FAT-FREE ECONOMICS: Why drug pricing bureaucracy is not cool
This became clearer to me when I attended the Congressional Oversight Committee on Quality Affordable Medicines at the Senate yesterday. It was chaired by Sen. Manny Villar and co-chaired by Rep. Albert Garcia – both of whom head the Committees on Trade and Commerce in their respective chambers.
The other legislator who attended was Rep. Ferjenel Biron (4th District, Iloilo), the main author of a bill creating the Drug Price Regulation Board (DPRB), of which a counterpart bill was filed by Sen. Villar. Besides the three, no other legislator attended the hearing. The panel of resource speakers represented various interests and groups in the Philippine healthcare sector.
Rep. Biron spoke long, glorifying the magic that government price regulation and control can do because “competition does not happen, drug prices here are very high compared to prices in India and Pakistan.”
The local generic companies, the multinational innovator companies, the local pharmacist association, medical association, drugstore association, hospital association, academic pharmacists, and some NGOs like us in Minimal Government Thinkers, are unanimous in saying that price control is not the answer as competition among various players has resulted in the slow but steady decline in average prices of drugs.
The price of anti-bacterial infection co-amoxiclav has gone down from around P56 per tablet in 2007 to P50 in 2008, P41 in 2009, and P33 in 2011.
A second reason it's wrong to say that poor people cannot afford essential medicines is that for really poor people, even a P5 tablet is still “expensive and unaffordable”, since they want the government – national and local – to give away the medicines for free.
The Department of Health has identified several medicines as “entitlements,” to be given for free to certain poor patients. Some rich local governments – such as the cities of Manila, Makati and Quezon - have city-owned hospitals and they treat poor patients for free, even give away some medicines for free. This is an example of making essential drugs not just “cheap and affordable” but free for the poor, and even to those pretending to be poor.
The reasons or alibi for regulating prices can be endless. “Millions of Filipinos are waiting and dying out there” is a statement for instance, that I heard at least three times from Rep. Biron during the hearing. So whether people are dying (we all die, right?) from cancer (and there are probably 200+ different types of cancer), various diseases of the heart, cerebrovascular diseases, pneumonia, diabetes, or mosquito-borne diseases (dengue, malaria, etc.), the threat of price control will be on the heads of the pharmaceutical companies.
Competition among various players, not more regulation by government agencies - whether existing or future bureaucracies - is the best tool to promote public health at the least cost to taxpayers, and invite the least opportunity for robbery among the corrupt officials in government.
Fat-Free Econ 8: Drug Price Regulation is Wrong, May 04, 2012
Drug Price Control 23: Greece's Pharmacy Nightmares, January 13, 2011
Drug Price Control 24: Forcing Drug Firms to Report Payment to Doctors, January 24, 2012
Drug Price Control 25: Top 10 Articles on Google Search, April 03, 2012
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