Monday, April 26, 2010

Medicinal elections

Health financing and medicine prices are among the topics that would crop up during debates among opposing candidates and political parties as the national and local elections are just a few days away. Candidates tend to embrace the more interventionist, more confiscatory policies to become more popular with the voters. Among the populist promises made by national politicians are (a) extend and expand the drug price control policy, and (b) the state confiscating drug patents to further bring down prices.

Let us expand this into a hypothetical but probable scenario.

Let the Department of Health (DOH), upon the prodding of some influential legislators, extend drug price control, impose compulsory licensing (CL), and push parallel importation, to all patented drugs in the country. Do all three policies simultaneously, since these policies are now legal and allowed under the Cheaper Medicines Law (RA 9502) under certain conditions, and many people think that patented drugs = expensive = anti-poor.

With the high cost of inventing more powerful drugs, the innovator pharmaceutical companies will stop selling their newest drugs, their more disease-killer drugs into the country. They say,

"The most effective anti-hypertension drugs in the Philippines right now can bring down blood pressure in 1 hour or 30 minutes. Our new drug can do that job in 5 minutes, zero complication…. Or current anti-cancer drugs available in the Philippines can give an average patient some 20 to 30 percent survival chance. Our new anti-cancer drug can improve a patient's survival chance from 50 to 60 percent…. But you can not buy our drugs in any Philippine drugstore. You have to buy them in Hong Kong or SingaporeJapan and other Asian countries with no price control, no CL." or

Is this a good and desirable situation?

Other people will say “Nothing to worry, multinationals have threatened in the past to pull out of the country, or pull out some of their products in Philippine markets if they will not get what they want. But they never did so since they still make lots of profit here. And patents have to be shortened as much as possible because 20 years patent is too long for profit-making. Patients over patents.”

This answer is not plausible for the following reasons.

One, there is no need to "pull out" newly patented, more expensive, but more disease-killer drugs from the country because the innovator companies, as mentioned above, will not make them available here in the first place. They will only bring in their off-patent, or patent expiring in 1 to 2 years, but not the newly-patented with 7 years or more patent life.

Two, the 20 years patent is only on paper. There are plenty of regulatory approvals AFTER a patent has been filed and approved, and regulatory scrutiny is increasing, not decreasing, around the world. Meaning, the patent starts from the discovery of the molecule, before undergoing various clinical trials, and not from the time the drug is marketed. Innovator companies say that of the 20 years patent life, the effective patent protection and “commercial or profit period” is only about 7 to 11 years because the first 9-13 yrs are spent on various clinical trials (from animals to people) and complying with various regulatory procedures by food and drugs administrations (FDAs) of governments.

Three, any adverse result to people that will occur during clinical trials which the innovator company cannot find a solution, then that drug will be abandoned for commercial development, even if several million dollars have been spent already, even if that molecule has a patent already.

There are proposals also that the government should put up its own drug industry, similar to Thailand’s Government Pharmaceutical Organization (GPO). The best way that I can think of developing "our own drug industry" is to allow United Lab, Pascual Lab, and other domestic pharma companies to flourish, via joint ventures with other big local Asian pharma companies (say from India, China and Pakistan) and become innovator multinational companies themselves, exporting their new drugs to other countries.

Let us not push the idea of the DOH putting up a government pharma company as the fiscal cost of such project will be too high. If the DOH cannot operate a big government hospital with full efficiency, what makes us think that the DOH can operate a big pharma company?

Many people never tire of citing “market failure” in health and other sectors. What they do not realize is the huge distortions created by bigger government intervention and taxation. At 5 percent import tax + 12 percent VAT + FDA regulatory fees + normal corporate taxes + local government taxes, government contribution to expensive medicines is often overlooked.

More competition, not more government regulation and taxation, will bring down medicine and healthcare costs over the long term.

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