I discovered just recently some of the articles on drug price dictatorship under Executive Order (EO) 104 signed by President Duterte last February 17, 2020.
In the first three articles by Peter Wallace (Wallace Business Forum) and Dr. Ramon Clarete (my former graduate teacher at UP School of Economics), they write with sense and wisdom. The fourth article shows why Laban Konsyumer Inc. (LKI) is a confused group. Consumers want more choices, more options, not less choices as a result of products pulled out due to state-controlled pricing of certain companies while leaving other companies' pricing untouched.
(Photo from BWorld)
(1) No COVID-19
By: Peter Wallace - 05:04 AM May 28, 2020
… The cure and vaccine for COVID-19 will be an essential
drug people must have. But under EO 104, because it is an essential drug, it
will fall under price control. If the government excludes these COVID-19 cures
and vaccines from the controlled list, what argument will it use? The medicines
for diabetes and heart ailments, respiratory illnesses, and cancers are just as
essential as COVID-19 cures, even more so as an estimated 300,000 deaths occur
in the country per year as a result of these illnesses, versus 904 so far for
Their prices will be reduced by EO 104. So COVID-19
vaccines and cures must be, too. That will result in the suppliers of these
COVID-19 drugs, where demand will outstrip supply, prioritizing other markets
where they can be sure of recouping the huge cost of research. The Philippines
will not get the expected relief from COVID-19.
It’s the case with many of the drugs on the list whose
prices will be reduced: Suppliers will rethink delivery to the Philippines. And
when other new ones are discovered—for cancer, for instance—EO 104 will result
in the Philippines being last on the list to supply, if at all. You’ll have to
travel overseas to get the drugs you need. But overseas travel is not a
particularly enticing thought at the moment, and will not even be allowed for
many months yet.
A disturbing side note on this is that EO 104 introduces
price cuts at the wholesale level (MDWP) as well as at retail (MDRP). Why? The
only concern of the DOH should be what the patient pays. Even stranger, some
wholesale prices are cut, but the retail price isn’t. Wasn’t the whole point of
EO 104 to help the patient? Take the price of Fluticasone (an anti-asthma drug)
at P85 per pill; under the executive order, the reduced MDWP price will be
P59.02, while MDRP will be 85. The net effect is zero reduction in retail
price, while pharmacies benefit from a margin of 44 percent, significantly
higher than the 10-15 percent they generally enjoy.
This is a very strange regulation that will do more harm
than good. It’s a populist stance whose goal (lower prices) could be achieved
in better ways. The DOH should meet with the manufacturers for pooled
procurement and other ways that are mutually agreeable to achieve the same
price reductions, without loss to the companies but with benefit to the
patients. But it has declined to do so.
EO 104 should be canceled so we still get the essential
drugs sick people need, and be on the list for COVID-19 vaccines and cures.
By: Peter Wallace - 05:05 AM June 18, 2020
… But vaccines are unlike cures; a cure is given to one
sick person in the hope it will make them well. If there are side effects, they
affect only that one person. Vaccines are given to millions of healthy
individuals, so if there are side effects they can make many of those healthy
people sick. Consequently, testing must be far more rigorous. …
There may be cures found in a relatively short time, and
that will certainly help to flatten the curve of deaths, if not of sickness.
Eli Lilly & Co. is talking about a drug available this year. Dexamethasone,
a commonly available steroid, has also been found to cure some patients. But
cures don’t give the protection necessary to get the world back to (a new)
normal way of life. And if the price of the drug is halved, will we get the
cure or the vaccine?
The Philippines has an ill-considered executive order (EO
104) issued by the Department of Health that halves the price of essential
medicines. A COVID-19 cure and vaccine are essential medicines, so their price
will have to be drastically cut, too. They can’t be considered any more
important than medicines for the heart or diabetes, which have had their prices
slashed. So those for COVID-19 must be, too. With that, will the manufacturers
put the Philippines high on the list of early recipients?
EO 104 needs to be talked through with the industry
because there are other, more acceptable ways to get prices down. Already, we
are not getting new drugs because of this.
