FDA 6: Business and Modernization Plan

The Food and Drugs Administration is technically a very powerful government agency because it can say Yes or No to the introduction of new medicines and vaccines, innovator or generic; new food supplements and drinks; new skin whiteners, boobs enlargers, soap and shampoo, toothpaste and lotions, medicines and vitamins for animals and fishes, medical and dental devices, and many other things.

So a vigilant and technically capable FDA can block the introduction of those “magic” tea/coffee or herbal drinks that can “prevent or cure all types of cancer, all types of cardiovascular diseases…” and penalize violators, those who introduced those “magical, cure all” products without FDA permission and make big money fooling the public and putting the health of some patients in danger .

Yesterday, I attended a presentation by the FDA headed by its Director, Dr. Kenneth Hartigan-Go, held at the Asian Institute of Management (AIM) in Makati. The event was sponsored by the Medicines Transparency Alliance (MeTA) Philippines, in coordination with the Stephen Zuellig Center for Asian Business Transformation.

He presented this paper, but in powerpoint form. This blog post by the way, is 7 pages long including photos and illustrations, so enjoy.

This paper is straightforward and frank. For one, it explicitly admits that the old FDA set was corrupt and fomented corruption. Hats off to the new FDA guys, led by Dr. Ken, for this admission. Undesirable acts can be corrected if the mistake is explicitly recognized in the first place. The paper said,

Why did the old FDA setup foment corruption? The old FDA is a web of misinformation, dead-ends and inconsistency. Companies who seek to be authorized encounter an ill-defined and dated body of regulations. With a bureaucratic process and indefinite deadlines, application turnaround times are known to exceed two years from lodging in of application to release of authorization. This alone translates to losses for companies who cannot operate and are forced to deal with overhead costs without revenues. In their efforts to avoid dealing with the FDA, middlemen (i.e. freelance regulation consultants) have risen to exploit the market of frustrated industry people taking advantage of the lack of transparency, inconsistency with regards to requirements and evaluation process, and the plain distance of the FDA from company offices in central NCR. While not all middlemen are unscrupulous, the agency’s tarnished reputation has been used as an excuse for the middlemen’s own shortcomings. Unfortunately, the old FDA cannot refute the allegations for it is all true – the process is corrupt, the system is sclerotic and the leadership wanting.

These are the four core reforms that the FDA is banking on. And each major heading has many parts or action items.

On (1) Improving the evaluation process, I was very happy to see those “paperless application”, “electronic payment”, “online application guidelines”, “automated renewal of licenses”. Yes, show the paper trails, remove or minimize the face to face interaction between the regulator and those regulated. Transparency alone reduces the itch for corruption and actual commission of corrupt practices.

On (2) Enhancing regulatory inspection, FDA is getting serious on having rule of law, it is one big good news. Make the inspectors more technologically sophisticated and accountable, more bold, prepared and even armed, and have a strong legal team, prosecute violators.

In a brief open forum after Doc Ken’s presentation, I spoke and lauded this new move. FDA is saying to potential violators that “Go ahead, sell and distribute fake or substandard medicines, adulterated foods, etc. and face our lawyers.” The threat of being legally prosecuted when found violating the rules is a stronger deterrence than pre-business inspections.

FDA 5: Trade and Investment Promotions

Today, the Food and Drug Administration (FDA) will celebrate its 50th Anniversary at its office in Alabang. Congratulations, FDA Director Dr. Kenneth Hartigan-Go and staff.

Doc KHG has a new slogan, a "Transformative FDA" where they are "finding the balance between innovations and sound regulations."

I think it is a good and simple goal. Encouraging innovations while weeding out the not-so-good guys among the players via regulations and penalties for violation of certain rules.

Last Monday, June 17, FDA held a training seminar for its top officials and decision makers from different centers and offices, with resource speakers from the Board of Investments (BOI, DTI) and the Bureau of Customs (BOC, DOF). The goal of the training and discussion is to further develop FDA as an "agency that is conscious of its important role in facilitating trade of goods and services as well as in promoting investment in the country.... securing public health (and) be a more trade and investment-friendly agency in order to support growth and development of the industry, promote national competitiveness and sustain economic gains of the country."

I saw the FDA Press Release on the activity. A BOC official and speaker, Mr. Villanueva,  focused on "Ease of Doing Business, discussing the importance of time, cost, and documents as far as business registration is concerned." 

Bureaucratic regulations are realities happening almost anywhere in the planet that we have to live with. If kept to the minimum, such regulations and prohibitions will drastically help reduce unethical or abusive business practices that can disadvantage consumers as both the players/regulated and the regulator can easily remember only a few regulations, not dozens or hundreds of them.

