Malaysia

Strategic purchasing in the Malaysian public healthcare setting is undergoing transformation, albeit in its early stages, in preparation for implementation of a national health financing scheme. Current purhcasing procedures include a combination of passive and strategic purchasing features. There is no specific Strategic Purchasing unit established per se to date at the Ministry of Health (MOH) for medicines and medical devices. However, there is an attempt to implement better purchasing practices for healthcare services, leveraged on public-private engagement based on performance.

Protecthealth Corporation Sdn Bhd (ProtectHealth) was established in 2016 as a wholly owned subsidiary of ProtectHealth Malaysia, established under the MOH. Protecthealth functions as a not-for-profit organisation, administering and managing initiatives related to financing healthcare services as a third-party payer/purchaser, as mandated by MOH. ProtectHealth is the healthcare scheme administrator for PeKa B40 (social assistance programme), electronic service provider for health insurance coverage for foreign workers (SPIKPA) and implementer of private medical practitioners’ participation in the National Covid-19 Immunisation Program.

Medicines and vaccines (other than Covid-19) (national level)
Pharmaceutical Division, Ministry of Health
Ministry of Defence
Department of Social Welfare
Ministry of Home Affairs
Ministry of Housing and Local Government

Medicines and vaccines (other than Covid-19) (subnational level)
Infection Control Unit, Ministry of Health: distributed MOH-purchased vaccines regionally
Private healthcare institutions (hospitals, clinics, retail pharmacies)

Vaccines (Covid-19)
Medical Device Authority (MDA), Ministry of Health
Ministry of Defence
ProtectHealth: venue selection, mass vaccination centres

Medical equipment and consumables (national level)
Pharmaceutical Division, Ministry of Health
Ministry of Defence
Department of Social Welfare
Ministry of Home Affairs
Ministry of Housing and Local Government

Medical equipment and consumables (subnational level)
Private healthcare institutions (hospitals, clinics, retail pharmacies)

Healthcare services (national level)
Ministry of Health
ProtectHealth
Health Technology Assessment Unit, Ministry of Health: consultations on HTA

Healthcare support services (national level)
Procurement Unit, Ministry of Health
Ministry of Defence

National Disaster Management Agency
ProtectHealth: venue selection, mass vaccination centres

The MOH’s Pharmacy division also conducts pooled purchasing of medicines and supplies for other ministries which provide healthcare services, such as the Ministry of Higher Education in university hospitals and the Ministry of Defence.

The Ministry of Health (MOH) is the largest healthcare provider and purchaser, with 50% of the market share. Private healthcare institutions (hospitals) make up the remaining 50%.

The purchasing of medicines, medical equipment and consumables is done separately between the public and private health systems. In the public healthcare system, pooled purchasing between university hospitals (Ministry of Higher Education, MoHE) and Ministry of Defence (MoD) facilities for medicines, medical equipment and consumables follow universal purchasing practices. Only the purchasing of Covid-19 vaccines was conducted solely by the Ministry of Health (MOH) alongside ProtectHealth for the whole country.

The private healthcare system, i.e. private hospitals, purchases directly from pharmaceutical companies. Private General Practitioners (GPs) in either single or group practice clinics or Private Specialist clinics purchase from principals (i.e. local manufacturers or importers) OR their distributors, directly from pharmacies. Retail pharmacies purchase between 70% and 80% of their medicines from independent distributors like Zuellig and DiethelmKellerSiberHegner (DKSH). DKSH is a Swiss holding company specialising in market expansion services, e.g. outsourcing. The remaining 20% to 30% of medicines are purchased directly from local principals and wholesalers.

In terms of healthcare services (e.g. for the PeKa B40 scheme and the SPIKPA health insurance scheme for foreign workers) and for healthcare support services, there is a move to regulate and monitor these under ProtectHealth as a form of strategic purchasing. Currently PeKa B40 subscribers/clients receive free health screening, free medical equipment, incentives to complete cancer treatments and transport incentives during treatment.

