Health Transparency 15, DOH Advisory Council meetings 2015

The DOH Advisory Council (AC) for the implementation of RA 9502 (Cheaper Medicines law of 2008) has already met twice this year. The second meeting  was yesterday, but I did not know these meetings as I received no invitation. I only received the three documents for comments by the AC members: (1) "Declaration of Conflict of Interest" form, (2) Draft DOH Administrative Order (AO) on the constitution of the AC, and (3) Draft AO, Regulating the promotion and marketing of pharma and medical devices products. The AC Secretariat noted this and promised  to invite me  next time. 

Here are my comments to those three documents.

1. On the "Declaration of Conflict of Interest". 

This was corrected earlier, during the AC meeting about two years ago when USec Mads Valera was presiding, to make it "Declaration of Interest". A "conflict of interest" connotes a negative meaning while a simple "declaration of interest" and affiliations will be more neutral.

For instance, pharma companies, innovator or generics, have the interest of selling more of their products, whether heavily advertised or not, whether endorsed by physicians or not, and so on. The same can be said of the drugstores and pharmacies.

Physicians and pharmacists have the interest of giving healthcare, particularly giving effective and safe medicines, innovator or generics, expensive  or cheap. The most expensive medicines are those that do not work, even if the price is only P1 but if it is substandard, or triggers allergies and negative side effects to the  patient, in effect it is an expensive medicine. It will invite new treatment, new medicines, new diagnostic tests, new physician pf, etc.

Consumers and patients have the interest of more choices, more options, among the different medicines, treatment, drugstores, clinics, hospitals, physicians, etc. If a doctor is expensive but he/she can make the patient get well the soonest possible, in effect he/she gives good value for money, "cheap" service.

2. On the draft AO constituting the AC.

a. For the nth time, the DOH and the rest  of us should STOP using those terms MDRP (and GMAP). These are illegal terms -- not in RA 9502, not in the implementing rules and regulations (IRR) of the law. What is clearly, explicitly, categorically stated  in RA 9502 is MRP, maximum retail price. MDRP and  GMAP are political  inventions by the DOH and DTI (under Secretaries Ona and Favila, respectively) during the last few months of former President GMA. GMAP is subliminal for Gloria Macapagal Arroyo Price, and not really Government-Mediated Access Price. MDRP was invented to deflect calling MRP as Mar Roxas for President because then Sen. Mar Roxas was being desperate to be pro-poor  to improve his low ratings in  the Presidential surveys in 2009.

b. On Specific functions of the AC. RA 9502 is first and foremost, an amendment to the Intellectual Property Code (IPC) to allow TRIPS flexibilities and hence, institutionalized the possible imposition of IPR-busting policies like compulsory licensing (CL), special CL, parallel importation, etc. Price regulation is just an "add-on" chapter in the law, not even in the original draft bills. But IPR policy review of the AC is not mentioned in the draft AO.

So I propose that IPR Policy review should be #1 under Specific functions, #2 is Price regulation,  #3 is Ethical marketing practices. Even if no CL application  was ever made since the law was enacted in 2008, according to IPO and Atty. Gepte, it should be in the draft AO because IPC amendment is the main spirit of RA 9502, not price control/regulation or regulation of pharma marketing.

c. Members of the Council. I am honored that Minimal Government Thinkers is still granted a slot in the AC despite the fact that MGT is the smallest unit or institute of all the members. It is not even a health-focused think tank as its core advocacies are small and limited government in general, small/few taxes, free trade, rule of law, individual freedom. Now if there are proposals to remove it from the AC because of this fact, I will not object, nor will ask who propose it. Not that someone is proposing this, but am just trying to be consistent. If I have some questions about the AC or its functions, I am also open to be questioned about my participation in the AC.

3. Draft AO on Regulating promo and marketing of pharma and medical devices.

Being a non-lawyer and non-regulator, my patience for long docs like this 18-pages draft AO is short. Personally, I would wish that ALL sectors and players should have their own respective Code of Ethics or other forms of self-regulation, with own set of penalties and punishment to erring  members.

How many pharma companies in the PH, how many wholesalers and drugs import distributors, how many drugstores and pharmacies, how many hospitals and clinics, how many physicians, nurses, pharmacists, etc.? Tens of thousands I would assume. The DOH and FDA have the energy, manpower and other resources to monitor all of them for compliance or violation? I seriously doubt it.

A better approach is self-regulation, self-policing. Then DOH  and FDA will only monitor those industry associations, professional organizations, etc. If these civil  society organizations do not do their work in penalizing non-compliant players and professionals, DOH will sanction them and their officers.

This is a party-spoiler proposal. After so many meetings and discussions in crafting that document, I will simply propose the above. So I do not expect the above proposal to be adopted, but only floating the idea, and to ask the various industry and professional groups to do it on their own, self-policing, parallel with DOH/FDA monitoring work. Everything is evolving, so that in the future when the finalized AO will  need revision, the various civil society groups have already done their homework and are more ready for self-regulation. 