One important precondition for the rule of law to prevail is that the laws and regulations should be as general (ie, not so detailed) in application and as few as possible in number. To promote economic freedom and more entrepreneurship, more job creation, everything should be allowed, except for a few expressly and explicitly prohibited acts like stealing, killing, abduction, explicit plan to fool the consumers, and a few others. The penalties should be very clear and should apply to all violators, no one is exempted and no one can grant an exemption. That is the essence of the rule of law.

In the case of the FDA, its main function is to allow and encourage the entry of more players, manufacturers, distributors and retailers, who will give the public more useful food, drinks and medicines at competitive prices, and weed out players that produce and sell products that can be harmful to the people. This way, public health will be further promoted.

It is important for the FDA to have a strong legal team that can prosecute at a short period of time those caught violating its rules and regulations. Or at least, it should have strong tie up with the Department of Justice, the police and the courts, so that legal cases against violators or plain suspects can be pushed with little or no delay.

This act alone will encourage the entry of more players both from abroad and from local entrepreneurs, to enter the food and drugs business, as they see the equal application of the law to unequal people and players, and the opportunist and shrewd among them will be culled and removed.

So good luck, Doc Ken and your staff at the FDA.
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See also:
FDA Watch 1: BFAD Strengthening Bill, May 06, 2009
FDA Watch 2: Inspection of cGMP Compliance, January 31, 2011 
FDA Watch 3: Retirement of Dr. Suzette Lazo from FDA, May 16, 2012 
FDA Watch 4: Dr. KH Go Lecture on Regulation and UHC, May 06, 2013

FDA Watch 4: Dr. KH Go Lecture on Regulation and UHC

Last April 12, 2013, Food and Drugs Administration (FDA) Director, Dr. Kenneth Hartigan-Go gave a lecture at the AIM, part of the MeTA Philippines discussion series. I was not able to attend it as I attended a lecture on mining taxation at UP Diliman that afternoon. So my discussions below will be limited to his presentations. The 69-slides presentation is available here.

Dr. KHG's talk started with photos and lessons from the movie, "The Untouchables". The lessons were very telling, like:

Walls have ears. Colleagues could be moles. Information from one trusted source could be wrong. Intel is critical but can you trust your boss? Media sometimes gets into the way of your operations. A good regulator can also experience fear (and temptation). Sin of omission is equally as dangerous as commission of crime. The Modus Operandi of Evil – bribe, extort, threat and lastly, harm.

This illustration or model below caught my attention. There is (government) regulation but nothing on (players) competition. Not everything can be provided or regulated by the government. Competition among players is often the best self-regulation that players do, they cannot over-price or sell inferior or harmful products as the customers can boycott them anytime, if not haul them to court. I will make no comments to the next two slides.

It is good that Doc KHG used the term "coercive power of the state" as government by nature, is force and coercion. It is not a voluntary organization like a tennis club or running club or rotary club that one can join and pay annual dues, then quit membership and stop paying the dues. And Yes, regulation is coercion. It is prohibition, telling players -- corporations, NGOs and individuals -- that certain things are prohibited and limited, and there are penalties for violating the regulations.

The illustration below shows the four elements of regulation. No comment.

These ethical considerations are informative. They present certain dilemma to regulators. If people are allowed to free ride, they will. Like non-poor people to get UP education subsidy or DOH and PhilHealth subsidy, and keep more of their money for various personal spending. That is why government subsidies should be limited whenever possible.

About the practice of certain physicians who prescribe and dispense at the same time certain medicines and vaccines, there is indeed some "conflict of interest" there. Like they will use medicines and/or vaccines where they can get the maximum profit margin. But in certain cases, that is not the end of the story. The physicians who do this would also bend backwards and exert extra effort to serve their patients. Like spending an hour with the patients and their parents/guardians instead of the usual five-minutes visit then call the next patient waiting outside. Or they make sure that the medicines to be administered are well-handled/transported and well-stored before being finally given to the patients.

FDA Watch 3: Retirement of Dr. Suzette Lazo from FDA

(* Note: the original title of this paper was "Resignation of Dr. Suzette...")

I posted my initial observation about the Senate hearing last week on DPRB,  Fat-Free Econ 9: Drug Pricing Bureaucracy is Not Cool in our CHAT googlegroups. FDA Director, Dr. Suzette Lazo, is a member of our discussion group as she used to be with us before she was appointed to head that office.

