AB035. Determinants of cost savings through pooled procurement: evidence from Malaysia’s public sector medicines pricing initiative

Background: Escalating pharmaceutical costs strain public health budgets, particularly in low- and middle-income countries, necessitating effective cost-containment strategies. As a means of reducing procurement fragmentation, addressing inequities, and optimising pharmaceutical spending, Malaysia implemented inter-ministerial pooled procurement (PP) in 2020 across the Ministry of Health (MOH), Ministry of Defence (MOD), and Ministry of Higher Education (MOHE). Following its implementation, a study was conducted to evaluate the impact of inter-ministerial PP on medicine prices and to identify the key determinants influencing cost savings in Malaysia.

Methods: A cross-sectional study analyzed procurement data from 82 medicines, comparing two-year periods before [2018–2020] and after [2020–2022] PP implementation. Estimated savings, price differentials, and dissavings were calculated. Multiple linear regression assessed determinants of cost savings, including inter-ministerial collaboration, brand substitution, supplier characteristics, number of bidders, negotiation, and procurement volume.

Results: PP generated ringgit Malaysia (RM)179.6 million (17.7%) in overall savings from an expenditure of RM1.01 billion. Inter-ministerial collaboration significantly increased savings (β = RM1.2 million; P<0.001), underscoring the benefits of joint bargaining. The most influential determinant was switching from innovator to generic medicines, resulting in an average additional savings of RM2.0 million (P<0.001). Conversely, switching to innovator products tended to increase costs. Other factors, such as procurement volume, supplier concentration, and number of bidders, were not statistically significant in multivariable analysis, although they influenced outcomes descriptively.

Conclusions: Malaysia’s PP demonstrates that generic substitution and cross-ministerial pooling are the strongest drivers of efficiency, delivering fiscal savings and more equitable access to medicines. Strengthening these approaches, supported by digitalisation and improved demand forecasting, can further optimise collaborative strategies to ensure sustainability and responsiveness to evolving healthcare needs amid social and environmental change.

Keywords: Generic substitution; inter-ministerial; pool procurement