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See also:
Health Transparency 7: DOH Advisory Council, CHAT, June 04, 2012 
Health Transparency 8: Advisory Council on RA 9502, June 11, 2012
Health Transparency 13: MeTA International Visit to Manila, April 16, 2013 
Health Transparency 14: IMS-CHAT Meeting, April 18, 2013

Senior Citizens Discount 5: Supreme Court Flip-Flopping on the Law

A fried from Mercury Drugstore, Atty. Edsel Manuel, gave a long reply to the complaint of Mr. James Auste, head of the Cancer Warriors Foundation, why his demand to get a 3-months supply of his medicines from Mercury was denied. The email exchange was posted in our DOH Advisory Council for RA 9502 (Cheaper Medicines Law of 2008) email loop. Atty. Manuel's long reply covered several topics, from the law on mandatory discounts to persons with disabilities (PWDs) or RA 9442, to the expanded mandatory discounts to senior citizens or RA 9527 (enacted February 2004) and RA 9994 (enacted January 2010), to pricing by big drugstore chains.

Below, I am posting portions of his reply related only to RA 9994. I will reserve my further comments about this law in my next blog post on the subject. I thank Atty. Manuel for giving me permission to blog his long reply. Photos here, I got from the web.

(S)ince the enactment of senior citizen and PWD discounts, drugstores have been crying afoul and have been literally crying a river in Congress and Senate.  If this 20% discount is viable and reasonable to drugstores why on earth will drugstores complain? And with the burden shared to manufacturers and suppliers, why are they complaining also? This means that there is something wrong with the law.

The first giver of 20% discount is RA 7432 or the original senior citizen law. This law is the most fair that even without the implementing rules being issued, Mercury Drug has initiated the giving of 20% discount believing in the just and fairness of the law as the cost of the discount was treated as tax credit. 

However, the anticipated fairness of the law was saddened by the issuance by the Bureau of Internal Revenue of Revenue Regulation No. 2 series of 1994, by treating the grant of the 20% discount as tax deduction instead of tax credit; and the expected propriety of the elderly was frustrated by the abuses made by unscrupulous persons. We were able to convict in Valenzuela court a person who used fake senior IDs and the discounted medicines he illegally acquired were sold to other establishments.

Appeal to the Executive branch of the government turned to be futile thus, the company sought the intervention of the Judiciary.  

From 1994 until the company won the case with the Supreme Court in 2005, the company had suffered substantial reduction in sales,  profit, and drain in the company’s cash flow, not to mention the litigation costs  incurred . 

It has been decided in numerous decisions of the Supreme Court that tax deduction is not fair- is not a just compensation for the loss revenues brought about by the discount. (Commissioner of Internal Revenue v. Central Luzon Drug Corporation G.R. No. 159647, April 15, 2005, 456 SCRA 414; Bicolandia Drug Corporation  v. Commissioner of Internal Revenue, G.R. No. 142299, June 22, 2006, 492 SCRA 159; Commissioner of Internal Revenue v. Bicolandia Drug Corporation, G.R. No. 148083, July 21, 2006, 496 SCRA 176; Commissioner of Internal Revenue v. Central Luzon Drug Corporation , G.R. No. 159610,(June 12, 2008] 

To quote the Supreme Court, thru Justice Panganiban, 

“Be it stressed that the privilege enjoyed by senior citizens does not come directly from the State, but rather from the private establishments concerned.  Accordingly, the tax credit benefit granted to these establishments can be deemed as their just compensation for private property taken by the State for public use.” (Commissioner of Internal Revenue v. Central Luzon Drug Corporation G.R. No. 159647, April 15, 2005, 456 SCRA 414)

That light we saw from the Supreme Court in redeeming the company from injustice did not continue to flame-up because the Legislature enacted RA 9527 or the Expanded Senior Citizen Act of 2004, which changed the original tax treatment of the discount from tax credit to tax deduction.

With the enactment of the Expanded Senior Citizen Act of 2004, the small drugstores filed a Petition with the Supreme Court questioning the constitutionality of the tax deduction provision of the law.

Surprisingly, the Petition by the small drugstores was dismissed by the Supreme Court, in deviation from their previous ruling by upholding the  tax deduction scheme, but questioning the business decision of drugstores in pegging a small mark-up. 

The Supreme Court enunciated thru Justice Azcuna

“it is unfair for petitioners to criticize the law because they cannot raise the prices of their medicines given the cutthroat nature of the players in the industry. It is a business decision on the part of petitioners to peg the mark-up at 5%. Selling the medicines below acquisition cost, as alleged by petitioners, is merely a result of this decision. In as much as pricing is a property right, petitioners cannot reproach the law for being oppressive, simply because they cannot afford to raise their prices for fear of losing their customers to competition.” (Carlos Super Drug vs. DSWD, G.R. No. 166494, June 29, 2007)

As evident from the above ruling, the Supreme Court teaches drugstores to increase their prices to counter the effect of tax deduction, but this has been rendered inutile by the enactment of RA 9502 or the Cheaper Medicine Law in June 6, 2008, where prices of medicines have been limited to the dictated price of the government. 

Where now will the drugstores put themselves? Again, woe to drugstores! Additional salt to wound is that the drugstores are being punished if they will not give discounts and the aggressive complaints of seniors and pwds as if drugstores are the dictator of prices….

