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
