Drug price control 2: Competition and GSK experience

(Note: the original title of this paper was "Competition, sans coercion, will bring drug prices down")

Competition among market players, not heavy government coercion and regulations, will bring down average prices. Whether we are talking about coffee, tomatoes, rice, or medicines. Thus, government should encourage and attract more players and competitors in each sector and sub-sector, not scare and threaten them with existing and future restrictions and additional taxation.

Some sectors would give more credit to the drug price control policy of the government (via the DOH) in 2009 for the decline in prices of many drugs. It is not true. Drug reductions have been happening much earlier than 2009, as more players, especially generic manufacturers, come in. For each successful and saleable drug whose patent has expired, there are many generic manufacturers, sometimes including the innovator companies themselves, who will produce new brands for the same drug molecule. The competition among them benefit the consumers and patients.

There's a news today in BWorld about the experience of GSK.

GlaxoSmithKline gets sales boost from drug price cuts

Posted on January 24, 2011 10:44:14 PM
BY JESSICA ANNE D. HERMOSA, Senior Reporter

Price reductions implemented years ahead of the government-mandated cuts allowed GlaxoSmithKline Philippines, Inc. (GSK Philippines) to best competitors and also keep up with cheaper generics, the officials claimed....

“The industry barely grew the past two years with sales just rising by just 2%,” GSK Philippines Managing Director Roberto C. Taboada said in an interview.

But for 2010, GSK Philippines “grew above the market,” Mr. Taboada said, declining to elaborate. This was a turnaround from the 7.8% decline in the company’s gross revenues to P8.076 billion in 2009. Net income that year plunged by 92.5% to P58 million....

Patients had been offered discounts since 2004 even before the government required price cuts for certain drugs in 2009, Lourdes Desiree D. Cembrano, vice-president for external affairs, said....

The DOH has not sounded any new pronouncement of keeping or withrawing the drug price control policy. In such silence of policy announcement, the implication is that the DOH will continue the policy. The DOH will also continue to remain silent on continued double (or more) taxation of drugs which contribute to "expensive medicines" despite repeated mantra and slogan of "cheaper medicines."

See Part 1 of this series and AsPac pharma market and government.