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Saturday, June 29, 2013

Drug Price Control 35: DOH Procurement Price and Lobbying for Another Price Coercion

Government price control is price dictatorship. It is wrong, messy and ugly.
Explore new data below, 2,500+ words, nine pages long including seven tables and one graph, get your favorite drinks and enjoy the ride.

Price comparison across countries of certain goods and services is useful both for public and private decision making, provided that people are using the appropriate and verifiable conversion factors. Otherwise, the comparison can only lead to confusion, not education, and can lead to wrong public policy formulation.

After my reply to the email of James Auste, head of the Cancer Warriors Foundation (CWF), to all members of the DOH Advisory Council on the Implementation of RA 9502 (Cheaper Medicines Law of 2008), see Drug Price Control 32: Policeman of Pharma CompaniesDr. Melissa Guerrero of NCPAM-DOH iinformed me that prices of anti-cancer drugs in the Philippines remain expensive and out of reach of many Filipinos and offered to show the data. I was happy for her offer, and after several emails, she sent me the data. Posting these with her permission, as they plan to post this also in the DOH website, for transparency purposes. Thanks a lot for the data, Doc Melissa.

Tables 1 to 4. DOH Purchase Price Index (PPI), Selected Medicines, 2009-2013, in Pesos


Of the 10 drugs shown above, there is a notable increase in the PPI from 2009-2010 for all except #s 2, 3 and 10. No price change from 2010 to 2012 for all except #7 (increase) and #10 (decrease). Then a declin in prices from 2012 to 2013 for all except #8. The change in prices were mainly due to the change in the name of supplier or trader.

Here are the other 11 drugs.


Price movement from 2009-2010, increase except #s 13, 14,16,  18, 20, 21, which retained their prices or declined (#16). From 2010-2012, prices have generally remained the same except #s 11 and 12 which declined. And from 2012-2013, price declines except # 16 (same price) and 18 (increased).

Before I show the price comparison of the above medicines among the Philippines, Thailand and India, I warned readers in my previous article that there is No Single National Price for most if not all commodities like medicines in a particular country. There are many sellers catering to particular customers and buyers and thus, have different prices for the same product made by the same manufacturer.

Consider these two graphs below for a particular medicine. Equilibrium points (where supply meets or intersects demand) A and B are prices in the pharmacies of the high end hospitals in Metro Manila like Makati Med and St. Lukes; C and D are prices for cheaper hospitals; E and F are prices for the big drugstores like Mercury and Rose or Watsons, G and H are for The Generics, Generika, and points I, J, K and so on are prices of the smaller drugstores.

Thus, one can make a table of price differences not only between the Philippines and Country B or Country C, but also among different drug outlets and retailers within the Philippines. There is NO national price for a particular commodity in one country. Only the price of the biggest retailer or second or third biggest retailer, as proxy or estimate of the prevailing price in a country at a given point in time.


So for inter-country price comparison to become meaningful and verifiable, I suggested that  one 
must show, or at least consider and mention the following:

(a) same or comparable retail outlet, say only from Watsons;
(b) same reference period, say June 15, 2013;
(c) exchange rate used for converting different currencies into a common currency on a particular day, say as of June 15, 2013;
(d) taxes and fees, national and local, applied on medicines;
(e) subsidies or mandatory discount, if any, applied on medicines;
(f) other factors.

When those verifiable factors are not shown or even considered, then the price comparison becomes less effective as the readers would only blame the country with the higher price, especially the drug manufacturers and/or drugstores.

It is possible that drug manufacturers and pharmacies in country A would have higher profit margin than those in countries B and C, even if they have lower retail prices than their counterparts in B and C.

How? When the government in country A (a) does not impose taxes on medicines, (b) has lower corporate income tax and other business taxes than in countries B and C, (c) directly subsidizes a particular medicine so that it can be sold at a lower price, (d) other factors.

With that caution, here now are the price comparison for the Philippines, Thailand and India, for the 21 medicines purchased by the DOH. The current market price for the Philippines referred here is the price of Mercury Drugstore (it corners about 60 percent of the total retail pharma market in the Philippines) and an undisclosed "big private hospital". 


There is a huge price differential (4x to 7x) between those by Mercury/big hospital in the Philippines, and those in India (what drugstore or hospital in India?) for #s 1, 3 and 7. Also big price differential between those in the Philippines and in Thailand and again, what drugstore or hospital in Thailand? There is NO single price for each country for each medicine or any other commodity.

Note #7 though, even the price in Thailand is about 6.5x higher than that in India. Any of these factors can possibly explain: (a) that medicine is under mandatory and forcible big price control in India, (b) that medicine is subsidized and sold by a government-owned drugstore in India, (c) that medicine is non-patented in India and is manufactured at very low cost by any of its thousands of generic producers, (d) other factors.