For medicines, vaccines and medical devices, some measures are in place to help integrate purchasing set by the Ministry of Finance. An example is pooled purchasing between the Ministry of Health (MOH) with university hospitals (Ministry of Higher Education, MoHE) and Ministry of Defence (MoD) hospitaols. The combined orders together with the three public university hospitals and MoD hospitals enable competitive pricing at a lower price.

Plans to integrate purchasing of healthcare services are beginning to take shape, starting with ProtectHealth efforts to regulate healthcare service providers and healthcare support services for the PeKa B40 scheme and SPIKPA foreign worker insurance schemes.

In MYR (million):

The Ministry of Health (MOH) being the main healthcare purchaser in the country in general, adopts a general criteria for purchasing i.e., providers’ profile (i.e., performance track records) and ability to meet specifications, fair pricing (based on pharmacoeconomic evaluation i.e. cost effectiveness analyses and budget impact analysis findings for medicines, vaccines and medical device). Reports and findings from Health technology Assessment Unit of the MOH (MaHTAS) also support the decision for procurement.

Protecthealth uses the following criteria to evaluate what health services to purchase:
1) Benefit package design (based on targeted population, needs and gaps, National Health & Morbidity Survey reports);
2) Mapping of existing services by the public and private sectors;
3) Financial objectives;
4) Contracting requirements/monitoring mechanisms (e.g.must be able to link with the Electronic Service Provider).

For medicines: In the Ministry of Health (MOHS)’s Pharmacy division, funds are utilised based on Ministry of Finance (MOF) procurement rules. This involves following purchase-for-value policies and obtaining approval from a committee chaired by the Director General of MOH.

For healthcare services and support services: ProtectHealth aims to ensure that the best providers who are agreeable to ProtectHealth provider management division standards are recruited. Monitoring and remedial measures are taken to ensure that healthcare services are optimised as per the targets agreed upon the enrolment of a service provider. ProtectHealth compares the services offered by independent companies and negotiates based on its own quality standards.

For primary care diagnostics: ProtectHealth will determine the standards which must be met by diagnostic clinical laboratory services. The list of laboratory providers who comply will be shared with participating General Practitioners (GPs). GPs will be able to make their own choice of services at a fixed price negotiated by ProtectHealth.

For defining the health budget: the Ministry of Health (MOH), upon receiving recommendations and feedback from its various Units/divisions/committees (e.g. Infection Control Unit, Medical Device Authority, Health & Technology Assessment Unit) will finalise budget requests by following approval procedures set in place by the Ministry of Finance (MOF). The annual budget allocation for MOH is determined by the Parliament and is monitored by the MOF.

For health financing reform: The main stakeholders involved in decision-making for health financing include patients, healthcare providers (both public and private), payors (Ministry of Finance) and policymakers (Parliament). Many factors have contributed to the delay tn the implementation of the much-needed healthcare reforms for the national health financing system over the past three decades. Some of the documented reasons which have been mentioned are lack of political will and lack of awareness of the role of social health insurance schemes for targeted population groups. 

Much-needed steps include consultation with stakeholders; commitment, support and understanding amongst politicians (government and opposition) as well as health care providers and other interested parties; critical appraisal of proposals; legal frameworks to back up health financing initiatives; and an effort by the government to educate the Malaysian population on the necessity of healthcare financing reform.

The operational aspect of ProtectHealth enables it to purchase services from the private sector, including private general practitioner services and private diagnostic lab services. If the providers fail to meet the standards and remedial measures set by ProtectHealth, the company has the capacity to terminate the services of the providers if necessary. ProtectHealth Board members consist of representatives from the Ministry of Health (MOH), Ministry of Finance (MOF) and Independent Board members. The Director General and the Secretary General of the MOH serve as Chairman and board member respectively.

The Ministry of Finance (MOF) Pekeliling Perbendaharaan Malaysia (PK 2.1) is a document which lists the detailed procedures for procurement for all Ministries, including the Ministry of Health (MOH).

For healthcare purchasing, which at this point appears to be regulated by Protecthealth, the policies are set by the Protecthealth Corporation. Protecthealth therefore does not adhere to the policies set by MOF in PK2.1. Through these policies, Protecthealth has the right to terminate services of non-performing providers based on the evaluation standards agreed upon with the provider at point of engagement.

