* My column in BusinessWorld on October 03, 2019.
The Philippines’ public health sector is not a “deprived” sector in terms of annual budget to fulfill various agencies’ functions and mandates. There are three reasons why.
One, the annual budget of the Department of Health (DoH) keeps rising and constitutes around 7% of total budgets by all departments, the Legislative, and Judiciary. The data in the table comes from the Department of Budget and Management (DBM), Budget of Expenditures and Sources of Financing (BESF), submitted to Congress usually days after the President’s SONA.
Two, there are many other national agencies that also provide public health services and subsidies, like the hospitals of state universities including the University of the Philippines’ Philippine General Hospital, hospitals by other agencies like Armed Forces of the Philippines Hospital, Philippine National Police Hospital, plus health subsidies by Philippine Amusement and Gaming Corp., Philippine Charity Sweepstakes Office, and other national agencies.
Three, local government units (LGUs) have their own provincial hospitals, or district hospitals, even city hospitals. Plus the various barangay health centers, city and provincial centers.
If all the public spending by national government and LGUs are combined, the Philippines would probably have at least 5% of GDP minimum health spending.
Now the DoH has revived the drug price control policy, officially called Maximum Retail Price (MRP), under the Cheaper Medicines Law of 2008 (RA 9502).
In 2009, the DoH and Department of Trade and Industry (DTI) jointly imposed the MRP, but because of heavy politicking that year before the 2010 Presidential elections, they avoided using the term “MRP” (which could mean “Mar Roxas for President”) and used “MDRP” (maximum drug retail price) instead. Then they invented another term, GMAP (Government mediated access price) to refer to “voluntary” price reduction. The subliminal meaning of GMAP of course was Gloria Macapagal Arroyo Price. There was no “health emergency” that year, only political emergencies for both the administration and opposition.
The DoH Secretary that time was Francisco Duque. And he is the DoH Secretary again now, and he is using the same political maneuvering to impose drug price dictatorship again.
Luckily, the DTI Secretary now does not believe in government price dictatorship and in arm-twisting innovator pharma companies to bring down their prices or face huge penalties.
The DoH target now is 120 drugs that address leading diseases and “catastrophic” conditions in the Philippines like hypertension, diabetes, cardiovascular disease (CVD), chronic lung diseases, neonatal diseases, and major cancers.
From the DoH press release, “Medicines were chosen on the basis of burden of disease in terms of magnitude and the severity of the conditions, high price arbitrage when compared with selected reference countries, and the presence of limited competition.”
These are illegal criteria, not found in the law.
Under Section 7, Chapter 6 of the IRR, among the many factors to consider in recommending MRP are the following:
“…Cost to the manufacturer, importer, trader, distributor, wholesaler or retailer such as but not limited to: The exchange rate of the peso to the foreign currency with which the drug or any of its component, ingredient or raw material was paid for; Any change in the amortization cost of machinery brought about by any change in the exchange rate of the peso to the foreign currency with which the machinery was bought through credit facilities; Any change in the cost of transporting or distributing the medicines to the area of destination; Marketing Costs (per drug and total global costs); Research Costs (local and global/per drug); Promotion Costs; Advertising Costs; Incentives and Discounts; Taxes and other fees, impost, duties, and other charges imposed by competent authority…”
These were not considered when price control was imposed in 2009, and again not considered when price control will be imposed in 2019. The DoH, as main implementer of RA 9502, becomes the chief violator of the provisions of the law — not good.
If we want cheaper medicines, there are many factors that government itself can do. Like reducing or abolishing import duties on medicines, taxes and VAT on medicines. Have more competition among pharma companies, innovators and generics, more competition among drug stores and pharmacies, among hospitals. Not to mention, reduce government corruption in the procurement of medicines.
The main function of government in this case is to ensure the good quality of medicines, to go after manufacturers and sellers of fake, counterfeit, and substandard medicines. Cheap but substandard medicines can kill when the disease is not controlled and mutates to something more serious.---------------