From coverage to quality: Seeking more transparent and efficient management of health resources

Despite challenges posed by bouts of social and political instability, Colombia’s public services have taken important strides forward in recent years. Traditionally, the Colombian health system has received international recognition. In its latest integral report from 2000, the World Health Organisation (WHO) ranked the country number one in Latin America and 22nd on a global scale. Much of the positive scoring can be directly related to coverage and facilities that provide highquality infrastructure for patients. Total health expenditure, including public and private resources, accounted for 6.1% of GDP in 2011, a proportion that has gradually declined in recent years, according to the WHO.

The number of doctors in Colombia is substantial by regional standards. In a WHO report published in 2012 (for data collected from 2009 to 2011), the country was cited as having 16.5 physicians per 10,000 people, only slightly lower than the Latin American average, recorded at 17.3, but above the Andean regional average, which is 13.3. Indicators for facilities display a similar trend. While Latin America has an average of 2.1 hospital beds per 1000 inhabitants, Colombia has 1.4, in comparison to the Andean regional average of 1.3. These conditions have helped the system attend to much of the population of roughly 46m.

SYSTEM: The concept of universal health care in Colombia has existed since 1993 when the Obligatory Health Plan (Plan Obligatorio de Salud, POS) was introduced. Two decades later, this system has managed to cover 95.72% of the total population, as recorded in 2012 by the Ministry of Health and Social Protection ( Ministerio de Salud y Protección Pública, MinSalud).

The POS provides a social security framework for health coverage, known as the General System of Social Security in Health (Sistema General de Seguridad Social en Salud, SGSSS), which divides beneficiaries into two main schemes: contributory and subsidiary. Treatment is arranged through Health Service Providers ( Entidades Prestadoras de Salud, EPS), which manage public and private resources as intermediaries between authorities, patients and the actual health facilities, such as hospitals and clinics. EPSs are similar to health maintenance organisations in the US.

The contributory system applies to stably employed Colombians with middle- to upper-level income, covering nearly 20m people, which accounted for 44.64% of the total population in 2012, according to MinSalud.

Independent contractors affiliated with the contributory system are required to pay a full rate of 12.5% to the EPS of their choice while employees pay 4%, with their employers covering the rest. Owing to a slightly larger scope, the subsidiary system applies to the country’s unemployed and very poor, reaching coverage levels of 22.5m, or 50.37% of the population. Subsidiary affiliates receive partial or complete government support of benefit plans. A third, smaller social security scheme applies to government employees, military officers and other special cases, covering roughly 2m people, which accounts for around 5% of all Colombians.

In terms of the employed population, approximately 90% is insured under the SGSSS, with 63.6% belonging to the contributory scheme and 23.6% benefitting from government subsidies, according to figures from the National Administrative Department of Statistics (Departamento Administrativo Nacional de Estadistica, DANE) in the first quarter of 2013.

PARTIAL REFORM: Until July 2012, the benefit plans for contributory and subsidiary schemes varied considerably in quality and coverage. Recent reform of the POS unified the range of benefits for each scheme, making access to services more affordable and improving coverage. Unification of both plans will assume costs of about COP120bn ($72m) per month and benefit up to 11.5m people aged 18-59 who currently belong to the subsidised system. Overall, both plans now cover the expenses of nearly 5900 medical and hospital procedures and interventions, as well as more than 730 medicines for the treatment of any health condition or illness for beneficiaries of all ages. The government plans to finance this model until at least 2022.

While sector specialists and the Colombian population are generally in favour of this reform, many questions have arisen as to whether the system will be able to cope financially with increasing patient coverage.

Leopoldo Giraldo, manager of the Medellín General Hospital, told OBG, “The government measures progress in the health system by coverage and this has indeed expanded to the point where nearly all Colombians are insured. But the truth is that gaps in the provision of health are getting larger.” So far, a number of public hospitals have faced financial difficulties, as well as issues accommodating patients, not to mention the confidence of health care staff. According to some analysts, the lack of promotion and prevention by the authorities has turned the system into welfare.

FINANCIAL CHALLENGES: Despite recent improvements, complex financial and management issues continue to restrict the growth of a quality health system for all. While EPSs were originally designed to pool resources for risk management, they have come to represent one of the root causes behind the health system’s existing challenges. According to Giraldo, the philosophy behind EPS firms has been oriented towards a business model rather than upholding a public service. EPS insurer companies are essentially profit-driven, which has limited resources for citizens and their access to medical facilities. This has ultimately created disparities in the gains provided under insurance benefit plans as well as the actual treatment patients receive. A number of EPSs have also grown vertically, operating their own medical facilities for affiliates, which has been viewed as somewhat contradictory.