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See also:
Senior Citizens Discount, Part 2, November 03, 2010 
Drug price control 5: Mandatory discounts and acronym politics, March 21, 2011 
Senior Citizens Discount 3: Sharing of Mandatory Discounts on Medicines of Senior Citizens, December 14, 2012 
Senior Citizens Discount 4: Distortion in Consumers' Perception of Drug Prices, February 04, 2013 

Drug price control 5: Mandatory discounts and acronym politics, March 21, 2011 
Welfarism 25: Centenarians and Populist Legislators, May 30, 2013

Drug Price Control 36: Advisory Council, James Auste and China

Another long article as a result of some exchanges we have in our discussion within the Coalition for Health Advocacy and Transparency (CHAT) googlegroups. This is four pages long, enjoy.

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After my reply to James Auste of the Cancer Warriors Foundation (CWF), contained in Drug Price Control 32: Policeman of Pharma Companies (June 04, 2013), then Drug Price Control 35: DOH Procurement Price and Lobbying for Another Price Coercion (June 29, 2013), James replied early this week.

He said that Unilab (while the biggest pharma company in the Philippines) and other local pharma, are not asking for a price increase of their products.

MALAKI MAN ANG KITA BUMABALIK SA LOCAL ECONOMY! SA INTERNATIONAL PHARMA SA KANILANG HEAD OFFICE SA IBANG BANSA  PUMUPUNTA ANG KANILANG PINAG KAKAKITAAN SA PASYENTENG PINOY!(HAVE DATA TO SHOW)  

KAYA CONGRATULATIONS SA LOCAL PHARMA! AT SERBISYONG TOTOO! PARA SA PILIPINO! CONGRATULATIONS SA UNILAB PASCUAL PHAREX  ATBP NA PATIENT FIRST BEFORE PROFIT! 

I replied that Unilab, Pharex, Pascual Lab, etc. were all affected by price control. That is why not one, not one, local pharma supported price control. Their prices are pulled downwards even if such prices are already low.

I remember from key leaders of local pharma, saying that some small local firms went bankrupt after price control, they could not bring down further their prices as these were already low due to competition among many players. Past President of the Philippine Chamber of Pharmaceutical Industry (PCPI), Edward Isaac, said in one  Advisory Council meeting that, 

This is the first time that we are united with PHAP in opposing a government policy. Before, it was easy for us to take a position. Kung saan sila, doon kami sa kabilang side. But this time, we are one with them in opposing price control.

James countered that the issue is the request by international pharma for a price increase, at least back to their levels before price control was imposed in mid-August 2009. And that there should be more  transparency in the health sector, that those multinational companies should open their financial statements (as submitted to SEC).

I think there are probably 200+ pharma companies in the country: PHAP members + PCPI members + non-members of the two federations.

The CWF data refers to the "top 25" taxpayers (in 2011 or 2012). But at the bottom of those 200+ pharma companies, these are the ones that can easily lose revenues and profitability in events of large price shocks, like the price control policy, and are likely to go bankrupt.

This situation can be illustrated by this hypothetical scatter plot below. Each point represents profit rate of each player. I made this illustration myself.

Before price control, companies have wide price ranges and hence, have wide range of profit margins among themselves for a particular drug molecule,. There is competition among them say in the 100-200 percent profit rate per tablet, another set of competition in the 50-99 percent profit rate, in the 5-49 percent margin.

After price control, the upper ranges were abolished and players have to adjust at lower profit rates, affecting everyone else. Those that used to make 10 percent profit rate must deal with just five percent and those that used to have net income of just 5 percent or less will suffer a loss, be in the negative territory. Some of these players may be able to float for sometime while others will simply have to close shop.

Drug Price Control 33: Debate with a Cat

When some people’s ego  is bruised, they tend to take revenge. And if that requires abandoning a previous advocacy, say from anti-statist interventionism and move to the opposite, statist and socialist, they will do it.

My blog post,  Drug Price Control 32: Policeman of Pharma Companies, about my reply to a demand for another round of price control by the head of the Cancer Warriors Foundation (CWF) here in Manila, was posted yesterday in the facebook group,  Imperium et Populi (Philippines), to be countered and debated by the fb group owner, Kensi Blye-Two.

Until last week, this person – don’t know if a he or she, I think a she – took an anti-statist interventionism (trying hard free marketer?) position. In my previous long debate with her (or him),  Business Bureaucracy 8: Exchanges at Imperium et Populi (Philippines), she wrote,

This would BOIL DOWN again to "EASE of DOING BUSINESS..." The SMALL PEOPLE are HEAVILY TAXED but the BIG COMPANIES can get away with almost anything...
Imagine this:

( 1 ) Corporate Tax 30%
( 2 ) VAT 12%
( 3 ) Withholding Tax
( 4 ) Business Permit from the LGU
( 5 ) BOC - Duties and Taxes for Imported Goods
( 6 ) Other Taxes from other Agencies...
What's left of the MICRO and SMALL Enterprises...?

That’s an anti-statist, anti-bureaucratism position, right? Cool.

Then in attacking my paper on drug price control, she wrote,

If you have read RA 9502 which I'm sure you have... There's a certain provision that says:  

SEC. 17. Drugs and Medicines Price Regulation Authority of the President of the Philippines…. 

These said PROVISIONS have already given the LEGAL FRAMEWORK to NO LESS than the President the POWER to IMPOST MRP to ANY and ALL "DRUGS" and "MEDICINES..." This itself would mean one thing- DRUG PRICE CONTROL...

