Drug Price Control 41: Exchanges with Joey Ochave at MeTA PH

After my  discussion on CWF Wants Price Dictatorship for Lipitor, Joey Ochave, SVP of Unilab and Vice-Chairman of MeTA Philippines, reacted to it. We have a nice, friendly and civil discourse and mini-debate the past two days. The other members of MeTA PH (80+ people in the email loop) expressed satisfaction reading our exchanges. Copy-pasting them below raw, zero alteration even comma. Later, another friend, Karen Villanueva joined. Karen is from Merck and also MeTA PH member. Both Joey and Karen gave me permission to use their comments for this blog post.

The two tables below are not part of the original exchanges. I made them and inserted them here as additional background info about the price control or mandatory, forcible 50 percent price cut policy in August 2009. This is about 3,200 words,  six pages long including the two tables. Enjoy.

---------

I never thought I would say this – I agree with Nonoy. (Biro lang, Nonoy.) Price control is not the answer. It is not a sustainable policy instrument to address issues relating to access.

If I remember correctly, there was a preliminary study done before on the impact of the 2009 MDRP (or MRP, if one is to follow the text of the Cheaper Medicines Law). It showed that the ones who benefited most from the 50% price reduction were those who were buying the “originator” medicines and not the poor who were its intended beneficiaries. The poor, after all, were getting free medicines from the government or already using generic equivalents. (I do not, however, discount the possibility that there were some poor people who having been prescribed the originator brands never used generics and thus were able to benefit from the MDRP. I would assume though that their numbers were not significant.) Hence, if the policy objective is to provide access to the poor, then price control is not the answer. (I just learned from former UP College of Pharmacy Dean Yollie Robles that  she just completed a similar study. It would be good if she could share it with META.)

Further, the situation now is much different from that in 2009. Competition in the pharma sector has flourished since then. Filipino patients have more choices now than before, with several brands at different price points for every non-patent protected molecule. Since 2009, generic drugstores have thrived due to the successful marketing programs of TGP and Generika. Even Watsons has seen it fit to introduce now its Watsons Generics brand, with all the marketing gloss that one would previously associate only with “branded” medicines. More importantly, the government put in more money for medicines, with the latest figures showing a 40% increase in budget. Many expect this to grow further as Universal Healthcare becomes a reality. After oncology and kidney transplant medicines, I understand that PhilHealth is interested in covering also out-patient medicines for diabetes and hypertension. They have an existing pilot program with a generic drugstore that they might scale up soon. Hence, while access to essential medicines is still an issue, there are already several successful initiatives to address it since 2009.

On Pfizer’s differential pricing scheme, this is nothing new. This is standard practice after patent expiry. Companies will have different prices for different geographical markets. This is why, for example, the price in Thailand for the same product by the same company may be lower than in the US. What is new now is that differential pricing is being done within a single country. In the Philippines, this has been made possible because of the Certificate of Listing of Identical Drug Product (CLIDP) scheme of FDA, which allows a manufacturer to provide several marketing companies a “daughter CPR” from its Principal (“mother”) CPR. This means that two or more marketing companies can source a drug from a single manufacturer, and each one is free to price it depending on its cost structure and intended market.  As anyone in the pharmaceutical sector knows, medicines are priced depending on what the company thinks the “market” will accept. The definition of “market” depends on the population segment the company wants to serve. If SEC (socio-economic class) AB, then one would expect a company to price it higher than another company which wants to serve the SEC D market. Theoretically, a company may choose to cater to both the SEC AB and SEC D using identical products, except for the packaging and the go-to-market strategy. There are many reasons why a company may want to do this – for CSR purposes, to have a flanking brand, to protect its market share, or as a product life cycle management strategy, among others. Each company will have its own reasons.