In fact, several EPSs are currently being investigated on charges of corruption. The most famous involves SaludCoop, the largest EPS, which has been charged with pocketing over COP1trn ($600m) of public funds. Due to such developments, the government has temporarily taken over the company’s management in order to continue providing insurance for some 6.5m affiliates. While the authorities seek to resolve such issues with SaludCoop, many smaller EPSs risk being permanently shut down. The POS reform in 2012 has set about reducing the total number of EPS firms from around 90 to fewer than 20 over the next five years.

However, not all the blame can be placed on the EPSs, since poor management stems from the authorities as well. According to Dr Juan Francisco González Londoño, president of Clínica SOMA, the state-run Solidarity and Guarantee Fund (Fondo de Solidaridad y Garantía, FOSYGA) does not distribute resources to health providers on time, forcing some to take out loans from alternative financing entities in order to pay their daily expenses. Many private facilities also resort to loans, such as in the case of Clínica SOMA, which provides transplants, oncology and other speciality services. Since EPS insurers impose rates, raising service charges is not a viable option for covering expenses, as it would generate a barrier for facilities to access the highest quality technology. González said, “If Colombia wants to fully achieve universal health coverage and maintain quality as a priority, all stakeholders need to make an effort, with insurers unifying their health schemes and becoming more flexible in negotiating rates with hospitals.”

According to reports filed by local press, the government and EPSs currently owe hospitals and clinics around $2.24bn. It is believed that Medellín General Hospital is still waiting on the payment of around COP180bn ($108m) from corresponding EPSs and FOSYGA.

Mauricio Castro, SaludCoop’s former administrator, said management issues at all ends has led to EPSs restricting provision and attempting to provide services in the shortest amount of time possible. On the government’s end, resources are regarded as insufficient to cover the number of citizens included in the insurance schemes. While the POS reform has helped to increase the per capita annual EPS payment to COP568,944 ($341) for contributory affiliates and COP508,993 ($305) for subsidiaries, Castro remains doubtful of the short-term achievements. Accordingly, he believes that the system should not support the existence of smaller EPSs, as the Colombian health system is aimed at ensuring that EPS firms have robust structures since total coverage demands the application of economies of scale both in the purchase of medication and high technology, he said. Regarding SaludCoop’s involvement in corruption, state intervention may help the firm to recover from the so-called EPS crisis, with better structural and financial decisions likely. The minister of health and social protection, Alejandro Gaviria, told local press in January 2013 that reform will eliminate the existing EPS system by no longer allowing the entities to manage public resources and health facilities. This duty will be passed over to a national entity in charge of distributing resources to hospitals and clinics. Whether the system is completely eliminated or not, regulation of resource allocation will be crucial to providing quality coverage.

ARTICULATION: Despite such high coverage rates in the public health system, private clinics tend to have better facilities due in part to superior management. Underdeveloped promotion and prevention plans can be traditionally traced back to weaknesses on the part of the authorities, which have historically applied only short-term strategies. Further, the fact that each local and regional government authority has considerable autonomy makes it difficult to achieve a sector-wide consensus. A new focus on improving communications and interaction among all participants in the sector would likely lead to more transparency, thereby increasing the confidence of stakeholders and society in general. In the medium and long term, this would attract private investment. Regionalism in health services has also generated a significant gap between more affluent major cities and poorer rural areas, which has had a particularly negative effect on emergency rooms in large metropolitan areas like Bogotá and Medellín. Government initiatives may need to focus more on improving basic services in rural areas by providing incentives for qualified doctors to accept jobs in the countryside.

TRAINING: Problems with specialised graduate studies is another concern, particularly in the case of medical schools such as the Universidad CES in Medellín, where the government limits the number of certain specialised studies, creating a shortage of professionals (see Education chapter). For example, the university is allowed four spots for anaesthetists while receiving around 160 applicants per year. This exacerbates the shortage of specialists in hospitals and clinics.

For Luis Gabriel González Marín, CEO of Vesalius Pharma, a local pharmaceuticals provider, quality health care begins in the classroom, where he believes students en route to becoming doctors should receive greater emphasis on prevention and promotion, two factors central to an effective health care system. Furthermore, he also said government policies need to be more concerned with sustainable practices than simply just covering the emergency needs of the population. Implementing a preventive system in which patients attend regular routine check-ups remains an area to develop in the long term; medical professionals would be better able to catch illnesses earlier and curative procedures further down the line would be less burdensome on patients and the state.

Although prevention has yet to become common practice among Colombians, waiting periods have in fact diminished notably over the past decade. In 2003, the average number of days patients had to wait for a general examination stood at 6.4, which has since dropped to 3.6 in 2011, as per MinSalud figures. “While access to health care has been ameliorated considerably through the improvement of first and second levels of attention, there is still a terrible shortage in care and prevention practices that causes excessive demand for health care,” said Julio Toro, the general director of Fundación San Vicente Hospital.

