retain only part of any income they generate, at best, with this disincentivising revenue creation at the local level. It is hoped that the new, 100% retention will encourage greater investment and competitiveness.
Higher Tech
Another aim of UHC is to boost information systems. This involves establishing not only better, centralised disease monitoring, but also an integrated human health resource database, as well as the aforementioned mandatory hospital data submissions. Indeed, these systems will be increasingly important to the future of health care. “Technology adoption is crucial in health care to meet the rising demand for quality care and increase efficiency,” Benjamin K Liboro, president of the Asian Eye Institute, told OBG.
For this reform to succeed, a general improvement in the IT infrastructure will likely be necessary. Hospital workers who spoke to OBG suggested that internet access in particular can be a challenge, particularly in rural areas, with clinics sometimes hand-delivering data on thumb drives to regional and provincial offices. “It is very important for the DOH and the private sector to develop better data collection and analysis capabilities, as this will allow them to become more effective at allocating resources,” Arturo de la Peña, CEO of St Luke’s Medical Centre in Manila, told OBG.
In light of these challenges, the government is committed to making improvements in the broadband network, while the DOH is keen to step up the level of IT available. This should not only ensure smoother running of its reforms, but also offer new innovations, such as telehealth, to a wider range of people (see ICT chapter).The Department of Science and Technology has managed telemedicine sessions via the Philippines Research, Education and Government Information Network – the government broadband grid – since the remote service was introduced in 2011. Other private sector services, such as Avizia’s MyDocNow and VS ee, provide similar remote diagnostic tools. In the Philippines – an archipelago of more than 7000 islands – such services clearly have significant potential.
Mixing Up Medicine
Developing modern IT infrastructure should also assist research and development, another growing segment, while accelerating the development of the Philippines as a centre for clinical trials. With a low cost base and large, diverse population, the country is attractive to multinational pharmaceuticals companies looking to trial products. According to the US FDA, in 2009 the number of trials undertaken domestically grew 31% on the previous year, although numbers may have fallen since: in 2010, some 80 trials were registered, but in 2015 this number halved to 40, according to BMI Research.
However, the EU’s efforts to raise the country’s status in protecting and enforcing intellectual property rights may help address some concerns in this segment and in the larger research and development sector. Negotiations for an EU-Philippines free trade agreement, started in 2016, may also see a more robust intellectual property rights framework emerge in future.
Meanwhile, the pharmaceuticals segment is generally strong, worth some $3.6bn in 2016, making it the third largest in the ASEAN region. The retail pharmaceuticals segment is competitive, reportedly fuelled by growing demand resulting from demographic and lifestyle changes. Generic drugs account for around 60% of sales, with some 4800 distributors and 650 importers. Multinational pharmaceuticals companies dominate, controlling around 70% of the market, with AstraZeneca, GlaxoSmithKline, Pfizer, Wyeth, Novo Nordisk and Novartis all present. The Filipino FDA is the sector’s licensing authority.
Expectations are widespread that the sector will expand on the back of the UHC rollout and increased government health care expenditure, and the value of pharmaceuticals is projected to grow to $4.1bn by 2020, according to consultancy firm GlobalData. Another factor driving expansion has been the introduction of village-level pharmacies (known as BnBs), with these entities government-licensed, but privately owned and operated. BnB numbers shot up from around 2000 in 2010 to 7700 in 2014.
Meanwhile, the medical equipment market is also expanding, though nearly all growth is in imports. US figures show the total market increased from $196m in 2015 to a projected $227m in 2018, with linear accelerators, electro-cardiographs, ultrasonic scanning machines, magnetic resonance imaging equipment, and dialysis devices among leading items.
Outlook
With the seemingly imminent introduction of UHC in the Philippines, alongside increased support for health services from the government and investment from the private sector, the health care industry looks set to be a major growth area for the country in 2018 (see analysis). In an increasingly prosperous nation spread across various islands, much will depend on how effectively the government and private sector can adapt to new health care innovations and digital solutions to serve the needs of patients nationwide.
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