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Abstract:
Across Southeast Asia, healthcare is at the crossroads. Since the Covid pandemic, medical trend costs have risen significantly, causing severe stress across governments, insurers and patients. The region’s steep medical inflation rates pose significant challenges to both the public and private healthcare models, especially for patients requiring long-term care. For 2025, insurers are expecting medical trend costs to go up a further 12.3% across Asia, up from the same 11.9% YOY rise booked in 2024. To manage ‘down’ medical inflation, the adoption of innovative treatments, therapies and procedures is likely to be impacted. Naturally, governments and insurers will be weary of funding and subsidizing costly innovative treatments, unless there are compelling ‘value-benefits’ to the overall healthcare ecosystem. This article provides a high-level perspective on SEA’s medical inflation, the move towards new cost-care models and how life sciences (pharma, biotech and medtech) companies may successfully introduce medical innovations by creating value to the key aspects of the overall ecosystem.
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Rising Medical Trend Costs – Southeast Asia Under Severe Stress
Across Southeast Asia, healthcare treatment costs are rising significantly, causing severe stress across governments, insurers and patients. Reported by Mercer and Marsh Benefits and respective local media across the region, insurers are expecting medical trend costs to further rise 12.3% across Asia for 2025, up from the 11.9% prior year increase. The rising costs pose significant challenges to both the public and private healthcare models, especially for patients requiring long-term care. The medical trend cost growth rate is determined by changes in the price of medical products, services and prescription medications, changes in the number or intensity of services used and/or changes in per capita utilization. As a measure of medical inflation, medical cost trend rates are measured, tracked and used by governments, payors and insurers.
At the country level in Southeast Asia, medical trend costs in Singapore and Malaysia rose 12% and 14.9% respectively in 2024. For 2025, costs are expected to rise 12% and 16.4% respectively. How does this translate to actual costs? Well, this means is that if a particular treatment at a Malaysia hospital costs USD10,000 in 2023, the same treatment will likely cost around USD13,380 in 2025 which represents a hike of 33.7% (versus the cost in 2023).
Medical inflation rates are steeper for the rest of the region. In 2024, medical trend costs in Thailand and Indonesia jumped 15.2% and 15.6% respectively, and is projected to increase in 2025, by 14.2% and 19.4% respectively. In Indonesia, alarm bells are ringing – in January 2025, the Nikkei Asia reported that the country’s universal health insurance (JKN) was facing a default risk for 2026 after registering a USD1.2bn deficit in 2024. It is also acute for the Philippines as the 2024 medical trend costs here rose by 19.3% and is expected to climb another 18.3% in 2025.
Health officials cite the twin challenges of medical inflation and rising non-communicable disease (NCD) prevalence as amplifying the fiscal burden on government healthcare subsidies. In Malaysia, the Health Ministry reported that managing NCDs now takes ‘twice the amount’ of the government’s public health budget. Naturally, governments and insurers are struggling to cope – insurers are widely expected to raise premiums, which poses a major threat to healthcare.
Driving Costs Down – Revamping Payor Models & Healthcare Delivery
The only way forward for insurers and government-run universal health coverage programs is to reduce medical costs by redefining, rationalizing and limiting treatments and claims. To avoid sharp insurance rate increases, governments in the region are encouraging insurers to better customize insurance programs versus offering broader integrated-care type coverage. In 2024, the Malaysia government warned the insurance sector against sharp increases in insurance premiums.
Malaysia further announced plans to roll out the Diagnosis-Related Group (DRG) pricing system in the first half of 2025. DRG is essentially a pricing system that charges a fixed rate for certain medical procedures, with hospitals getting paid a fixed amount for treating patients based on a specific illness or condition, irrespective of how many services the patients use or how long the hospital stay. The DRG model is currently used in Germany, the United States, South Korea, and Japan. DRG was recently implemented in China together with centralized drug procurement, and adjustments to deductible thresholds within the social medical system.
Medical inflation in Southeast Asia – Will it impact the introduction of new innovative therapies?
In the past – when introducing new therapies and treatments, the ‘go-to-market’ strategy for life sciences companies (i.e. product owner, licensee or manufacturer) in Southeast Asia used to be straight-forward – the focus was on demonstrating improved clinical outcomes whilst leveraging US and EU clinical data and regional smaller scale studies. For new treatments, the companies achieved market-access through key opinion leaders’ endorsements. Traditionally, life sciences companies relied solely upon ‘influential’ specialists to recommend the preferred therapy/treatment to their peers who worked across public and private hospitals. Market adoption was achieved when treatment protocols were updated whilst mass adoption required payor and/or universal coverage inclusion.