PHARMA: While discussions over how best to improve access to health services continue, reforms to the POS in 2012 have significantly boosted the potential of Colombia’s pharmaceuticals industry, largely due to widening the spectrum of benefits in the subsidiary scheme. According to Francisco de Paula Gómez, president of the Association of Pharmaceutical Laboratories for Research and Development (Asociación de Laboratorios Farmacéuticos de Investigación y Desarrollo, AFIDRO), the new POS structure will boost medicine distribution by 20-25% in the near term.

Although regional powerhouses like Brazil, Argentina and Mexico dominate a significant proportion of the Latin American pharmaceuticals market, Colombia is quickly making a presence as a leading producer and distributor in the region. Having sold approximately COP4trn ($2.4bn) in 2012, the domestic industry is estimated to grow by 6-7% during 2013, according to the National Business Association of Colombia.

Much of the industry growth can be attributed to strong regulation, investment stability, high quality of human capital and positive research conditions – as is evident in the many health free zones where companies benefit from lower tax rates. The most notable health zone is located in Medellín (see analysis), but small medical research clusters are also being developed in Bucaramanga and Barranquilla. The country already has a total of 350 research institutions, with more to come on-line soon, according to AFIDRO.

One area in which Colombia has taken encouraging steps forward is intellectual property. While only 1% of the drugs in the country are at present protected by patent, Colombia offers five years of data protection, which, according to leading biotech company Roche Colombia, is much more important than a patent in the short term. Free trade agreements (FTAs) with developed parts of the world, such as the US and the EU, should increase the level of patent and data protection in Colombia. While Roche general manager, Rolf E Hoenger does not believe Colombia will transform into a centre for research and development per se, it can become a major headquarters for clinical testing. However, this will depend on the authorities creating the resources to support such an initiative.

“The environment is good and the timeline to prove a clinical trial is quite fast,” Hoenger also told OBG. “It is also important for the Colombian government to keep pharmaceuticals companies in Colombia on a long-term basis. By doing so, patients get free access to drugs and procedures through clinical trials.”

Doctors participating in these trials also gain more education, experience and a better understanding of international standards, he added.

GENERICS: A major challenge for leading brands like Roche is that Colombia has yet to tighten regulation on the production of biosimilars, which are the generic version of biotech drugs. Roche invests millions of dollars every year in clinical trials, and without proper regulation in Colombia the company risks losing out to local biosimilars that are not required to adhere to the same rigorous trials for product safety and efficacy. Regardless, Hoenger said that regulation adhering to WHO standards is expected to pass, establishing the grounds for a better-monitored industry in the long term.

In Colombia, generic drugs often prove an affordable alternative for patients on a tight budget. According to Vesalius Pharma’s González, some generic medicines can be up to 80% cheaper than their brand name counterparts. Moreover, all generic medicines must undergo inspection by the National Institute of Food and Drug Regulation (Instituto Nacional de Vigilancia de Medicamentos y Alimentos, INVIMA), an entity that also regulates factory production. Foreign companies looking to enter the market must have prior certification from an international organisation, such as WHOGeneva, the US’s Food and Drug Administration and the EU’s European Medicines Agency. Uncertified companies are required to visit Colombia at their own cost to undergo INVIMA inspection.

The acquisition of Laboratorios Genfar, a large local pharmaceuticals firm, by French group Sanofi Aventis Pharma is by far the most significant and recent market development involving foreign capital. Genfar accounts for over 22% of the generic market and following the deal, which was sealed at the beginning of 2013, Sanofi became the first foreign company to penetrate local production of generic drugs. At present, roughly 60% of the local market is generic production.

COVERT PLAY: Colombia is no exception to the fierce competition that unravels between brand name and generic drugs. While some leading pharmaceuticals companies combat generic competition by paying doctors to prescribe their products, several small generic producers pay commercial pharmacies to promote their drugs, according to González. “In several cases, multinationals buy the doctors and small locals buy the pharmacies,” he told OBG.

While INVIMA establishes strict regulations for legal companies, it has often overlooked unregistered activities, a situation that is leading to a developing problem of black market drugs. This includes medicine stolen from state health facilities, expired drugs or simply false products, all being sold locally and in some cases entering the country through border crossings. According to María Cristina Álvarez, president of Novartis Colombia, 10% of pharmaceuticals products on the market come from illegal trade. It is a key issue, though concrete steps have yet to be taken targeting its occurrence. In the meantime, it is crucial for companies to separate their products from illegal equivalents, she said.

INTERNATIONAL RELATIONS: MinSalud and the Ministry of Trade, Industry and Tourism have been hesitant in recent years to fully regulate the prices of medicine, making Colombia one of the region’s most expensive pharmaceuticals retail markets. While some companies currently exercise monopolies on their products, only aggravating the situation, others have welcomed the idea of new international competition as necessary for levelling out the market. The recent signing of several FTAs is expected to have a positive impact on multinationals in the industry, as these groups will be able to rely less on Colombian firms as the main links in distributing their goods to the market.

