Bitter pill and sour taxes

An Editorial of one of the local newspapers here in Manila declared, “End of the bitter bill” (http://businessmirror.com.ph/home/opinion/11120-editorial-end-of-the-bitter-pill.html).

It’s about the growing share of generic manufacturers’ and distributors’ share in the Philippine pharmaceutical industry. Understandably so, With more new players, the market share of the incumbent players, all other things being equal, will decline.

The main issue in the “cheaper medicines law” is how should the various sectors -- government, generics manufacturers, NGOs, media, the public in general -- would treat medicine innovation. Because not one of them is capable of inventing new, more revolutionary and more powerful and safe drugs to evolving and emerging diseases. Only the innovator companies are capable of doing it. That is why provisions on compulsory licensing (CL), special CL, government use, parallel importation and maximum retail price (aka price control), when not justified by clear and apparent health emergencies, are seen as affront or attacks to medicine innovation.

There was one statement of the editorial that is wrong. It wrote, “It’s an open secret that many Filipino families spend a huge part of the household budget on medicine”.

I checked the National Statistics Office’s (NSO) family income and expenditures survey (FIES), latest survey was done in 2006. Percent of household spending that goes to medical care (physician visit, medicines, etc.) was only 2.9 percent. This is not “huge”. What was huge was spending on food. Household spending on alcohol and tobacco products was 1.6 percent of total. Well, people would be ashamed to admit in public surveys that they spend 5 percent or more of their monthly spending on beer, whiskey and other high-octane drinks, and cigarettes.

The editorial repeated this wrong claim. In its concluding paragraph, it said,
“we may yet see the day when ordinary families are no longer forced to give up so much of their food budgets just to pay for grossly overpriced medicine. The public has swallowed this bitter pill for decades, and, one hopes, change is real and sustained this time.”

Oh well. But back to parallel importation, because the editorial made repeated mention of this scheme. It still baffles me why proponents of cheaper medicines cannot attack high and multiple government taxation of medicines. Combined costs of import tax + import processing fee + import documentary stamp tax + local tax + value added tax can easily hit 20 percent or higher of the retail price of medicines, whether these are imported from India or US or Europe or anywhere else.

So if we succeed in convincing the government to abolish all those taxes and fees, then medicine prices in this country, whether innovator or generic drugs, will easily go down. We don’t even need parallel importation scheme that creates a fuzzy system of corporate accountability among foreign drug manufacturers, wholesales, local importers and retailers because these are all different companies. Free trade and the abolition of those expensive taxes, and a welcome mat for all pharma companies from around the world who will clearly and strictly stand by the quality of all the medicines that they bring, that they will accept full accountability and face the prison bars, should they bring in fake and substandard medicines that can cause negative effects to patients in the country.