On the GMAP, it is actually a voluntary price reduction by selected companies in response to the government’s request. There is nothing illegal in it, Nonoy. In truth, almost all molecules (except for one) covered by the Executive Order imposing MDRP are Pfizer products, for reasons all of us know. Atorvastatin (LIPITOR) is one of them. This means that the current LIPITOR price is already 50% lower than its pre-MDRP price. If indeed, Pfizer is supplying Rhea an atorvastatin product that is identical (same manufacturer, same shape and color of tablet) to LIPITOR and it is 40-60% cheaper than the current post-MDRP LIPITOR price, then we should welcome this. Doctors and patients (who continue to prescribe or buy LIPITOR despite the presence of its generic equivalents) may be advised to shift to Rhea Atorvastatin so they can save.  (I bought samples over the weekend, and what James says is true. LIPITOR and Rhea atorvastatin are identical.) Kung ayaw ng RiteMed o Pharex (okay ba, Beau?), then LIPITOR users can shift to Rhea Atorvastatin. Switch and save, sabi nga ng Watsons Generics. Rhea, by the way, is only available in MDC.

I was told that Pfizer is also supplying Rhea Mefenamic Acid. I checked this over the weekend, and it’s true. Totoo nga, parehong-pareho. Same manufacturer, same color and shape of tablet as PONSTAN. The only difference is the price – PhP 3.90 for Rhea Mefenamic Acid and PhP 31.25 for PONSTAN, or almost 10x the Rhea price. This is even bigger than the Rhea atorvastatin savings. Remember Sec. Pagdanganan during the Cheaper Medicines Law campaign? Remember when he was comparing the PONSTAN prices in the Philippines and India and wondered aloud why the big difference? J

While I disagree with James on the price control proposal, we should nevertheless thank him for his continuing advocacy of patients’ right and welfare. C’mon, none of us in this email loop has done more individually for patients than James has. He was an influential voice during the Cheaper Meds campaign and he was instrumental in persuading PhilHealth to cover out-patient oncology medicines, especially for childhood leukemia. At the last META Board meeting, we noted the continuing absence of patient organizations (except the Psoriasis group now) in META. Until now, the access campaign in the Philippines has largely excluded patient groups. Maybe it’s because patients’ hands are already full coping with their condition and they find tiring the endless discussions/arguments that we have. However, if we are to have meaningful changes in the healthcare system, the voices of the patients have to be given primacy. It is a real issue for them, life and death, not a theoretical one as it is to some of us. Kaya James, saludo kami sa iyo. Yes, kindly give the same passion you gave to Cancer Warriors to your advocacy for Lolo and Lola. Sadly, many of us are either compromised or do not have the courage to do that.

Hala, masyado nang mahaba itong email ko. Bottomline, I agree with Nonoy that price control is not the answer. Competition is. The fact that Pfizer is now in the generics arena through Rhea should be a cause for celebration. Now, the LIPITOR and PONSTAN prescribers or users who are not comfortable switching to existing generic brands will have the option of switching to Rhea. Trust me, parehong-pareho sila. This is what competition is all about.

-- Joey Ochave

Thanks Joey. I believe that majority of players and stakeholders in the PH health sector never support or advocate price control or price dictatorship. When the issue became sensationally hot in early to mid-2009, there was never a "health crisis" or emergency, only a political crisis for then Sen. Mar Roxas who was too desperate to raise his low ratings as a Presidential candidate.

Re studies about the impact of price control, it is in the law that the DOH should submit a report to Congress Oversight Committee on RA 9502 at least once a year, and submit a report to the President two times a year. I think this was never done by the DOH, or if ever it did so, those reports were never made publicly available, freely downloadable.

Leonie Ocampo of PPhA, Reiner Gloor of PHAP then, Beau Agana of PCPI, have made several presentations showing that (a) drug prices have been declining even before the 2009 price control because of growing competition among drug manufacturers and distributors, and (b) only the overall revenues of affected innovator companies were affected but volume wise, their sales have not significantly increased. Someone taking Norvasc 1 tablet a day against hypertension does not take 2 tablets a day simply because the price is cut by half. Ma-'undertension" na sya noon :-)

Price differentiation, market segmentation, is a natural thing to do for private enterprises. The prices of a can of Coke in a sari sari store, 7-11, Mini Stop, SM grocery, Rustan,s, Itallianis, Shangrila, Intercon, etc., can vary widely. Same product, same volume, same packaging, same manufacturer, and yet have different prices. Because they cater to different buyers and consumers. The same practice applies to a bottle of C2 or a piece of Toblerone.