Maybe the First World will step in to supply the Third
World with a vaccine for free, but surely that will be after they’ve supplied
their own populace and paid the producers for it. With many countries clamoring
for the drug, can we risk being low on the list?
The IATF needs to do three things: 1) Think of ways to be
an early recipient of the vaccine. 2) Plan on when to relax controls based on
having a cure maybe in a year or so, but not having a vaccine in enough
quantity for two or more years. 3) Put EO 104 on hold, or better cancel it as
it has no part to play in a free market economy.
If it turns out to be better than this, we’re ahead. But
if we plan on a quick vaccine solution, we could be consigning many Filipinos
to an early death.
(3) Let’s talk about
July 26, 2020 | 5:58 pm
… Price controls would, however, bring more problems than
benefits to patients. Like price controls imposed on other consumer items,
which politicians are prone to price cap such as housing and food items, in the
long run E.O. 104 would dry up the supply of medicines and drugs, reduce our
country’s access to innovative pharmaceutical products, and would ultimately
undermine the overall quality and integrity of the local pharmaceutical market…
When supply gets scarce, black markets of medicines start
to co-exist with formal markets. Patients start to search for suppliers of the
medicines they need. The added search costs effectively raise access costs of
patients to medicines and drugs.
Even the rich among us, who could import medicines abroad
in desperation would likewise have added access costs. No formal private
businesses, Filipino or multi-national, would import drugs and medicines
because of price controls. If they cannot pass on to the market the real costs
of these products, they would not be supplying these items….
Secondly, price caps would undermine: the quality of the
medicines and drugs sold locally. When the local market of price-capped
pharmaceutical products gets to co-exist with black markets of badly needed
drugs and medicines, the Food and Drug Administration would be unable to guarantee
Thirdly, all of the innovative medicines are manufactured
abroad. Innovators price their medicines and drugs higher because they are
recouping their investments in developing these innovative medicines and drugs.
International and our national intellectual property laws do allow them to have
a monopoly of selling the innovative drugs for about 21 years, for them to
recover their R&D costs….
Fourthly, EO 104 may have disastrous effects on the
supply chain of drugs and medicines. In the supply chain are giant retailers
(or perhaps just one with more than half of the local retail market) of
pharmaceutical products. Suppliers know that, and take care they would not
incur the ire of these large retailers. With retail prices capped, it is
expected that big retailers would just pass on to suppliers the burden of price
controls by telling suppliers to price their products at wholesale prices set
by the large retailers….
Fifth, delivery delays of medicines would also occur.
There are two major supply chain distributors linking the suppliers to the
hospitals and other health care institutions, and pharmaceutical retailers.
Both are experienced in the distribution of medicines and drugs. Because of
them, the private sector led-supply chain is relatively efficient.
Their revenues are proportionate to the wholesale prices
of suppliers. With lower wholesale prices, distributors’ revenues fall and with
distribution costs remaining the same, their net incomes get squeezed. I talked
to the CEO of one of these distributors. In the price cap in 2009, his company
lost about P10 billion. The price cap then was less than 10% of the scale of EO
With expected larger losses, these distribution companies
would have to re-think their business model. One possibility is they may carve
off their businesses to focus on outlets where they can make money — another
reason why access to medicines may shrink because of price controls….
Secretary Duque, let’s attend to this now, before these
long-term negative effects (effects one through three) and the contemporaneous
destructive effects on the supply chain of medicines and drugs in the country
(effects four and five) of EO 104 become irreversible.
(4) Consumer group
vows to help guard lower medicine prices
By Kris Crismundo
June 3, 2020, 5:12 pm
Laban Konsyumer Inc. (LKI) has vowed to help the
government in monitoring retail prices of drugs and medicines as Executive
Order 104 regulating their prices took effect Tuesday….
Dimagiba lauded President Rodrigo Duterte and Health
Secretary Francisco Duque III for continuing the implementation of the EO 104
amid calls to withdraw the policy….
Drug Price Control 47, Article in August 2010, June 01, 2020
Drug Price Control 48, DOH orientation on MWP, MRP, June 30, 2020
Drug Price Control 49, The FEF statement, July 24, 2020.