In my notes to the group, I said that some of our legislators motormouth like they know everything in this planet, they are hypocrites. I pity Doc Suzette and other guest speakers sometimes because while they have to do many administrative work in their offices, attend to various invites and meetings by sectors that they  regulate, they have to spend many hours at the Senate or Congress, only to speak for 3 minutes or less.

Sen. Villar and the congressmen, they have been in the legislative body for many years (Villar has been in Congress since the 90s), and they do not understand that FDA's mandate is on food and drugs' quality, never on pricing. Yet they keep inviting the FDA officials to discuss bills on drug pricing, weird.

Doc Suzette replied to my observation, rather long. I thank her for giving me permission to post it in this blog. She wrote,

Noy,

This very perceptive insight on your part is totally correct and I really appreciate. In fact very few in government understand what the FDA is all about- although they act like they do. I have been giving presentations on this when I get the chance- para akong evangelist ng FDA. It is a poorly understood agency, much maligned and very little appreciated. People don't realize that it is the only government agency that stands between them and safety - as it looks after a very wide array of products: food, drugs (including biological vaccines and veterinary drugs), cosmetics and all personal care products, household hazardous substances (detergents, antiseptics, etc), household pesticides, medical devices including radiation-emitting devices, medical gases, in vitro reagents, bottled water, toys, some school supplies (pencils, crayons, inks), even tobacco but voided by an RTC court (no regulation to thwart the recruitment of the young to become hooked to tobacco).

I also want to share with the MeTA family that my position as head of the agency will be coming to a close next month. It has been a life-changing experience for me and an honor to serve government. I hope the many reforms I have started will be continued. This includes requiring mandatory GMP , inspection of foreign drug sources, evaluation of the drug approval process with the help of WHO who will be conducting an assessment on JUne 18th this year. The FDA is now undergoing ISO-certification hopefully to be completed within the year and it will also undergo PIC/s audit on September. A new Bioequivalence Committee is now in place and reviewing the list of products that will require bioequivalence testing; a new Advisory Committee on Pesticide is being set-up to address the critical safety issues and strengthen FDA's regulatory capability in this area; pesticides was placed under FDA jurisdiction in 2007 from the Fertilizer and Pesticide Authority. It was a great privilege to work with other agencies in governments such as the Dept of Agriculture to craft a much needed Food Safety Bill that will hopefully be passed soon. Linkages with other agencies were also a source of support.There were other great linkages such as with advocacy groups like ECOWASTE whose goals paralleld FDA's in line with ensuring safe cosmetics and toys; all the groups under CHAT also supported me at all levels from the budget to the most personal level and I will forever be grateful. And more - Health Justice for their support in the issues FDA faced with tobacco groups. With the academe, notably PCP and PSECP, as well as other specialty medical organizations there were multifold projects and support- such as ensuring the usefulness of the last medicines effective against MDR-TB. The Phil. Society of Dermatology helped FDA's campaign against the irrational use of intravenous glutathione. With DOST=PCHRD, and the ethics board, PHREB, a new framework and road map for clinical research management seeks to create a streamlined environment for global clinical research that will ensure the protection of Filipino patients participating in clinical trials and make available a robust regulatory environment that that promote and not impede progress. It has also been my honor and burden to play a major role in the implementation of RA 9711 which is now in the hopefully, final stages of review by DBM.

It has also become very apparent that there is a lot of work that needs to be done. First, the country needs an institution geared at training people in regulatory affairs. Second, there is a need to bridge science, real science, into the government decision making process. Countless sessions to clarify many issues should precede legislative hearings. Third, our innumerable laws need to be reviewed and harmonized. For the clinical research project, there is a collaborative effort between government, academe and industry that seeks to come up an integration of all the documents, to see if the laws jive or contravene one another, to cross-reference, etc and to distill the entire substance into a clear summary.

I have known Doc Suzette for about 3 1/2 years now, since January 2009. And I can say that being incompetent or corrupt is the last thing that can describe her. She is simply a down to earth pharmacology scientist and academic who was appointed to head a big regulatory body like the FDA.

Now that is leaving the FDA, not due to health reason perhaps, my rather malicious mind would like to think that there could be something rotten in that agency, but I doubt that she will discuss it publicly.

FDA, like all regulatory agencies in the government, national and local, can be a good magnet for scumbugs and bad elements in society. Why? Because those agencies can say Yes or No to anyone trying to bring in or introduce new products and services -- a new drug, a new skin whitener or shampoo, a new toothpaste or deodorant, a new sauce or pasta, a new juice or energy drink, etc.