In the second batch of medicines below, note #20, Philippine price is 8.7x while Thailand price is 4.6x higher than that in India. The above possible explanations may also apply here.

The price comparison would have been more level or glaring if medicines are bought in the same multinational drugstore, like Watsons. 


The second list of medicines sent to me by Doc Melissa is for breast cancer. There is a substantial price decline for all the eight medicines except #1, I wonder why since it is the same supplier as in 2012. Maybe a typo error, P94 instead of P194?

Tables 5 and 6. DOH Procurement Price Index (PPI) for Breast Cancer Medicines Access Program (BCMAP), in Pesos per vial, as of mid-June 2013


Below, note #4, Docetaxel 80 mg vial. It was procured by the DOH from Sanofi at only P10,000K per vial last year, then procured from Fresenius at only P5,500 per vial this year. But if one will buy that medicine from Mercury or that undisclosed big hospital, the price is P40,568.  


Note: #9, Methotrexate 25 mg/mL vial, supplied by (Altrex) Naprod Life Sciences Pvt Ltd., India, has been delisted from the Approved Treatment Protocol.

Why a huge price by Mercury/hospital? Only the company can provide the answer/s, but some possible explanations are: (a) Mercury/hospital is selling a new brand by an innovator company other than Sanofi, (b) lots of women senior citizens (automatic 20 percent discount + 12 percent VAT waive = 32 percent mandatory price discount) are buying that drug, so it is passing the price to the non-senior citizens female patients. Or (c) Mercury/hospital simply wants a huge mark up because it is a highly popular medicine.

But wait, Philippine price is actually lower than that in Thailand, sold at P43,665. Only India has a low price.

One problem in the Philippine health sector is the existence of a black market in medicines dispensing by some Filipino physicians themselves. Even the DOH does not know the prices of cancer drugs dispensed by oncologists to their patients. So the price of the same medicine by the same manufacturer can vary from one physician to another. I understand that it is against the pharmacy law, or medical law, for doctors to dispense medicines, they can only prescribe.  

The DOH considers this case of market failure for some oncology products, so it has created an access program for poor patients. At those prices, even middle class and some rich patients would wish they can get those cheaper DOH-procured medicines. To avoid suspicion that the DOH officials may actually be giving those cheaper medicines to non-poor patients, the DOH should publish the names of the recipient patients. But this will violate patient privacy. Some patients will not admit publicly that they are suffering from cancer because it will affect their career, or might cause depression among some family members and friends, or various reasons.

Lots of dilemma indeed. That is why in economic theory, market failure is considered only as a “necessary but not sufficient condition” for government intervention. There are many instances where government intervention actually worsens the initial condition, or a case of “government failure worsening market failure.” So, dahan-dahan, hinay-hinay lang, people should not propose more government intervention, regulation and taxation as if such are just temporary measures that can be discontinued and withdrawn next month or next year when the result is more damaging than being helpful.

Finally, we keep hearing from some sectors and individuals that we should emulate India’s pricing as they have among the lowest medicine prices in the world and hence, by implication, people there have better health outcome. Is this so? Check this simple table to separate illusion from facts.

Table 7. Some Basic Health Indicators for Thailand, Philippines and India


Thailand
Philippines
India
Life expectancy at birth Male/Female (years)
71 / 77
66 / 73
64 / 67
Probability of dying under five (per 1 000 live births)
12
26
61
Probability of dying between 15 and 60 years M/F (per 1 000 population)
207 / 102
256 / 137
247 / 159


Even if medicines are ultra cheap in India, one’s chance of dying young and early is higher there than in the Philippines or in Thailand. There are many factors for better health outcome other than cheaper medicines. But some sectors have taken the ideological position that multinational pharma companies and global capitalism are evil, so the solution is more government intervention, and move to healthcare socialism.

The kind of more government price intervention in medicines is three-pronged One is by expanding the existing drug price control (or maximum retail price, MRP) policy by covering more drug molecules. Two,  by expanding the mandatory price discounts for senior citizens and persons with disabilities (PWDs) to other sectors like solo parents. And three, raising the forcible price discounts to 50 or 75 percent for centenarians.. Again, guys, dahan-dahan lang. If you get what you wish for, you will simply regret it because socialism is a lousy, inefficient and dictatorial system that only dictators and highly insecure people would love to become leaders of that society.

Back to James Auste of CWF. Yesterday, he emailed to various yahoogroups including CHAT’s, then to all DOH Advisory Council members. He recalled that during the 16th meeting of the Council (February 14, 2013), there was a proposal by some (not all) innovator pharma companies to raise the price of their medicines, at least those not covered by EO 79 issued by former President Gloria Arroyo. He opposed this during the 17th AC meeting (June 14, 2013). Instead, he asked that all multinational pharma companies should submit to the AC their audited financial statements submitted to SEC, to see if they are indeed losing money to justify raising the price of their medicines that were affected by the price control policy.