Now she is pro-state intervention, justifying government price control and politicized price-setting.

That’s a 180 degrees turn around. Mental inconsistency, intellectual dishonesty, plain brickbats to have a revenge, any of these can possibly explain the behavior.

I checked the fb profile of this person…  

A cat! I was debating with a half human, half feline entity J Kidding aside, this person has no real name, no photo, no affiliation, no school, nothing. This is a perfect formula for people who appear “brave” and utter almost anything, but are cowards that their words and ideas will be associated with their faces and names.

Anyway, below are Kensi’s rapid-fire-revenge attempts, my brief rejoinder to her comments and questions, then another round of insecure brickbats.   Copy-pasting everything so readers can see the kind of mentality this cat or person has. Seven pages long, almost 3,000 words including this intro, get your fave drinks and enjoy the ride.

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Kensi Blye-Two   "That "MDRP" by the way is an illegal term coined by former DOH Secretary Francisco Duque and Malacanang under former President Gloria Arroyo. The original provision in RA 9502 is MRP but Malacanang did not like it to mean "Mar Roxas for President" then so they invented MDRP." (Noynoy Oplas) 

http://funwithgovernment.blogspot.com/2013/06/drug-price-control-32-policeman-of.html

( 1 ) Has the term "MDRP" been DECLARED "ILLEGAL" by any competent Court...? Has EO 821 (Executive 821) been REVOKED...? Has AO 2011-0012 (Administrative Order 2011-0012) been AMENDED or REVOKED...?

( 2 ) And where did you get this RUMOR or GOSSIP that the ONLY REASON the MRP was changed into MDRP by the former Administration was mainly due to the fact that it could be used by Mar Roxas (which eventually RAN for Vice President)...? Can you show some PROOF or EVIDENCE to support your claim...?

"Besides, it is preposterous for someone to claim that he or she can speak "in behalf of the millions of Filipinos who are sick and dying". Have the sick and dying organized themselves into a national organization and they elected a leader to speak in behalf of them? There is no such thing or organization or leader."

( 1 ) Did you CLARIFY whether he wanted all the DETAILS and INFO for ALL MEDICINES or perhaps for certain Medicines that their GROUP are eyeing...?

( 2 ) I think that you KNOW or UNDERSTAND the REALITIES that beset a lot of Filipinos when it comes to ACCESSIBILITY to MEDICINES... Are you "DENYING" that FACT that a lot of Filipinos who are SICK and DYING just because they can't buy MEDICINE...? Do clarify...

( 3 ) Whether the INTENTIONS or Mr. Auste is GOOD or BAD, he has introduced REALITIES that needs to be ADDRESSED immediately and these are LEGITIMATE ISSUES... Now, would you HELP the Filipino SICK and DYING or you would stick to your "brand of bureaucratic maneuverings...?"

Senior Citizens Discount 4: Distortion in Consumers' Perception of Drug Prices

(Note: The original title of this paper was "Health Transparency, More on Senior Citizens Drug Price Discount".)

There will be another meeting, the 16th meeting of the DOH Advisory Council on the Implementation of RA 9502 (Cheaper Medicines Law of 2008) next week, February 13 at the DOH. I have told the Secretariat that I will join the meeting.

I think the new Department Order regarding the sharing of burden of the mandatory 20 percent discount for medicines of senior citizens will be shown to us members of the Council. Or has it been officially issued already, I don't know.

In my blog post last December on this subject, there were two comments there, one from Leonie Ocampo, the President of the Philippine Pharmacists Association (PPhA) and from an anonymous individual who owns a small drugstore in the province. See below:

(1) ... Drug price regulation or expanding he MDRP list, as had always been my personal and the PPhA POSITION, THIS WILL NOT HELP. The first list did not give the expected result; no increase in the number of users which means only the regular users of the SKUs in the list benefits from the initiative and those who have NOT used said medicines continue not to avail of them even at 50 or 70% price reduction because in the first place, these people do not have the money to buy the medicines. Other ways to improve medicine access must be explored BUT THIS MUST BE DONE WITHOUT JEOPARDIZING THE MEDICINES QUALITY. We are open to help how this will be done.

-Leonie Ocampo

(2)  As a small independent drugstore in the province, I would like to add that the senior citizens law is being EFFECTIVELY USED by the giant chain drugstores as a LOYALTY and PREDATORY pricing program. Since they have the advantage of the “economies of scale”, they can easily “force and coerce” the drug distributors to subsidize this “expense discount” or else they will not buy. Because of this reason, the giant chain drugstores capture more or less 100% of the sales from senior citizens, without spending a penny! Unfortunately (also) for the small independent botikas… this not only means LOST SALES from the seniors, but they also loss the LOYALTY and PATRONAGE of the very influential sector in the local community! A double whammy!

-Anonymous

I developed this new graph below showing what happens when the smaller drugstores in small municipalities in the provinces will stop selling some drugs at a loss, particularly those medicines often demanded by the senior citizens. The mandatory discount under RA 9994 or Expanded Senior Citizens Act is 32 percent (20 percent original discount + 12 percent VAT) and only a small portion will be shouldered by the drug manufacturers, the bulk of the burden will be shouldered by the small drugstores. Government takes little or no burden as such loss is not tax-credited. 