A tablet of Norvasc or Biogesic can have different prices in Mercury, Watsons, TGP, Aling  Merced drugstore, etc because they have different cost structures. Aling Merced and other small drugstores rent a small space and pay little on space rental, have no air-con and pay little on electricity, have no full time pharmacist and pay smaller on manpower, etc.

GMAP Joey, is never voluntary price reduction. There was a blackmail, a threat by the state, that if the affected innovator companies do not "voluntarily" cut their prices by half, their drugs will be included in the Gloria EO. So the message of then DOH Sec. Duque and DTI Sec. Favila was "You bring your price down by 50% on your own, or we will bring it down by 50%, by hook and by hook". Blackmail was explicit, not implicit, so it was never "voluntary" price reduction.

The DOH was lucky that not one of the affected companies sued it. ALL the criteria that the DOH used as suggested by IMS, were NOT in RA 9502, not in the IRR. In  short, they were all illegal criteria and yet was implemented with force and coercion by the state.

Well if I was the affected company, I would not sue the DOH and DTI too. It is difficult to fight the state, you will be courting more trouble and problems. Especially in a highly politicized environment like the 2010 Presidential election coming just a few months away.

So, do we see an  end to an  itch, a temptation, for some sectors to call for another round of price control in the future? I doubt it. Out of nowhere, some people will simply demand for that policy. Just two years ago, when leptospirosis was killing many people due to heavy flooding in many parts of the country, there was a call for price control of doxycycline, I wrote it here,

Drug Price Control 29: MRP Attempt Over Anti-Leptospirosis Drug.

Until today, dengue knocks down if not kills many people and there is no vaccine against it yet. But Novartis, other innovator pharma are close to developing their own. Once that patented vaccine becomes available and priced high, I can smell future complaints like "Profit hungry pharma making big money out of the sick and dying patients. Government should impose a price control. Or issue a compulsory licensing."

MERS-CoV is another killer infectious disease. It has killed hundreds in Saudi Arabia alone, and no  existing vaccine or medicine against it yet. My sister in law, an  OFW-Nurse in Saudi was killed by that disease just 4 months ago, Her body was brought home to our province in Negros Occ. more than  a week ago. See  MERS-CoV and OFWs, Part 3.

If an innovator pharma can develop an effective cure against this disease, that too will become the subject of political hatred by many groups, calling for price control of that medicine or  vaccine.

Re patient groups, I think all of us have patients among our family members and friends. Or some of us are patients themselves in the sense that they are taking maintenance drugs or regularly see health professionals for healthcare. My mother is an 80 year old, mostly bed ridden patient for several years now, with kidney problems and Alzheimers. My father is 85 yrs old and going to a hospital from time to time is part of his regular life. That makes all of us lobbying or advocating for patient rights somehow, though informally as we do not belong to any SEC-registered health NGOs.

-- Nonoy Oplas

While I think that price control is completely inappropriate at this time, it is a policy instrument that no government should waive. It is a much easier, less contentious policy instrument than, say, compulsory licensing or parallel importation. Witness the political lobbying against the last two instruments every time a developing country uses them. This despite these instruments being WTO-legal; in the IP laws of even developed countries like the US, Japan, and EU nations; and explicitly encouraged by the WTO Doha Declaration on TRIPS and Public Health to be used by developing countries. Every time Thailand or South Africa resorts to compulsory licensing to address a public health problem, a sophisticated lobby industry goes into full gear to paint them as being “anti-intellectual property”. The usual arguments are given much play -- it discourages foreign direct investments (hogwash, if you ask me) and punishes innovation (hmmm J). The “offending country” is then placed in the Special 301 list and threatened with unilateral trade sanctions. This despite the fact, again, that compulsory licensing and parallel importation to address a public health issue is WTO-legal and included in the TRIPS Agreement.