He actually left early during the 17th meeting, so when DOH UnderSec. Madz Valera later called that issue in the agenda, it was not taken up because the proponent has left. Yesterday in his email blast, he argued the following:

ANALYSIS--WALANG DAHILAN! NO REASON! HINDI MAKATARUNGAN! HINDI KATANGGAP TANGGAP! ANG REQUEST FOR INCREASE SA PRICE NG GAMOT NG PILIPINO PATIENT BASED ON THEIR TAX DATA....  BINAYAD NA TAX

1-MERCURY DRUG           717,963,633.61
2-MEAD JOHNSON          584,867,044.57
3-WYETH                           446,164,642
4-ZUELLIG PHARMA        286,241,875.50
5-GLAXO SMITHKLINE     252,669,751.78
6-PFIZER                           241,760,750.40
7-BOEHRINGER INGELHIEM 199,050,089.15
8-MERCURY GROUP       177,072,565.66
9-METRO DRUG                149,146,130.70
10-BAYER                            140,397,676.50
11-EURO MED                    107,077,860
12-ROCHE                            91,123,065.30
13-NOVARTIS                       80,135,169.90
14-BAYER                            79,107,661.80
15-MERCK                           74,467,667.70
16-ELI LILLY                      66,909,611.70
17-ABBOT                         48,599,623.20
18-WATSONS                    47,790,257
***LIST GALING SA BIR.GOV.PH! please reply kung di kayo kasama sa nag re request ng price increase! 

CONCLUSION--MALAKI ANG KANILANG KITA! IN MILLIONS OF PESOS INDIVIDUALLY!  COMBINED IT IS A MULTI BILLION INDUSTRY!
ITO ANG DAHILAN BAKIT ANG PINAS ANG HAS THE HIGHEST PRICE OF DRUGS IN ASIA! AND INCREASING MORTALITY SA DISEASES! KAYA ITO ANG DAHILAN WHY WE DENY TO THE HIGHEST DEGREE ANG REQUEST FOR PRICE INCREASE!

CALL-- PANGKALAHATANG PRESYO PARA SA PILIPINO!

                                                          BAKIT MAHAL 
                                               BAKIT HINDI MAGBABA 
         BAKIT HINDI MAGAMIT ANG MGA GAMOT NG PILIPINO PATIENT

   LOWER PRICES OF MED==MORE SAVINGS=MORE BUDGET FOR OTHER MEDICAL FAMILY NEEDS!

--finalizing prices of the essential drugs! ITO ANG UNA
 1--MERCAPTURINE TABLETS USED DAILY NG ALL KID FOR 2-3YEARS! BEFORE MDRP MRP 80 PESOS! 
SA INDIA 6 PESOS LANG!!

 2-METOTREXATE TABLETS USED 2-YEARS NG ALL KIDS! NASA 19-30PESOS 
        SA INDIA 3PESOS LANG! I
     ITO ANG PROCURMENT PRICE NUNG 2009 NG SINIMULAN ANG PROGRAMA!
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At the CHAT yahoogroups, I replied to him and pointed out that Unilab is the biggest pharma company in the Philippines. It corners about 25 percent or 1/4 of the total Philippine pharma market. The 2nd, 3rd, 4th -- GSK, Pfizer, MSD I think -- have combined share of around 21 percent or lower than the market share of Unilab.

Note also that in his data above, #s 1, 8, 9 and 18 are drugstores, local drug retailers and not multinational pharma companies which are the object of his criticism as having very high revenues.

For public interest groups, NGOs and other CSOs that advocate certain policy measures, it would help if they do more serious research before they open their mouth. There are alternative sources of data, like (a) company websites, they normally publish their financial statements; (b) BusinessWorld’s Top 1,000 Corporations, available in bookstores or in some university libraries, (c) SEC, maybe write a formal letter of request, (d) DOH or MeTA Philippines presentation papers, (e) Center or Institute of Public Health in some universities (UP, Ateneo, La Salle, UST, etc.), others.

For patients and other people who keep asking for more subsidies, more welfare from the state, they should be happy and thankful for those big corporate taxpayers, instead of demonizing them. Government is a penniless institution that becomes rich and powerful only from the taxes that it collects from the people, individuals and corporate taxpayers alike.

Government price control is wrong. Whether we are talking about cellphones, computers, clothes, mangos or medicines, price dictatorship is wrong. What the consumers should demand from government, is to further liberalize the economy, so that more producers and suppliers, more manufacturers and retailers, will come in and do business in the country. Then consumers will have more choices, more options. If they complain of high prices by one seller, no need to rally in the streets or make political noise and call for government price dictatorship. Simply walk away and go to the next supplier who can sell at a lower price, easy.
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