In graph A, before the expanded mandatory price discounts to senior citizens is implemented, there are four sellers of a particular drug often demanded by senior citizens. Mercury Drugstore (they control about 60 percent of the total drug retail business in the country) and three small, town-specific drugstores. They may have slightly different prices for the same drug with the smaller ones selling lower than the dominant player Mercury. These are represented by points A, B, C and M.

After the expanded mandatory price discounts, the three local drugstores are still around but they have stopped selling some medicines often demanded by senior citizens to prevent losses. Only price M by Mercury is left, still at the same level as chain stores keep only one price for each product for all their branches nationwide. But the quantity has expanded from Q1 to Q2. 

What the anonymous commenter above argued is that they may prevent losses by not selling certain medicines often demanded by the senior citizens, but they suffer further lower revenues as the senior citizens who may be buying other medicines, say vitamins for their grandchildren, will purchase these in the same store, ie, Mercury or other big chain drugstores (Watsons, Rose, etc.).

The above graph is hypothetical but it shows another negative effect of government price intervention on small businesses. The other negative effect is the inconvenience to senior citizens themselves. If drugstore A selling at price A is just a few blocks away but it has stopped selling the medicine that they need, then they will have to travel to farther, perhaps in the neighboring town or city where there is a Mercury or other big chain drugstores.


I hope that this law will be amended in the next Congress. The main goal of that law is to help the poorer senior citizens purchase their needed medicines, fine. But the law did not make a distinction between the richer senior citizens with their poorer cohorts. Many senior citizens are rich or have ample savings, have PhilHealth and private health insurance, they do not need that discount much. The ones who need a discount are the poorer ones, those who worked at the informal sector. 

There are actually many government programs towards this end. Like the rising budget of the DOH, additional funding for PhilHealth from the new Sin tax law and higher monthly contributions from those working in the formal sector, and higher budget for local healthcare by the local government units. Forcing the private players (drug manufacturers, drugstores, drug importers, hospital pharmacies, etc.) to give that discount otherwise the government will go after them and cancel their license to operate (LTO) or business permit is wrong.

So a new legislation to correct this mistake is needed. I am not sure though how ready the major players and stakeholders can be in deflecting legislators' grandstanding and political harassment. Finding less costly alternative schemes to protect the poorer senior citizens will make this work more palatable to the legislators.

For the meeting next week, we were asked what topics we wish to be included in the agenda. I suggested that requests for price hike for some drug molecules that were put under the mandatory 50 percent price cut through the "voluntary price reduction" or politically twisted as  GMAP, should be be considered and granted. Why? 

So long as cheaper generic products for the same molecule are available for the consumers and patients, meaning they have the option to buy other drugs, let the innovator drugs be priced high if they want.

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See also:
On Senior Citizens Discount, August 10, 2009 
Senior Citizens Discount, Part 2, November 03, 2010 
Drug price control 5: Mandatory discounts and acronym politics, March 21, 2011 
Senior Citizens Discount 3: Sharing of Mandatory Discounts on Medicines of Senior Citizens, December 14, 2012

Senior Citizens Discount 3: Sharing of Mandatory Discounts on Medicines of Senior Citizens

Republic Act (RA) 9994 or the Expanded Senior Citizens Act of 2010 provides for these new benefits to resident citizens of the Philippines who are 60 years old and above:

"SEC. 4. Privileges for the Senior Citizens. -

The senior citizens shall be entitled to the following:

"(a) the grant of twenty percent (20%) discount and exemption from the value -added tax (VAT), if applicable, on the sale of the following goods and services from all establishments, for the exclusive use and enjoyment or availment of the senior citizen

"(1) on the purchase of medicines, including the purchase of influenza and pnuemococcal vaccines, and such other essential medical supplies, accessories and equipment to be determined by the Department of Health (DOH).

"The DOH shall establish guidelines and mechanism of compulsory rebates in the sharing of burden of discounts among retailers, manufacturers and distributors, taking into consideration their respective margins;

"(2) on the professional fees of attending physician/s in all private hospitals, medical facilities, outpatient clinics and home health care services;

"(3) on the professional fees of licensed professional health providing home health care services as endorsed by private hospitals or employed through home health care employment agencies;

"(4) on medical and dental services, diagnostic and laboratory fees in all private hospitals, medical facilities, outpatient clinics, and home health care services, in accordance with the rules and regulations to be issued by the DOH, in coordination with the Philippine Health Insurance Corporation (PhilHealth);...

While there is not much confusion or conflict in the discounts in professional fees of healthcare professionals, there is confusion and even conflict among the various players in the medicines sub-sector, in particular among drug manufacturers, distributors, importers/exporters, wholesalers, retailers, and hospital pharmacies.

The Department of Health (DOH) has requested members of the Advisory Council (AC) on the Implementation of RA 9502 (Cheaper Medicines Law of 2008) for their comments of the draft DOH Circular that will soon be issued by the DOH Secretary. Below is my letter to them which I sent by email yesterday.
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12 December 2012

Dr. Madeleine de Rosas-Valera

Chair, Advisory Council for RA 9502

Assistant Secretary

Department of Health

Dear Doc Madz,

Here are our comments to the draft Department Circular, “Clarification on Certain Provisions of Administrative Order No. 2010-0032” regarding RA 9994 or the Expanded Senior Citizens Act of 2010.