Vesalius has already explored the international playing field, most notably in terms of production, being the first Colombian company to partner with Indian pharmaceuticals firms. Dedicated to producing anti-tuberculosis (TB) medicine and solutions for common and rare diseases, Vesalius’s need for high levels of technology drove its production offshore.

The occurrence of TB in Colombia has been reduced significantly over the past decade. While in 2001 the ratio of new cases was reported at 42 per 100,000 people, this dropped to 34 by 2011, according to the World Bank. Data gathered by WHO shows that the global rate of deaths caused by TB also declined by 41% from 1990 to 2011. While Vesalius targeted TB as a means to enter public health schemes that cover common and acute illnesses in Colombia – such as rabies and malaria – rare diseases have in fact become a significant problem in the country and across Latin America in general. The definition of a rare disease is that one to five patients for every 10,000 people suffer symptoms. The company has documented around 6000 rare diseases globally, of which 120 have been fully studied, while medication exists for around 50.

As a result, pharmaceuticals firms tend to focus less on this area and Vesalius sees it as a niche market. The company orients its products towards Latin America, with operations in Argentina, Chile, Panama, Costa Rica, the Dominican Republic and Peru, respectively. Vesalius is currently looking to expand production to Asia and increase its product portfolio.

THE PRICE OF BEAUTY: Besides the pharmaceuticals segment, there has been significant growth in plastic and reconstructive surgery. While Colombia is emerging as a growing business centre, the country is also becoming a larger market for aesthetic surgery, particularly for nose and eyelid work among men. According to the aesthetic clinic La Font, operations for men have increased by 10-20% over the last few years. The most common treatments sought out by women continue to include breast implants and liposuction.

In line with figures provided by the Colombian Society of Plastic and Reconstructive Surgery (Sociedad Colombiana de Cirugía Plástica, Estética y Reconstructiva, SCCPER), around 240,000 procedures are carried out per year, making Colombia a regional leader, along with Brazil and Argentina. The industry has now become involved in medical tourism as well. La Font, for example, has a hotel and spa attached to the clinic’s Bogotá headquarters and its clientele is around 30% foreign.

However, illegal operations, which often place patients at risk, do remain a problem. “Colombia has no shortage of reputable programmes in medicine and surgery,” Dr Lina Valero, the co-founder and director of La Font, told OBG. “The problem is that there are very few annual residencies for doctors to become specialists. This produces too many general practitioners and too few specialised surgeons.”

In May 2013 alone, three women died in Medellín due to faulty plastic surgery procedures, one of them a foreigner from the Netherlands. So far during 2013, another woman in Neiva and a Colombian actress in Bogotá also had fatal experiences with aesthetic surgery. While the details surrounding all these cases have not been made clear, clandestine clinics that offer services at significantly lower rates are commonplace in the country. The concentration of incidents in Medellín set off red alarms for the authorities, who are currently running public awareness campaigns to warn of possible risks and encourage responsible selection of clinics or hospitals for cosmetic surgery. Aware of the risks associated with illegal clinics, the government is working to structure a more effective control scheme that allows identification of clinics that have quality accreditations. Although some 15,000 Colombian women were affected by the Poly Implant Prothese (PIP) scandal uncovered in 2011, SCCPER says that demand has grown to high levels again, since surgeons were not to blame, but rather the French producers who are now on trial in France for deceiving buyers and health authorities worldwide, including INVIMA.

PIP implants supposedly used industrial silicon unfit for humans, affecting more than 300,000 women in 65 countries. Company founder Jean-Claude Mas and several of the firm’s top executives face up to five years in prison if found guilty; the verdict for the case is expected to be announced in December 2013. There are calls for independent legal cases to take place in countries where women were subject to the faulty implants, as well as for medical compensation.

OUTLOOK: While the Colombian authorities have managed to provide better health care services to a large percentage of the population, issues of quality and financing still generate debate among both sector participants and system beneficiaries. Deeply engrained complexities lending to systemic weaknesses and corruption will need to be overcome by the authorities and the private sector together for the health sector to attract more foreign investment to infrastructure and insurance schemes in the long term.

Meanwhile, positive developments from the new, unified POS will be felt most strongly in the pharmaceuticals industry, which is already on track to continue growing. Widened portfolios of state coverage for patients should provide a constant source of demand for medicine, whether it be for brand name or generic drugs. While the overall industry is highly competitive and market entry is likely to prove difficult for new players, FTAs are expected to break down the sector’s barriers, allowing for more interaction between international firms and their local counterparts. As a result, the country is likely to accelerate its efforts to obtain financial assistance from international institutions.