Corrupt or shrewd businessmen with connection to powerful politicians though, can bring in the most unsafe drugs, the most unsafe food and drinks, to the country and avoid any requirement for bioequivalence test, or food safety test, by paying off some regulators. Likewise, businessmen who want to bring in really safe drugs, food and drinks cannot sell their products if certain regulators and product inspectors will demand extortion money.

I am not saying that certain FDA people are corrupt, that's too malicious and would require substantial proof which I do not posses. But theoretically, it is a possibility, given the high level of corruption in the Philippine government, in all branches. That is why I can never support any expansion of government, like creating a new bureaucracy called the Drug Price Regulatory Board (DPRB) because it will invite another opportunity for corruption. If the government and all its anti-corruption bodies -- Commission on Audit (COA), Ombudsman, Civil Service Commission (CSC), Presidential AntI-Graft Commission (PAGC), etc. -- cannot control existing corruption, how can they control future corruption with future bureaucracies to be created?

That is why we in civil society like the member-NGOs of CHAT, should never be hoodwinked that government is the solution to many problems in society. A lot of the problems in society in fact, are created by governments. Like the poor who do not want to be dependent on politicians, they put up a barbecue stand, a barber shop, vulcanizing shop, buko kariton, etc., and yet the local governments think these are illegal because they need to get various permits from city hall before they start their business. That's how buko kariton are being confiscated here in Makati by city hall trucks, the penalty is P1,000 no receipt possibly, they release the kariton, then go and confiscate them again the next few months. Money that could have been used by the poor vendors for their family is given to city hall or BIR bureaucrats. But I digress.

In order to make the job of the FDA and other government regulatory agencies in charge of ensuring public safety from harmful substances much easier and less bureaucratic, I think we should encourage, or at least not put more bureaucracies, companies and entrepreneurs to develop their own brands. Corporate trademark and brands that simply say, "Our name is our guarantee to the good quality of our products."

Thus, food manufacturer A that sells dozens of different food products need not bring in all their existing products to the FDA for quality testing. The trick is that just one, just one of its dozens or hundreds of different products that is found to be unsafe, will negatively affect the entire company. It will be a corporate brand that was built for many years or decades as having good image, will now be tarnished by just one product that is found to be dirty or harmful. That public penalty is worse than the FDA stopping the sale of one or two of its products into the market.

The same principle should apply to drug manufacturers, innovator or generics; should apply to all juice and drink manufacturers, multinational or local.

I doubt though that this principle will be considered by any government regulatory agency. There is money involved also in each approved product, like product certification fee, something that goes to the coffers of a regulatory body.

Meanwhile, I wish to see Doc Suzette more in CHAT and MeTA Philippines meetings and other activities when she goes back as an academic and NGO leader.
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See also:
FDA Watch 1: BFAD Strengthening Bill, May 06, 2009
FDA Watch 2: Inspection of cGMP Compliance, January 31, 2011


Health Transparency 1: MeTA Forum January 2009, January 26, 2009
Health Transparency 2: CHAT Discussion and Debates, June 15, 2009
Health Transparency 3: MeTA Forum January 2010 (Prevention vs. Medication), January 27, 2010
Health Transparency 4: Drug Promotions and Government, September 03, 2010
Health Transparency 5: Forum on Good Governance in Health, March 08, 2012

Generic Drugs Asia 1: CGDA Notes 1

I am starting a new discussion series in this blog, "Generic Drugs Asia". Mainly about the Conference of Generic Dtugs in Asia (CGDA), November 19-21, held in Taipei, Taiwan. There were so many information imparted over the past two days, I should write about them little by little.

Below is my article yesterday while I was still in the hotel in Taipei. It is posted today in the online magazine,
http://www.thelobbyist.biz/perspectives/less-gorvernment/1239-generic-drugs-and-the-consumers-part-2
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Taipei – Generic drugs have a wide range of use and acceptance in many Asian countries, from as low as 23 percent of total pharmaceutical market volume in Japan to about 65 percent in the Philippines to as high as 80 percent in India. This reflects the extent of confidence or suspicion of generic drugs in our continent.

This is among the important data and information that were discussed during the 1st Conference of Generic Drugs in Asia (CGDA), November 19-21, held here in the capital city of Taiwan. The event was jointly organized by the Federation of Asian Pharmaceutical Associations (FAPA) and the Pharmaceutical Society of Taiwan. The word “pharmaceutical” here also would refer to pharmacists association, and not the pharmaceutical companies.