1. Definitions of Wholesaler, Retailer, Distributor, Manufacturer and so on, we agree with the definitions given.

2. On the sharing of the 20 percent mandatory discount to senior citizens, the 30-70 percent burden sharing to retailers-manufacturer/distributor/wholesaler looks fair.

It is assumed that whatever burden sharing should apply after the new Department Circular has been issued and not apply retroactively.

As an outside observer and not part of the major players – the drug manufacturers, distributors, retailers and so on – it is pathetic to see how these players were forced to debate among themselves who should get the bigger burden while government burden in the form of tax credits or loss carry over is not clear. Each of these players is doing its share in giving patients and consumers have access to quality and affordable medicines. That alone is an important social function or public service already..

An enterprise that is forced and coerced by the government to give discounts to certain group of consumers will attempt to survive and not go bankrupt. There are many ways to do this.

One is to stop selling those medicines and products that are highly demanded by the senior citizens. This is happening already in some small and independent drugstores in rural areas which have little leeway for further price discounts as they do not have the economies of scale. 

Two, raise further the regular price of those medicines demanded by the senior citizens so that after the 20 percent mandatory discount, the price simply goes back to its original level and thus, not suffer a loss.

Three, raise the price of other medicines and products demanded by the non-senior citizens. In effect they subsidize the price discount given to the senior citizens. This situation can be illustrated by this graph.

If there was no price distortion like RA 9994, the “equilibrium price” (P*) of a particular medicine will be at point A, With the law, the new price with mandatory discount (Pmd) will be at point B, lower or cheaper than point A. In order to prevent losses, an enterprise (retailer, wholesaler, manufacturer, etc.) will hike the price (Ph) of  medicines to point C. So a 20 percent discount at point C will only bring back the original price at point A while giving the illusion to patients that they are buying at point B. Or senior citizens pay at point B while non-senior citizens suffer even higher prices at point C.

The only way to correct this injustice is to scrap that law, but since this is impossible at the moment, let this situation serve as additional lesson, that government price regulations and forcible, mandatory price discount, produce more harm than good.

Thank you very much.

Sincerely yours,

Bienvenido “Nonoy” Oplas, Jr.

President

Minimal Government Thinkers, Inc.

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See also:
On Senior Citizens Discount, August 10, 2009 
Senior Citizens Discount, Part 2, November 03, 2010 
Drug price control 5: Mandatory discounts and acronym politics, March 21, 2011

Welfarism 23: Letter to Sens. Cayetano and Pangilinan on Solo Parents Welfare, October 23, 2012

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

Today, the drug price regulation or control policy in the Philippines is exactly three years old. It was implemented August 16, 2009. No cake nor cigar for this wrong policy.

Yesterday, I attended an emergency meeting of the Advisory Council for RA 9502 (Cheaper Medicines Law) at the DOH. There were some proposals to impose a maximum retail price (MRP) on doxycycline, a drug against leptospirosis, a common disease during heavy flooding that submerge thousands of houses for hours or even days.

Here is the background as I gathered during the meeting and in small talk after. During typhoon Ondoy (see  Climate stupidity 18: Warming causes more storms and less storms, Typhoon Ondoy Photos) three years ago, and in other severe flooding after that, several people died due to leptospirosis, an infectious disease coming from animals, especially rats' urine that mix up with dirty water and enter the human body via the mucous or wound or infected drinking water.

Once untreated, the virus can cause first flu-like symptoms (fever, chills, headache, etc.) later on meningitis, damage of the liver or other internal organs, and later, can result in death. The DOH was peppered with questions if not blame, during the leptospirosis outbreak then. So this time, before any outbreak would show, the DOH wanted to be ready.

So during the heavy flooding last week caused by southwest monsoon or "Habagat", then another heavy flooding early this week due to typhoon Kai-tak (local name "Helen"), many people tried to stock up on doxycycline as a precaution. A friend of President Aquino was said to have complained to him why the price of the drug was high, more than P50 or even more than P70 a tablet, when it should be cheap. The President asked the DOH about it.

Then the Director of DOH NCPAM, Dir. Virginia Ala herself got a call from a physician in Marikina, a city that often gets heavily flooded, why the price of doxycycline in Mercury Drugstore was more than P50 when it should be around P10 only. People began to wonder if there was a sudden jack up in the price of doxycycline from around P10 to P50+ or P70+, or even P160+. If that was so, some people suggested to put the drug under price control or MRP.

The DOH wanted to explore other proposals aside from imposing a new round of MRP, hence the need for that emergency meeting. Well, I got the notice of meeting only one day before the meeting, that's how urgent the meeting was for the DOH. I admire the DOH, especially Assistant Sec. (ASec) Madeleine "Madz" Valera for her trust in the inputs of members of the Advisory Council, as well as the consensual nature of the Council.

The meeting was initially chaired by former DTI UnderSec. and now PITC President, Ma. Lourdes Baua. DTI is the co-chair of DOH in the Advisory Council. PITC is an attached agency of the DTI. Then ASec Madz came to preside as Ms. Baua went to another meeting. She just came from a meeting with DOH Sec. Enrique Ona, and was later called out again for another meeting with the Secretary.

