Government and Taxes: Drug Price Control 47, Article in August 2010

Monday, June 01, 2020

Drug Price Control 47, Article in August 2010

I just found this, my guest article in Manila Times nearly 10 years ago, reposting.
Below it is part of the one-page statement by various organizations on price control that will be implemented tomorrow. It was posted by PHAP in the DOH Advisory Council members (about 75 names and email ads), me included.

Drug price control a year after

August 19, 2010

https://www.manilatimes.net/2010/08/19/opinion/columnists/drug-price-control-a-year-after/638116/

The drug price control or price regulation policy will turn exactly 1-year-old on August 15, 2010. A year after its implementation began, has the policy achieved its goal of making essential, popular and branded drugs become more accessible to the poor?

To help us answer this question, let us see some sales data from two drugstore chains, MedExpress/Manson drugstores and Watsons, which, starting this year, has become the second biggest drugstore chain in the country. The officials of these stores gave me permission to use their data for this article.

MedExpress’ sales data for the price-controlled drugs showed the following: From August to December 2009 vs. same months in 2008, sales volume fell by 3.4 percent and sales value tumbled 34.3 percent. From January to May 2010 vs. same months in 2009, sales volume has managed a 7.3-percent increase but the value plummeted by 65.4 percent, whacking the retailers’ margins.

The sales value decline is now bigger than the mandatory 50-percent price reduction because there are additional government-imposed discounts, such as the mandatory 20-percent off for senior citizens and people with disabilities (PWDs).

Data from Watsons show that from mid-August to December 2009 compared to same months of 2008, sales volume of all price-controlled drugs increased by 35.9 percent although sales value declined by 13.2 percent. And from January to April 2010 vs. January to April 2009, sales volume has increased even higher to 57.2 percent while the peso revenue was flat at 0.2-percent growth.

What are the implications of these numbers?

At first glance, one may conclude that price control was a success in making more popular, previously expensive drugs by multinational pharma companies become more affordable to the poor. Wrong.

Watsons drugstores are located mainly in the malls, especially in SM malls, which the richer ABC income class of people frequent. A 50-percent forced reduction in prices by some of the most popular, branded drugs by multinationals prompted the ABC class to patronize these products and abandoned some of the generics drugs that they used to patronize.

This result is a clear setback to the government’s 22-years old campaign to promote generics through the Generics Law of 1988.

Did the government, the DOH officials in particular, foresee this huge and glaring contradiction between its old policy of generics promotion and its new branded drugs promotion?

What about the poorer consumers and patients, those who are in the rural areas and do not frequent the malls, did they also join the bandwagon shift to the branded drugs?

Judging from MedExpress’ sales data, the answer seem to be No. The 7.3-percent modest growth in sales volume in the first five months of 2010 can be attributed to the shift by some of MedExpress’ wealthier consumers in the provinces to the branded drugs. If the poor also joined the bandwagon, then the increase in sales volume would have been larger than 7.3 percent.

Prior to the imposition of price control policy last year, there was already a healthy competition among many pharma companies, especially between the innovators and generics manufacturers. One clear example is amlodipine molecule used to treat hypertension. The cheapest generic available on the market prior to price control was selling for only P8. The most popular brand name version was Pfizer’s Norvasc, selling for P44 a 5mg tablet. After the mandatory 50-percent discount, it became P22.

For the poor who used to patronize the P8 generics, the P22 Norvasc was still expensive and thus, a shift to the branded drugs is still not viable.

Meanwhile, a number of small and independent drugstores, those which do not belong to any drugstore chains, have been forced to drastically shrink their operating costs including laying off some staff. Some also have had to stop selling some of the price-controlled drugs altogether as they encountered problems in getting rebates from the manufacturers, and they could no longer make useful profits. The situation of “cheap but not available” drugs in some rural areas has become more pronounced.

If the policy is a failure, then the DOH should consider advising the new President to recall or abrogate Executive Order 821 issued by the past President imposing price control on certain drugs.

It is time to move on, abandon politicized pricing of certain drugs, and focus our energy on the bigger issue of healthcare coverage for many Filipinos.

BY BIENVENIDO OPLAS JR.

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