In contrast, when a government imposes price control, no one goes to the WTO or any international organization to complain. Why? Because it is recognized as a valid (albeit not necessarily effective) policy instrument by everyone. Japan enforces price control every two years. The EU governments do it regularly. The US, well, prices plummet after a patent expires due to market forces, especially because of big third-party payors like the government, HMOs, and Pharmacy Benefit Managers.

I am not a big fan of price control, but I recognize the need for it when there is market failure. If due to anti-competitive practices prices are maintained artificially high thus constricting access, why not? Rest assured, however, that there is a thriving competition in the Philippine pharma market on non-patent protected medicines so price control is totally inappropriate. However, the pharma companies need to be more cognizant of the needs of the poor if their businesses are to be sustainable. No company doing business in a country like the Philippines can afford to ignore the poor. No one.

-- Joey

Price control is already in RA 9502, so it can be applied anytime, provided that the criteria in the law should be followed, and the DOH should not invent at whim and arbitrarily, new criteria, 100 percent illegal criteria, in imposing price control. There are about 7 or 8 criteria specified by the law, and affirmed by the IRR, before price control or Max Retail Price (MRP, not MDRP, not GMAP) can be imposed. Rule of law, not rule of desperate politicians and play along Secretaries.

About CL, again, it is in RA 9502, it is in the TRIPS agreement, thus players and the public recognize the possibility of its application. But like price control, the criteria for imposing CL as stipulated in the laws should be properly observed. There should be no out-of-nowhere, illegal criteria that should be introduced in imposing CL

The politics of hatred and envy should be discarded whenever possible. Like now, no one is an "evil pharma that profits from the sick and dying of dengue" because such successful and marketable vaccine does not exist yet. But once it becomes available, the politics of hatred and envy will come in. "Impose price control, or impose CL on that essential medicine/vaccine against dengue. Public health is involved here" will be a new call that we might hear and read soon.

Re market failure, if the economy is competitive and not heavily regulated, market failure invites market solutions. Anyone anywhere can actually create market failure. Mr. X demands that an effective medicine against Alzheimers should be available at only P100 per tablet. Demand is there but supply is zero, so market failure. Existing suppliers are unable to produce a particular good at a particular price demanded by certain sectors of the market.

Does this situation warrant or justify government intervention, like price control  or CL of existing, popular drug vs Alzheimer's? No.

Market failure can be a necessary but not sufficient condition for government intervention. Because it might be a case where the intervention, the supposed solution, will create more problems than the original one.

See guys, cheaper medicines go beyond populism and media/street noise.

-- Nonoy

Price control for medicines  as a policy instrument is a lever for government specially when they are funding healthcare spending.  It is an effective means to influence behavior.  However, if it is imposed in the private market, it becomes contentious, ineffective and benefits only those who can already afford the medicines.  That was the experience when this supposedly instrument of last resort was imposed in 2009/2010.

Now, we see a lot more innovative ways to make medicines affordable and accessible.  There are differential pricing strategies that target certain segments of society that can avail of the cheaper prices.  Some companies are focused on serving government tenders which because of volume drives down prices.  Some have resorted to starting up generic companies or partnering with each other to expand reach and depth.   There are so many ways to skinning the cat to quote our favorite lawyer Joey O.

During the tribute to Dr. Quasi last Sept. 14, we again had the good fortune of hearing the views of Dr. Dodo Banzon on UHC.  He said that it is imperative that government have the financial muscle to be able to influence health providers to move and align with Philhealth policies.  He also again emphasized the importance of primary health care.  It would be interesting how we can restart the dialogue we had with Philhealth on primary heathcare in view of these interesting developments.

-- Karen Villanueva

------------

See also: 

Drug Price Control 37: Four Years of the Policy, August 16, 2013 

Drug Price Control 38: Presentation at USC, Cebu, March 2010, March 01, 2014 

Drug Price Control 39: Presentation at USC, Cebu, March 2014, March 25, 2014

Drug Price Control 40: CWF Wants Price Dictatorship for Lipitor, September 12, 2014

ETHIKOS 2: Pharma Companies and Patients, April 01, 2014

UHC 24: Corruption in Government Purchase of Medicines, April 02, 2014