I noted during the meeting that the date was rather good as it was (almost) the 3rd year anniversary of MRP implementation. Dr. Rustico Jimenez, the President of the Private Hospitals Association of the Philippines, Inc. (PHAPI) noted that it was the DOH or other government agencies themselves that alarmed the public about leptospirosis and hence, alarmed the need for doxycycline. In his observation, more people died of pneumonia, gastro enteritis, other diseases during and after flooding than lepto. ASec Madz said that it might be true, but many people are at risk of lepto due to the rather high number of casualty from the disease in previous flooding.

There were several suggestions that came out on what the DOH should do to limit public alarm over lepto and other water-borne diseases. The DOH observed that many individuals and civil society groups were distributing medicines to flood victims especially in evacuation centers. The DOH suggested that since non-rational use of medicines (RUM) is becoming common, like not all people can take a particular medicine for a specific disease, medicines donation should as much as possible be coursed through its central office, its provincial offices and attached hospitals.

I suggested during the meeting that since many people would give their donations to civil society and charity organizations than to government, call it distrust of government in one way or another, medicines donation should be done with the presence of health professionals for proper dispensing to patients. Doxycycline for instance should not be given to pregnant women and children, especially those below eight years old.

Reiner Gloor suggested that in times of emergencies, if it is possible that drugstores can give the doxycycline and PhilHealth will reimburse later. I don't remember what the guy from PhiliHealth said in reaction to this. But  for members who are qualified for the out-patient benefit package, I think this is possible and a good proposal. If a member is kept out of hospital, takes medication and recovers at home, PhilHealth spending will be lower and hence, it will benefit.

One good outcome of the meeting was that no one suggested that doxycycline be put under MRP. No one suggested to expand drug price control policy. Here's one reason, from some of the materials distributed during the meeting.

Doxycycline, Pesos per 100 mg capsule, Muntinlupa:

Brand Name	Drugstore Name	Price
1. Vibramycin	Watsons Mercury	169.75 168.75
2. Doxin	Asian Hospital Medical Center Muntinlupa Watsons, Mercury, South Star, Rose	145.25 103.62   74.25
3. Doxicon	Rose Pharmacy Shopwise Pharmacy Watsons	58.10   56.00   49.25
4. Dyna-doxicycline	Mercury, South Star	53.00
5. Drugmakers	Middle Town	5.00
6. Mydoxy	The Generics Pharmacy	2.00

source: DOH.

So if people will suggest imposing drug price control, they would most likely be targeting Vibramycin. But why would people insist on vibramycin with its almost P170 price per capsule, when other brands at a much lower price, P49 or P5 or even P2 are available. Although I think that the P2 drug would have been snapped up by some hoarders, to be sold at a higher price via black market in still submerged towns and villages in Laguna or Cavite, Bulacan, Pampanga, Bataan, etc.

A note on groups that oppose and support the MRP policy...
As far as I can recall in previous Advisory Council meetings, those who are explicitly against government drug price regulation or control are:

1. PCPI, Philippine Chamber of Pharmaceutical Industry, local generic manufacturers and distributors, drugstores,
2. PHAP, Pharmaceutical and Healthcare Association of the Pilippines, mostly multinational innovator companies, big drugstore chains like Mercury,
3. PPhA, Philippine Pharmacists Association,
4. PHAPI, Priv. Hospitals Association of the Philippines, Inc.
5. DSAP, Drug Store Association of the Philippines, small and non-chain pharmacies and drugstores,
6. AGAP, Ayos na Gamot sa Abot-kayang Presyo coaltion
7. MGT, Minimal Government Thinkers.

Those with soft or implicit opposition are
8. PMA, Philippine Medical Assocation,
9. Mercury, Watsons, The Generics
10. MeTA, Medicines Transparency Alliance, Philippines.

Those who explicitly support price control
1. CWF, Cancer Warriors Foundation.

Those who have no explicit position but only follow their mother agencies:
1. PITC Pharma, DTI
2. PhilHealth, DOH
3. FDA, DOH
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See also:
Drug Price Control 23: Greece's Pharmacy Nightmares, January 13, 2011
Drug Price Control 24: Forcing Drug Firms to Report Payment to Doctors, January 24, 2012
Drug Price Control 25: Top 10 Articles on Google Search, April 03, 2012
Drug Price Control 26: Conflict of Interest in Drug Price Regulation Legislation, May 13, 2012
Drug Price Control 27: Letter to Sen. Pia Cayetano, May 15, 2012
Drug Price Control 28: On Cong. Biron and Sen. Villar Bills, July 14, 2012

RUM 7: Leptospirosis and Doxycycline, August 12, 2012
Warming Hysteria: Typhoon Ondoy Flooding, September 28, 2009

Health Transparency 8: Advisory Council on RA 9502

Last week, June 06, the first meeting for this year of the DOH Advisory Council on Healthcare was held. It was chaired by Assistant Secretary (ASec) Madeleine "Madz" de Rosas-Valera. It was among the liveliest meetings of the Council that I have attended since the Council was formed in 2009.

There were four topics and issues that were discussed and resolved that day:

1. Senior Citizens' discount (SCD), RA 9994, distribution of private sector burden since the government through the BIR assumed zero burden on this.

2. Electronic Drug Price Monitoring System (EDPMS), among the provisions of RA 9502 or the Cheaper Medicines Law of 2008 started in February 2006 under AO 2006-0009.

