Saturday, August 08, 2020

Drug Price Control 50, Wallace, Clarete and LKI

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 vaccine 
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 COVID-19.

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.

(2) Unrealistic expectation 
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 drugs
July 26, 2020 | 5:58 pm
Introspective    By Ramon Clarete

… 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 pharmaceutical quality….

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 104.

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….

See also:
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.

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