The main legislation providing guidance on public finances is the Financial Procedure Act 1957 (Act 61). It covers the management of public finances, including accounting procedures; the management and control of Consolidated Funds; custody and investment of moneys; government trust funds; payment of moneys; and other functions.

Government procurement and tendering processes follow guidelines set by the Ministry of Finance (MOF) and are based on the value of a purchase. The following procurement methods are used:

• Direct purchase: up to MYR 50K
• Quotation: MYR 50 – 500K
• Open tender: over MYR 500K
• Pre-qualification open tender: over MYR 500K and subject to specific criteria
• Open tender Request for Proposal: over MYR 500K and subject to specific criteria
• Direct negotiation: over MYR 500K and subject to specific criteria

Pekeliling Perbendaharaan Malaysia (PK2.1), the Financial Procedure Act 1957 and the Government Contract Act 1947 and circulars issued thereunder define Malaysia’s public procurement policies, applies also to the procurement of medicines for the public sector.

The purchasing of medical supplies and services by the Ministry of Health (MOH) is based on the value of the procured items, and follows procurement procedures laid out by the Ministry of Finance.

The procurement of medicines is regulated by the purchasing department at the Pharmacy HQ, Ministry of Health (MOH) through three main methods:

1) Purchasing drugs via a government-linked company (GLC): GLCs can be defined as companies that have a primary commercial objective and in which the Malaysian government has a direct controlling stake. Pharmaniaga is the GLC responsible for supplying items on the Approved Products Purchase List (APPL) in the National Formulary (also known as the Blue Book). Almost 40% of medicines at MOH facilities are on the APPL, and Pharmaniaga is awarded concession to supply medicines at all sites.

2) Direct tender purchasing by MOH. Tender bids are submitted online and evaluated by the Pharmacy Division of MOH, chaired by a Director. Users of the drug are invited to attend this meeting to help the committee deliberate on who should be awarded the tender to supply the said drug. The final list is provided to the Director General of MOH who chairs the Tender Board.

3) Local purchaser order (LPO) at the institutional level. Each tertiary hospital is able to directly purchase products valued at MYR 50K and registered in the formulary (aka the Blue Book/ National Pharmaceutical Regulatory Authority (NPRA) list). Such purchases will have to undergo a tender process. The application is reviewed by an in-house panel including a specification committee, technical evaluation committee and financial evaluation committee. Upon obtaining approval at the hospital level, requests are forwarded to the Procurement Unit at Pharmacy HQ, which is responsible for collecting all requests across the country and uploading them in the e-procurement portal. This portal also contains historical information of past tenders.

The procurement of other items or services by other agencies follows similar processes to select suppliers (e.g. MOH Infection Control Unit for vaccines; the Medical Device Authority for medical equipment and consumables).

For healthcare goods, the Procurement Unit at the Ministry Of Health (MOH), alongside the Ministry of Finance (MOF), enforces contracts with service providers or suppliers.

The unofficial blacklisting of errant pharmaceutical providers comes to the attention of the Pharmacovigilance Unit & Market Surveillance (Good Manufacturing Unit) of the Pharmacy Division, upon receiving reports related to procured products from end-users. When two reports are received on the default of a certain product (e.g. broken packaging, change in colour, particle contamination), the enforcement division will visit the premises of the manufacturer and monitor it for the next 2-3 years. If evidence proves that some substandard practices or lapses in quality took place, a warning to non-compliant suppliers will be issued by the MOH Procurement Unit based on MOF guidelines.

For healthcare services under Protecthealth, enforcement of contracts with service providers is managed by the Strategic Purchasing Department. Monitoring and remedial measures are taken to ensure that services are provided as agreed upon. If a service is substandard and complaints are received (e.g. complaints on contracted clinical laboratory services by GPs participating in Protecthealth), the Strategic Purchasing Department will investigate accordingly. If the provider continues to perform poorly repeatedly, Protecthealth will penalise them. The Department’s Provider Management Division ensures that service providers such as GP clinics comply with their contracts, and otherwise, they will be penalised or services will be terminated.