There were four of us from the Philippines who came to the conference. Ms. Leonila Ocampo, President of the Philippine Pharmacists Association (PPhA) where the association is a member of FAPA; Ms. Nazarita Tacandong,Deputy Director of the Food and Drug Administration (FDA), Jose Maria “Joey” Ochave, SVP of United laboratories (Unilab), and me We were all speakers on different panels.

The conference has four main themes or panels. (1) generics, scientific and legal standing points, (2) government policies for generics, (3) development and contribution of generics, and (4) generics , the perspectives of healthcare providers and patients/consumers. I spoke on the last panel to discuss the view of consumers, not only of generic drugs but also of innovator drugs and healthcare system in general. See my notes about the conference before coming here, also Part 1 of this discussion, Generic Drugs and the Consumers.

In panel 1, the key presentation was made by Dr. Vinod Shah, a senior research scientist at the US FDA. He worked for that agency for the past 30 years, so he really knew a lot about the various requirements and approval process of generic drugs in the US, which has among the most strict regulations worldwide. Dr. Shah said there are 6 strict criteria of generic drugs approval in the US. They must (a) contain the same active ingredient as the innovator product, the inactive ingredients may vary, (b) be identical in strength, dosage form, and route of administration as the innovator drug, (c) have the same use indications (labeling), (d) be bioequivalent, (e) meet the same batch requirements for identity, strength, purity and quality, and (f) be manufactured under the same strict standards of FDA’s good manufacturing practices (GMP) required for innovator products.

Six strict requirements, wow. We wonder if all or most of them are also done in the Philippines and other Asian countries. For many Asian governments, two criteria are set as the minimum: generic drugs must pass bioequivalence (BE) tests and they must get a certificate of GMP from the FDA. Then they add a 3rd or more criteria.

Panel 2 was the presentation of the FDAs of the governments of Malaysia, Philippines, Japan, Korea and Taiwan. Ms. Tacandong of the Philippines spoke about the Generics Law of 1988 including the registration of generic products, the National Medicines Policy, generic labeling, prescribing and dispensing.

Panel 3 has lots of good speakers from among the biggest generic producers in Asia – from Japan, Korea, Philippines, India and Taiwan. Mr. MV Ramana from Dr. Reddy’s, the world’s 12th biggest generic manufacturers, spoke for India. For the Philippines, Joey Ochave of Unilab, the 17th biggest generic producer in the world, spoke. Joey talked about the Philippine pharma market (80 percent of total generics market, and 23 percent of total value including innovator drugs held by Unilab), an assessment of the Generics Act of 1988, the WTO TRIPS flexibilities on intellectual property rights (IPR) on medicines, the Philippine’s intellectual property code (IPC), the Cheaper Medicines Law (RA 9502) and how drug price control policy was inserted into the law when it was not there in the previous bills. Joey was the usual articulate and clear speaker. Even if I know a number of the topics that he discussed, I still learn many new things and insights as I listen to him.

In panel 4, the main presentation was made by Dr. Leslie Benet of the Department of Bioengineering and Therapeutic Sciences, School of Pharmacy and Medicine, University of California in San Francisco. The guy is a big name in the international pharmacy research, he is also a tall guy with a big voice that he needed no microphone to speak even in an auditorium. His bottom line presentation is this: “No prospective study has ever found that an FDA approved generic product does not show the same clinical efficacy and safety as the innovator product, even when special populations (eg elderly, women, severely sick patients) are studied.”

His conclusion would be consistent with the presentation by Dr. Shah of the US FDA the day before as Dr. Shah showed how stringent, how strict, the FDA is in approving any generic drugs to be sold in any drugstore in the US.

For my part, I spoke on “Generics, Perspective from Consumers”. My six-point conclusions were: (a) consumer interest is more choices and options for each molecule or generic category, (b) reduce or remove taxes on medicines and withraw drug price control policy, (c) government should focus its resources on fighting substandard and fake drugs, (d) expanding generics only retailers (GORs) improve access of patients to generic products, (e) drug innovation + generics complement each other in protecting the public, and (f) on drug switching, physicians and pharmacists should guide patients.

I would say that the conference was highly successful as there were lots of information and observations discussed, lots of networking opportunities, all the speakers came, and there was a good audience. The conference venue was also very nice, there is a microphone every two seats so that participants in the audience who want to ask questions need not stand up and go to the microphone in the aisles.

The organizers also arranged three dinner banquet for us speakers, moderators, organizers and sponsors of the conference. So many nice food and drinks, while exchanging notes and information beyond the plenary and conference hall. I thank again FAPA and the Pharmaceutical Society of Taiwan for organizing that first conference on the subject in Asia. It will become an annual conference around Asia in the future, and healthcare providers, regulators, professionals and consumers/patients will learn a lot from such important event.

