An analysis of changes in drug price under 1997 economic crisis

Abstract

This study is to analyze changes in hospital drug price during 1997 economic crisis comparing purchasing drug prices before and after the depreciation of Thai Baht. Primary data are collected from three hospitals i.e. Police General Hospital, Siriraj Hospital and Ramathibodi Hospital in the period of 1996 to 1998. A multiple regression model is developed to test factors affecting changes in drug price. The independent variables for explaining changes in drug price are percentage changes in foreign exchange rate, cancellation of medium price, increase in value added tax rate, changes in Civil Servant Medical Benefit Scheme, duration, and percentage changes in quantity procured. The average first time of drug price adjustment was 132.3 days after baht depreciation, partly due to long term contract. One percentage depreciation in the value of baht increased overall drug prices by 0.22 percent. Prices of essential drugs set by original firms increased by 0.20 percent, whereas locally made drug prices changed by 0.24 percent. For the non-essential, original drug prices rose by 0.19 percent while those of local made drugs rose by 0.22 percent. Cancellation of medium price policy had a positive and significant impact on changes in drug prices while other government regulations such as increase in VAT and change in CSMBS did not have significant influence. Length of time had negative relationship with percentage changes in drug price. One percentage increased in procurement volume lowered the average prices of drugs by 0.038 percent.