Medicines & Medical Devices: Impact of GST

During the announcement of the 2015 Budget, it was made known that 2,900 medicine brands listed in the National Essential Medicines List (NEML) will be "zero-rated"

Since then, it had been pointed out by the Pharmaceutical Industry that many of the medicines in this list are actually the same drug, with only the difference being the manufacturer and/or dosage size.

According to the Pharmaceutical Association of Malaysia (PhAMA), the current NEML – the fourth edition issued by the Health Ministry on September 29, 2014 – contains 320 chemical compounds, representing 500 medicines in specific doses or forms of packaging.

“This amount only makes up around 25% of the nearly 12,000 registered brands of medicine in Malaysia,” says PhAMA which represents the multinational importers and distributors in the country.

This means that the remaining 75% of registered and approved drugs in Malaysia will be subjected to GST.

At the current moment, these drugs are not subjected to any kind of tax, due to the Government’s National Medicine Policy, which includes ensuring the affordability of medicines.

PhAMA notes that the NEML was developed principally to ensure that essential and basic medications that “satisfy the priority healthcare needs of the population” were available at all times.

“As such, the NEML, which was developed based on WHO (World Health Organization) Essential Medicines list and the nation’s basic medicines needs for its healthcare system, does not provide a comprehensive medicines list to effectively treat all diseases or illnesses of the population,” it says.

The list only covers about 30 types of illnesses, with the medicines being older generation drugs, as these have been proven safe and are more cost-efficient.

According to PhAMA, this means that the majority of the latest, most advanced drugs that treat chronic illnesses like diabetes, hypertension, cancer, cardiovascular diseases, genetic disorders and severe infections, are not in the list and will be subjected to GST.

“Whilst the industry is cognizant of the Government’s intention to minimise the increased cost burden faced by Malaysians post-GST implementation, the GST zero-rate accorded to the NEML only covers 23% of the medicines used in the private sector. This, as such, does not provide much relief to patients in addressing the inflationary cost of living and overall healthcare.” 

It estimates that with the implementation of GST on April 1, patients will be required to pay an additional RM180mil per year for their medications. 
While the Royal Malaysian Customs Department recently revised the zero-rated medicines list to include all dosages and brands of the drugs in the NEML, bringing the total number of zero-rated medicine brands up to 4,215, the number of individual drugs that will not be charged 0% tax actually remains the same.

This, of course, does not include the dietary supplements many people take nowadays.

Medical Devices

Medical devices are often critical to helping diagnose, treat and manage patients with various conditions.

According to the Association of Malaysian Medical Industries (AMMI), the term “medical devices” encompasses a wide range of products that range from contact lenses, condoms, heart valves, pacemakers, wheelchairs and artificial limbs to surgical instruments, syringes, resuscitators and radiotherapy machines, and blood glucose monitors and pregnancy tests.

All such devices are required to be registered in Malaysia under the Medical Device Act 2012 (Act 737), and are currently not subjected to any tax.

AMMI chairman Hitendra Joshi notes that while those companies that are export-oriented will not be significantly impacted by the implementation of GST (as exports are zero-rated), those that serve the domestic market will be affected.

Initially, all medical devices were to be standard-rated under the upcoming GST. However, the Customs Department recently announced that they are in the midst of preparing a list of medical devices that will be GST-exempt.

 /the STAR29-03-2015

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