On IPR Abolition 8: Data Exclusivity in the Proposed EU-Philippines FTA

ate last month, there was a roundtable discussion between NGO leaders of the Coalition for Health Advocacy and Transparency (CHAT) where MG Thinkers is a member, and some convenors of the EU-ASEAN FTA (Free Trade Agreement) Network of NGOs. The main presenters were from the Focus on the Global South and the Fair Trade Alliance (FairTrade).

The FTA network NGO leaders are watching the proposals by the EU for the possible EU-Philippines FTA, on the aspect of IPR and medicines. They said that the EU wants a stronger data exclusivity agreement with the Philippines, like the patent period to start not from the discovery of the drug molecule, but from final approval and marketing of the drugs. I have not seen the draft agreement yet, it will be tackled in another round table discussion next month.

There was a proposal from a leader of Sanlakas, a militant labor organization advocating for socialism, that civil society groups should air for the "highest" form of protest like the outright abolition of the IPR system. Many NGO leaders in CHAT played a big role (me not included) in the passage of the Cheaper Medicines Law or RA 9502. That law simply amended the Intellectual Property Code (IPC) of the Philippines, not abolished the IPR system like drug patents. RA 9502 was a hard-fought law for many CHAT-affiliated NGO leaders and it is not possible, not wise, to just throw it away in favor of advocating for the abolition of IPR.

Notice that not a single local pharmaceutical company, from the biggest (like Unilab) to the smallest, advocates the abolition of IPR. I think all local and generic pharma companies recognize the value of new drug invention by the multinational innovator companies as a very expensive, high-risk, and very bureaucratic (dealing with Food and Drug Administrations (FDAs) endeavor. Thus, they respect the patent given to newly-discovered drug molecules by the innovator companies. They only wish that certain TRIPS flexibilities on IPR like the "early working" principle, compulsory licensing (CL), parallel importation and related measures be given to governments of poorer countries to allow such governments and local pharmas to deal with certain health emergencies. That is why RA 9502 was enacted into a law.

During lunch, I discussed with the Sanlakas leader my observation that there are two groups of people who support the abolition of all forms of IPR. The socialists or the lovers of BIG government, and the libertarian anarchists, or the lovers of ZERO government. Libertarians are supposed to be free marketers, to support private property rights. The main difference between capitalism and socialism is that the former supports and respects private property ownership of the means of production (thus, advocacy for private property rights) while the latter disrespects such rights and supports state and social ownership of the means of production.

But certain libertarian anarchists support only private property rights for physical and tangible properties (land, house, car, computer, cell phone, etc.) but not intangible or intellectual output. They consider ideas as "non-ownable" and private property rights cannot be conferred on ideas.

I have debated with some socialists and some libertarian anarchists on IPR -- see my earlier discussions on IPR since late 2007 in this blog, most recently Parts 1 to 7 of this subject. And I discovered that some libertarian anarchists are the most rabid, the most vocal, and the most passionate in the campaign for the abolition of all IPR compared to the socialists. It was a big surprise to me.

Well, I've been a Marxist-socialist (but never a Maoist) for a few years in the 80s, and very briefly was a fan of Michael Bakunin and other anarchists. So somehow I know how the minds of the socialists and anarchists work. Maybe, I could be wrong.

When the socialists call for the abolition of IPR as "non-property rights", it is understandable because they are consistent with the abolition of private property rights of the means of production (land, machines, factories, offices, etc.). Drug molecules, song compositions, books and scientific papers, etc. are considered part of the means of production. So for the socialists, whether physical property or intellectual property, both cannot be granted as private property; both should be state and communal property.

The libertarian anarchists' arguments for IPR abolition are four: (1) Ideas are non-scarce and there is no conflict among people when they use such non-scarce commodity, (2) ideas cannot be owned in the first place, (3) IPRs like patent, copyright and trademark, create monopolies, and (4) all IPRs are state-granted and issued.

My quick answer to all points above are:
(1) Bright ideas are scarce, idiotic ideas are not, they abound, and one proof is that governments around the world keep expanding.
(2) Ideas are ownable, bright minds who pursue molecular biology from BS up to PhD and post-doctoral degrees for instance, will pursue a full time career of producing nothing but ideas, they should be entitled to their own inventions.
(3) True that IPRs create monopolies, but not industry monopolies, rather, brand or product monopolies, better termed as "mini-monopolies." One million rock songs, one million song copyrights, no problem; there is no single "rock song copyright."
And (4) it is possible that IPRs can be issued by industry associations in the future. A system of reward and punishment can be implemented for respect or disrespect of IPR at the private, industry level.