3. Status of implementation of the FDA Act of 2009 or RA 9711.

4. Proposed amendments to RA 9502 creating the Drug Price Regulations Board (DPRB).

Dr. Madz is a vocal, frank and good-humored person. I really liked the way she chaired the meeting. And the DOH, despite its limitations, still offers a more open venue for real discussions and dialogues among various stakeholders on health issues, compared to Congress, both the lower and upper houses. I have argued in my earlier papers here, that there is a tendency of bullying by some legislators during Congressional Committee hearing.

On the expanded senior citizens discount (20 percent off on medicine prices, medical devices, hospitalization and other fees), the problems simply refuse to go away. Or more appropriately, the problems created were larger and plentier than the solutions they are supposed to provide in bringing down the prices of medicines and other healthcare goods and services.

Why? Of the 20 percent mandatory discounts given to senior citizens, 30 percent is supposed to be shouldered by the government through the BIR, in the form of tax credits by retailers, wholesalers and drug manufacturers, the 70 percent to be distributed among these private players. But this is not happening as the BIR refuses to recognize the discount as tax credit. So the retailers and manufacturers, plus wholesalers, are pointing at each other sometimes of who should shoulder the bulk of the burden.

If the retailers get 16 percent or higher discount from manufacturers (like Mercury drugstore chain), 100 percent or the entire 20 percent SCD should be shouldered by the retailers. If the retailers get lower than 16 percent drug suppliers' trade discount, the suppliers will assume the entire burden.

So the government regulates and taxes the private players, then forces them also to provide mandatory discounts at zero financial burden to the government, and the public think that it is the government that gives the discount. This is deception.

What many private small drugstores and pharmacies do, is they do not carry or sell certain medicines and medical devices that are frequently demanded by the senior citizens, in order to avoid or at least limit the losses. Supposedly cheap but not available medicines, this is happening in certain areas of the country.

On the EDPMS, NCPAM mentioned that the recent DOH Administrative Order mandating the monthly updating of drug prices data by drugstores and pharmacies  to the DOH, imposing penalties for violation, has been released  Ms. Leonila "Leonie" Ocampo, President of the Philippine Pharmacists Association (PPhA), and Ted Colorado from the Drug Store Association of the Philippines (DSAP) explained why EDPMS is not working as designed and only created more problems and jacked up the operating costs of retailers. Leonie cited that they go around the country every week to conduct various seminars to Filipino pharmacists and the problem of EDPMS, the difficulty in complying with it, ranging from technical problems in uploading the data, to system inconsistencies with the DOH server, would always crop up.

Ted mentioned that he experienced facing the computer the whole evening up to early morning the next day and he was able to upload the prices of only five drugs out of several products they sell. I think the sheer volume of data from more than 22,000 drugstores nationwide being uploaded to the DOH would be enough reason to clog the DOH server and cause slow connections.

Madz said this is another example of "baking a cake that we cannot swallow", of having regulations that are difficult to implement. Yeah, that's why I said above that Madz is a frank and good humored person. Even if those being regulated want to comply with those regulations, they simply encounter various technical problems, not to mention diverting manpower away from the pharmacy and advicing patients, to the computer trying to upload data that would hardly go through the system.

There was one good resolution from members of the council who were there -- that they will ask the DOH  Secretary to have a moratorium on the implementation of complying with EDPMS pending further studies how to make the process easier to comply with, until end-2012 temporarily.

On FDA law implementation, the submission of a business plan to the DBM was briefly discussed.

On DPRB bill by Cong. Ferjenel Biron, Sen. Manny Villar and others, Dr. Madz said she is preparing an official position paper by the DOH on the subject. Generally, they are not in favor of creating the DPRB, they recognize that price control and regulation should be a "last resort" measure to further bring down medicine prices.

I briefly spoke on DPRB, I said that only one legislator is so gung-ho in creating this new bureaucracy, Cong. Biron and I think that he foresees himself to head this agency once it becomes a law. Given the conflict of interest of Cong. Biron -- he and his family own PharmaWealth, a drug importer and supplier, and Botikang Pinoy, a drugstore, it does not look good that the regulator is also a player, enjoying certain privileges that other drug manufacturers and pharmacies do not enjoy. I believe there is bad if not evil intentions in pushing hard that provision of institutionalizing price control as a policy and creating a permanent bureaucracy that will implement a bad policy.

Among the other agreements that afternoon, aside from (a) having a moratorium on EDPMS are:

b) change the name of the Advisory Council (AC) from AC on Healthcare to AC for RA 9502 implementation.
c) rationalize -- trim down, expand some -- the members of the AC
d) creation of a technical working group to further study the processes and implementation of EDPMS
e) the AC will meet quarterly or four times a year.

Meanwhile, google "drug price control" and here's one surprising result....

Seven of the top 10 articles on page 1 of google search are my papers: two from www.thelobbyist.biz, four from this blog, and one from www.interaksyon.com. :-)
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See also:
Health Transparency 4: Drug Promotions and Government, September 03, 2010
Health Transparency 5: Forum on Good Governance in Health, March 08, 2012
Health Transparency 6: Physician Protectionism, May 19, 2012
Health Transparency 7: DOH Advisory Council, CHAT, June 04, 2012