However, steep medical inflation is fast neutralizing this traditional approach. The introduction of innovative treatments and therapies will be ‘less received’ by universal coverage models and insurers, given that these entities need to manage costs downwards. While more innovative advancements may yield superior clinical outcomes, the influential key medical specialists are no longer the only stakeholders in the mix. Governments and insurers are looking at cheaper, more cost-effective approaches, including generics and biosimilars. Today, ‘cost effective’ has a broader healthcare context beyond achieving better patient outcomes. The adoption of precision treatments, personalized medicines and preventive treatments may be at risk if the costs are exorbitantly higher, especially with expensive testing.
For example, in late 2024, the Singapore health ministry announced that it would not offer any subsidies for shingles vaccines due to the high price proposed by the manufacturer. While Singapore offers an impressive vaccine program, it was reported that the vaccine was evaluated to be ‘not’ cost-effective for the prevention of shingles, to the broad general population. It further stated that the country’s healthcare system had an existing shingles treatment plan in place, for patients who do contract the virus. This was despite the high incidence rate of shingles.
Expensive treatments will likely be out of coverage. Treating cancer with the latest targeted therapies and procedures such as gamma knife radiosurgery or CAR T-cell therapy will likely be excluded from most universal coverage models across many parts of Asia. For such treatments, patients will probably have to rely on private insurance or personal funding.
Some governments in the region make it extremely difficult for newer and costlier treatments to be registered and included in their universal healthcare insurance model. The Indonesia government also imposes steep tariffs upon foreign-made therapies which severely limit patients’ access to treatment.
Generating ‘Value’ – Life sciences’ New Marketing
To bring innovative therapies and treatments to SEA markets, life sciences companies now must demonstrate how new treatments and therapies create value for the patient, disease management, and the overall healthcare delivery and payor system.
Termed ‘value-based healthcare’ or VBHC – this is a healthcare delivery model focused on achieving the best health outcomes for patients while optimizing the use of resources and costs. Unlike traditional fee-for-service models that emphasize volume (e.g., the number of procedures or visits), VBHC prioritizes the delivery of best quality care to treat the patient. The model defines ‘value’ as health outcomes achieved per dollar spent – emphasizing efficiency and effectiveness, minimizing unnecessary tests, procedures, and treatments. Ensuring budgets and resources are spent wisely, VBHC aims to lower healthcare costs through efficient resource use.
With such an operating model, life sciences companies need to reframe their go-to-market approach to present value-based benefits that are factual with real world international and local data pertinent to the relevant market. Beyond improved patient outcomes, companies must detail how the treatment/therapy addresses the specific needs, pressure points and challenges faced by each pertinent stakeholder group.
To address payors and policy makers, companies need to ensure all clinical and financial modelling is well-presented clearly. The effective presentation and visualization of the ‘right’ data sets are often overlooked by companies, leaving decision and policy makers to sift through all the information, even when the information is compelling.
When introducing innovative or breakthrough treatments/therapies that seem to contravene and/or clash with current treatment regimens and payor policies, companies should undertake an advocacy strategy that aims to update and engage policymakers, with the ultimate objective of policy or protocol adjustments. This is a mid-to-long-term commitment that will help boost adoption and usage of innovative therapies.
Summary
As Southeast Asia governments and insurers are already managing ‘down’ medical costs and coverage, life sciences companies must rethink their market access strategy. Companies will have to shift from traditional volume-based models to value-based solutions, focusing on outcomes and cost-efficiency. Sustained counter-medical inflation policies will force companies to adopt leaner operational models to maintain profitability. Without universal coverage, it is fair to expect new treatments and therapies to be restricted to the private healthcare market. Mass adoption for costly innovative treatments and therapies will be rare.
At cmXp2, our life sciences team helps organizations define and architect strategic marketing, product recall & risk remediation, compliance frameworks, and advocacy & engagement for policy programs. For more information, contact us at info@corpmediapl.com
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About the Author
Dennis Susay is a senior partner at Xp2, co-leading the firm’s counsel across two sectors – the Life Sciences and Global Banking & Markets and Corporate Professional Services sectors. He has more than 25 years of Asia Pacific and international leadership experience – across marketing, brand, communications, and BD with top ranked brands including Bank of America Merrill Lynch, Baxter Healthcare, Yahoo!, Nike and Johnson & Johnson Medical. In the area of Life Sciences communications, Dennis worked for leading global agencies Hill & Knowlton and Porter Novelli, where he headed the regional Life Sciences practice serving multiple mega life sciences brands across therapeutics, vaccines and medtech. Dennis also has valuable medtech start-up experience, where he was part of the cofounding team. With his experience in highly regulated sectors, Dennis is well versed in working alongside regulatory, compliance and legal partners.
About cmXp2
cmXp2 (‘Xp2’) is a strategy services firm with deep communications, brand, engagement and advocacy expertise – designed to serve organizations operating in highly regulated sectors, specifically:
• Life Sciences
• Food & Nutrition
• Agriculture & Agri-Food and Aquaculture
• Global Banking & Markets, Institutional & Corporate Banking
• Professional B2B Corporate Services
www.cmXp2.com