It is funny how some anarchists would label other free marketers who support the IPR system, those who disagree with their brand of libertarianism, as "advocating violence". For this dogmatic type of libertarians, there is only one truth of "peace" in this planet: THEIR version. I am not comfortable working with the dogmatists.

Meanwhile, I just read from the Property Rights Alliance that the Australian government is planning legislation that will mandate the removal of trademarks and logos of tobacco manufacturers in cigarette packages. I have posted in Tobacco taxation, Part 2 that I have little or zero sympathy with smoking, but I recognize that people own their bodies. If they want to smoke and smoke, drink and drink, even if they know that it is not good for their health, so be it.

But I am not in favor of such proposed legislation in Australia -- and soon, it will be introduced here in the Philippines and other countries. A company's trademark and logo represents its identity. Remove the trademark and you remove its identity compared to other producers and manufacturers. The public then will have a hard time, or will not be able, to distinguish between the real and fake manufacturers. In addition, such proposal will also violate existing IPR laws, unless they will also amend their respective Intellectual Property Code (IPC) or similar laws.

Drug price control 9: More comments on single pricing per drug

After posting Part 6, Exploring just one price for each drug last week, I received several feedback and comments from some friends. Here they are.

1. I agree with you. There is a fundamental problem with some NGOs, they do not do critical analysis, or is it the government who also does not do this. -- Dr. G.

2. Thanks for sharing your paper. It's a bit disconcerting that despite the wealth of knowledge out there about medicines and data that supports the folly of price control, there are still random ideas that linger and sadly will never address the issues of access. -- Ms. V.

3. Thank you so much for sharing your latest paper on single pricing for drugs. Having hospital pharmacy as my background I am very much aware why medicines are priced higher as pointed out by Dr. A. Bengzon. I also fully agree with the points you and Dr. Jimenez raised.

Big chain drugstores enjoy bigger dicsounts and get more incentives because they buy in bulk. Likewise government hospitals get their drugs and supplies at very low costs that private hospitals are not entitled to. Operating costs for private hospitals are higher. And to stay in competition upgrading of equipments and offering of better services and programs are needed to stay alive. Having said these how then can I support single drug pricing. I hope a more comprehensive study be done on this issue. -- Ms. L.

4. It is not fair, not correct, to compare pricing of Coke and drugs. Coke or other commodities can have different prices because they are not necessities, thus consumers can easily choose the cheaper shop or outlet. Drugs are different, they involve public health, they should be treated differently and their pricing should have the narrowest range as much as possible. -- Randy

5. I partly agree with all this need for profit for those who really do the hard stuff of researching and inventing and producing drugs. But what makes it expensive is the unnecessary spending on marketing and the so many layers of sales and marketing people and advertising models and copyrights that make the whole system too expensive and has veered away from the original objective of the inventor - to help cure diseases and to profit from it as well. In the end the shareholders' interest become supreme and that is where all these evils go in. In return the Pharma Execs and the investment companies Execs earn far too much than the poor inventor who may have some altruistic motives in addition to his quest to earn a living. More often than not he does not even get to own the patent or share from the royalties of his discoveries. It is the avaricious Investment and Pharma Companies Execs who gets to holds the hen that lays the golden eggs!

Inventors do have a right to profit from their operating costs and research costs and production cost. Investors do have a right to profit from their investments - but for how much and for how long? -- Floro.

I thanked the first 3 commenters above. I did not reply back to them anymore. Here are my rejoinders to #4 and #5 last week, below:

On #4, Food are also necessities. For me, plenty of (especially nutritious) food are the best "medicines" because they are preventive, not just curative. People accept different pricing of the same food (rice, vegetable salad, spaghetti, adobo, etc.) from different food outlets, they do not demand "same price for each food." Since there are different input costs in the selling and dispensation of drugs by different outlets (from hospitals to modern drugstores to ordinary, non-air con village drugstores), then there will be different output pricing for each drug outlet.

If prices are to be kept at a single, uniform price -- a de factor drug price control for each drug preparation (brand at a particular dosage) and not just for each drug molecule (ie, the generic name) -- then some drugstores will stop providing better services for the consumers. Like remove the air con or keep it at low cool even at noontime, reduce lighting, hire low-paid and less-trained pharmacists who work long hours with no overtime pay, etc. just to keep the costs as low as possible. Cutting the air con will later adversely affect the quality of certain drugs that require a certain low temperature range.

