1 month of drug price control, initial assessment

Below is a news report, an initial assessment of a month of drug price control policy by the Philippine government.

Watsons drugstore says business was good, the federation of small and independent drugstores, DSAP, says they're bordering on bankruptcy. Private Hospitals Assn. of the Philippines(PHAP) also complain, while the Pharmaceutical and Healthcare Assn. of the Philippines (PHAP) and the Philippine Chamber of Pharmaceutical Industry (PCPI) have relatively neutral statements.

But for the first time, I read that the DOH, through USec Padilla, is talking to the Department of Finance (DOF) re government taxation of medicines, especially the 5 percent import tax and 12 percent VAT.

Theoretically, the DOF can't just remove the VAT on medicines because you need a new law amending some portions of the national internal revenue code (NIRC) to say that medicines should be exempted from VAT, also amend the tariff and customs code to say that medicines should be exempted from import tax. These cannot be done by administrative measures, only legislative measures. But then again -- if no one will protest and object -- the DOF can possibly issue an administrative order temporarily exempting medicines from VAT, until a new law is enacted. But such law will have to wait for the next Congress starting 2010.

It's important that government double-talk of "cheaper medicines" and expensive medicines via taxation be corrected. Taxes always distort prices upwards. Govt. can double the taxes on alcohol and tobacco products, but abolish the taxes on medicines.
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http://www.businessmirror.com.ph/home/top-news/16196-1-month-after-big-pharma-drug-stores-hospitals-assess-mdrp.html

1 month after, big pharma, drug stores, hospitals assess MDRP

Written by Sara D. Fabunan / Correspondent
Friday, 18 September 2009 04:00

BIG pharmaceutical companies, which feared the worst with the cheaper- drugs law, are slowly seeing a window of opportunity one month after the government fully enforced an executive order implementing the year-old law: the window is in the tradeoff between much lower prices, but bigger sales volumes.

Small drugstores, however, are complaining, and claimed the combination of cheaper prices and the mandatory senior-citizen discounts are driving them out of business.

A similar complaint is being made by hospitals, who said their in-house pharmacies, known to be adding on hefty sums on the usual prices in drugstores outside, have said they lost a vital profit center when the MRDP went into effect on August 15. Some even claimed they took a big chunk of manpower costs from the in-hospital pharmacy profits....