In a healthcare sector report by AmInvestment Bank Bhd (AmInvestment Bank), A cheaper ringgit might boost Malaysia’s medical tourism volume.

AmInvestment Bank highlighted that private healthcare operators in Malaysia can be negatively impacted by a weaker ringgit versus the US dollar as costs of key inputs such as drugs, medical supplies, and medical equipment are affected by the US dollar.

The research firm said “On the other hand, a cheaper ringgit might boost Malaysia’s medical tourism volume. Malaysia’s medical tourists contribute around five to six percent of IHH Healthcare Bhd and KPJ Healthcare Bhd’s revenue.”

On the global front, AmInvestment Bank noted that the growth prospects for the sector are positive over the long term, underpinned by an aging population, rising affluence, and increasing life expectancy.

“The local private healthcare sector has an added catalyst, i.e. medical tourism backed by its highly competitive charges and hospitalization costs (versus those in developed countries), a general English-speaking population as well as various incentives provided by the government.”

However, the research firm anticipated new hospitals to be hit by gestational costs in the near term as well as the impending drug pricing control (DPC).

“According to the Pharmaceutical Association of Malaysia (Phama), the Ministry of Health (MoH) has announced that the ministry intends to use external reference pricing (ERP) to benchmark drug prices in Malaysia against seven to eight selected countries by choosing the average three lowest reference prices to determine the ceiling price sold to dispensing channels in Malaysia.

“One of the highlights is a phased implementation of the DPC whereby the first phase is to apply the mechanism on single-source products which are generally patent-protected medicine”.

AmInvestment Bank estimated sales of drugs to be circa 20 to 25 percent of revenue for the hospitals. However there’s still ain’t any clear drug pricing guideline, the research firm believed any impact on the selling price of drugs can be partially covered by other charges in the medical sector limiting the impact to its margins.