Insurers seek generic drugs rules to cut medical cover costs

Insurers are pushing for rules that will require hospitals to prioritise dispensing generic drugs over branded medicines to patients as a strategy to tame the rising cost of medical cover.

The Association of Kenya Insurers (AKI), an industry lobby, is calling for a legal framework, which will ensure doctors do not prescribe the brand name, but only write down the chemical make-up of the drug.

AKI chairman Patrick Tumbo reckons that drugs make up about half or an average of 45 per cent of patients’ hospital bills, and the ratio is even higher in health facilities, which dispense branded medicines.

“When the cost of healthcare goes up, we’re also forced to raise premiums. Generic drugs can be up to 80 per cent cheaper than branded drugs,” Mr Tumbo said in an interview with Smart Company.

Underwriting loss

AKI wants Kenya to follow in the footsteps of India where Prime Minister Narendra Modi in April announced a new health policy, which compels doctors to prescribe generic medicines and only resort to branded ones in unique cases where there are no cheaper alternatives.

New drugs are normally developed under patent protection, but once that expires, other pharmaceutical firms are allowed to develop them in all chemical characteristics thus their cheapness. 

Half of Kenya’s 20 insurance firms, which offer medical cover reported underwriting losses in this category in the period to December 2016, according to official data.

This means that the 10 medical insurance providers paid out more in claims and expenses than premiums collected – according to data from the Insurance Regulatory Authority (IRA).

Resolution Insurance topped the list with a medical underwriting loss of Sh213.2 million followed by UAP’s Sh189.1 million, Takaful (138.4 million), Madison (Sh119.8 million), First Assurance (Sh45.3 million), Sanlam (Sh34.3 million), and Kenindia (Sh30.7 million).

Bribery claims

Others that incurred losses from the medical insurance class were Cannon Assurance Sh22.7 million, Pacis (Sh17.2 million) and GA’s Sh8.02 million hole.

This was partly blamed on increased cases of doctors prescribing branded drugs, as well as fraud.

One high-end hospital in Nairobi had 68 per cent of prescriptions in the first five months of this year being branded drugs, while the average for other health centres – especially those sponsored by religious bodies – was about 30 per cent, according to data seen by Smart Company.

The ratio of prescribed generic drugs in the US is about 80 per cent, according to Food and Drug Administration.

There are allegations that pharmaceutical giants bribe Kenyan doctors to prescribe their brands in return for kickbacks such as hefty bonuses and holiday trips.

Kenyan doctors were in 2014 accused of receiving bribes from French firm Sanofi to prescribe its drugs to patients.

Sanofi reported itself to the US Department of Justice and the Securities and Exchange Commission.

Aon Kenya, the administrator for medical schemes for civil servants – Teachers Service Commission, National Police Service and Kenya Prisons Service – also says that it encourages use of generic drugs, which are cheaper than and just as effective as branded drugs.

“We need to separate the two. Branding comes with a cost. We don’t want our patients to bear that cost. When prescribing we want you to prescribe paracetamol not brands,” said Dr Njoki Fernandes, a director at Aon’s managed medical care unit.


The medical schemes have 400,000 principal members and about 600,000 dependants; making it one of the largest health covers in Kenya, according to data from Aon.

Jubilee Insurance made the biggest underwriting profit in the medical insurance class of Sh257.6 million in the period under review, followed by Sanlam (Sh224.5 million), Heritage (Sh126.9 million), AAR (Sh83.9 million) and CIC’s Sh73 million.

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