The practice of providing performance-based incentives is not a standard process at the Pharmacy Division, Ministry of Health (MOH). While no clear guidelines are documented, the practice of blacklisting and whitelisting is unofficially adopted when necessary whilst still following general procurement guidelines set by the Ministry of Finance (MOF).

ProtectHealth follows similar procedures with its contracted providers, whereby there is no official blacklisting. ProtectHealth adopts the policy that financial contracts are already an incentive and providers are expected to perform accordingly, i.e., take the initiative to recruit and manage clients for PeKa B40 and SPIKPA using several provider payment mechanisms, e.g., capitation and fee-for-service according to the Benefit Package specifications. 

There is reactive monitoring of suppliers of healthcare goods. Unofficial blacklisting may be done for suppliers who fail to comply with agreed-upon standards. Specialists can also lodge official complaints against poor-performing suppliers directly to the Procurement Unit of Pharmacy Division, Ministry of Health (MOH).

For healthcare services at ProtectHealth, the performance of PeKa B40 and SPIKPA is assessed via regular medical audit processes and performance reviews at both company and MOH levels.

Feedback to suppliers at the Ministry of Health (MOH) level is generally based on any complaints filed.

At ProtectHealth, a Provider Management Division in the Strategic Purchasing Unit is responsible for providing feedback to service providers.

General information on systems-level analysis of service utilisation, quality and efficiency may be found in the Ministry of Health (MOH) Annual Reports. Information on financial analysis can be found in the Malaysian National Health Accounts, which give an overall financial breakdown of the MOH’s activities.

Based on its operational functions, ProtectHealth is capable of providing detailed information on service utilisation, quality and efficiency as these indicators are continuously audited.

The Health Management Information System (HMIS) facilitates the Ministry of Health (MOH)’s function of overseeing Malaysia’s public health. The HMIS can be operated through manual or computerised means. It provides information on preventive services (Program Pencegahan Penyakit) and monitors disease incidence and prevalence alongside State and District health offices (Pejabat Kesihatan Negeri, Pejabat Kesihatan Daerah). Promotive, early detection and primary healthcare services delivered through public healthcare clinics also use the HMIS.

To carry out its strategic management function (forecasting, planning, budgeting, funding), the MOH requires information on the status, trends and future needs of health and healthcare. Information is obtained from various healthcare facilities and health administration offices (e.g. using web applications and electronic forms). The data is then gathered, stored, analysed and interpreted at a central office called the Information Documentation System (IDS) Unit in the MOH.

Private healthcare providers including hospitals, GP clinics and diagnostic laboratories each have their own Health Information System (HIS) and are not linked to or regulated by MOH.

The Pharmaceutical Division practices scheduled and as-needed discussions on the procurement of drugs, medical equipment and consumables. During the Ministry of Health (MOH)’s annual budget preparation, the submission of basic statistics about utilisation rates and resource usage is also expected. However, it is unclear how this information affects future purchasing decisions.

For the PeKAB40 health insurance programme under ProtectHealth, some of the findings which may influence decisions are:

• Reasons for non-referrals from private GPs to public health clinics (aka Klinik Kesihatan (KK), which have onsite Family Medicine Specialists/Consultants);

• Information on referred patients;

• Reasons for patients defaulting onappointments (e.g., short opening hours of public health clinics).

The Ministry of Health uses the following indicators:

• Value for money (Pharmacoeconomics principles; cheap & efficient);
• Track record of the supplier (poor performers are not officially blacklisted but will be ‘remembered’)
• Added value ( pharmaceutical companies providing bonus deals on products offered, e.g. giving additional test kits for testing drug levels when a drug is ordered).

ProtectHealth uses the following indicators:

• Value for money: quality of service defined by certain standards
• Satisfaction from providers (for contracting services, e.g. laboratory service)
• Timely payment (for contracting providers as purchasers of services, e.g. GP clinics who buy laboratory services).