Tuesday, June 22, 2010

WSJ article on drug price control

About 2 weeks ago, I got a call from James Hookway of WSJ in my cp. He said he read my papers and presentation materials on drug price control from the MG website. Below is his news report, I was quoted in one paragraph there.


Wall Street Journal
JUNE 18, 2010

Philippine Price Controls Hamper Rise of Generics


MANILA—The Philippines recent embrace of drug-price controls to lower the cost of life-saving medications is creating some unexpected problems—including crimping the supply of inexpensive generic drugs.

The country's president, Gloria Macapagal Arroyo, was eager to reduce the cost of pharmaceuticals in a nation where a third of its 95 million citizens live on around $2 a day. Last August, she used new regulations to cut the cost of five widely used medications, including Pfizer Inc.'s Norvasc hypertension drug and GlaxoSmithKline PLC's Augmentin antibiotic.

Facing mandatory price cuts, drug companies in the Philippines cut the prices of an additional 16 drugs, and in February agreed to slash the prices of frequently prescribed medicines.

A pharmacy customer in Manila.

Industry analysts and executives said the price caps have unintentionally knocked the wind out of a nascent generic-drugs industry that had sprung up here. Lower-priced brand- name drugs are pressuring these low-cost producers, and creating a policy challenge for President-elect Benigno Aquino III, who takes over at the end of June.

Edward Isaac, executive director of the Philippine Chamber of the Pharmaceutical Industry, said price controls and the threat of more caps have lowered the cost of some brand-name drugs to near those of generic competitors. Pfizer's Norvasc was cut to about 22 pesos, or 47 cents, for a five milligram tablet, from over 44 pesos.
"What's happening now is that when the price of Norvasc, for example, is cut, the generics have to slash their own prices," Mr. Isaac said.

Declining profits have some drug retailers putting expansion plans on hold. "We've not opened any new stores since the price controls were introduced," said Leonila Ocampo, vice president of Manila-based MedExpress. The drugstore chain has seen sales volumes drop since the price controls were introduced. "Our margins are under pressure, and if there's no profit, I don't know what will happen," said Ms. Ocampo.

Another drug store operator, Florecita Intal of Stardust Drugs & Medical Supplies Corp., said lower revenues from the branded-drug price caps restricts her ability to expand and offer less expensive generics. She fears smaller retailers might not survive.

While brand-name drugs still account for a large proportion of the drugs market here, generic competitors were beginning to gain in popularity, driven by the spread in recent years of generics-based chain stores up and down this densely populated country.

Data collected by Mr. Isaac's organization indicate, however, that the value of all drugs sold dropped 15% from August 2009 to February 2010, while the volume of pharmaceutical sold here held steady.

Bienvenido Oplas, head of the Manila-based Minimal Government Thinkers Inc. think-tank and a member of the consultative panel advising the Philippines' Department of Health, said this means the price controls policy just isn't working. "It hasn't fulfilled its objective of making more drugs available to more people," he said....

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