On #5, Floro identified possible causes of high medicine prices -- unnecessary spending on marketing and the so many layers of sales and marketing people and advertising models and copywriters.

I think that all products and services, especially for technical products like a new car (new engine power, new safety measures, etc.), a new airplane and chopper, a new laptop, a new camera, a new cellphone, a new drug, etc., would somehow need some marketing and advertising. How would ordinary mortals like you and me be first, made aware of their existence, and second, be aware of their properties, functions, user-friendliness, price, etc., compared to competing products?

Companies and entrepreneurs should be left alone on what mixture of production cost, marketing and advertising cost, they will employ. Let some companies over-spend on advertising and lose money later due to the high price of their products compared to products by other competitors. Governments have no role in regulating how much price those companies can charge, or in regulating the kind of advertising and advertising cost they can employ. The role of government is to promulgate the rule of law. Someone got bad allergies or died after taking a particular food, drink or medicine. Government comes in to investigate and try the case/s quick, then punish hard the perpetrators of such crime once proven guilty. The quickness of the justice system and the certainty of punishment if proven guilty -- no exemption from the law, no one can grant exemption from punishment -- is the best regulation that government can do.

On the "how much, how long" is the profit for new inventions. How long is fixed, 20 years patent life for a newly-discovered drug molecule, 50 years copyright after the death (I think) of the song composers and inventors. In the case of drugs, the various clinical trials and compliance with government food and drug administrations (FDAs) regulations take up about 10 to 13 years of the patent life, according to industry figures that I've read. So the "profit period" is only 7 to 10 years out of the total 20 years patent life.

As to "how much" profit, again, let us leave that to the companies themselves. If we care "how much profit" those companies can make, do we also care "how much losses" they can make too? Capitalism and entrepreneurship is about profit and losses, expansion and bankruptcy. Some if not many of the "biggest" companies in the country and the world just 20-30 years ago are perhaps just medium size companies by now. A few may have been gone already. Like Lehman Brothers in the US, like Pantranco, BLTB and Grand Air in the Philippines.
-------

See also Part 7, Pricing by drug inventors

IPR and medicines, Part 7

I will discuss two related topics on the role of government in IPR. See my earlier discussion on why fellow free marketers and advocates of individual liberty do not believe in IPR in Part 6.

Should IPR be granted by governments only?

Currently, governments through their Food and Drugs Administration (FDA) and Intellectual Property Office (IPO) or similar agencies, are the ones that produce the various regulatory and health requirements then grants (or denies) the IPR application by the innovator pharma or biotech companies. There is no private entity yet like those private credit rating agencies that does the job. Government would think that bublic health is too important to be left to the market players and thus, unlucky for us, it seems improbable that government will abandon this function.

Let us assume just for discussion purposes, that one government in the rich world will allow a private body, say a federation of pharma + biotech companies + universities, with DOH/MOH participation, to grant or deny an IPR application for drug molecules.

Most likely it will be a less bureaucratic set up than existing government FDAs' approval process. Thus, the entire regulatory procedures before a drug can be finally marketed to the public will be shorter, less than the current 10 to 12 years. It is not the regulatory procedures that will put fear in the hearts of the innovator pharma companies should they produce an ineffective or effective but unsafe drug. It is the fear of being sued left and right and from many countries that will put fear and internal discipline for the pharma companies.

Between a government and a private agency that will grant or deny the IPR application, I would choose the latter, for the reason I cited above. But nonetheless, I am indifferent for now of who should give or grant the IPR, government or private. The point is that there should be a mechanism to assure those who invested huge amount of time and money to give us effective and safe medicines, to recoup their investments. Those drugs and vaccines will save or prolong our own lives and the lives of our loved ones anyway.

Please note that we are not talking about simply copying others' ideas here. We are talking about innovation and first time invention, about originality and creativity. Some can start from scratch, some can start from other researchers' studies, some can start from their previously failed experiment on other diseases. Their ultimate goal is to produce something that is new, something that is revolutionary and was never invented by anybody else.


Legislation and cronyism

I think that most if not all legislations after the State has expanded, are favoring certain vested and crony interests, mostly local. I discussed for instance that the Renewable Energy (RE) law is cronyism in favor of the wind, solar and other renewable plants. See here, Energy rationing and climate alarmism, part 2.

The current Cheaper Medicines Law also has the signature of favoring local pharma which have the capacity at large-scale manufacturing of drugs that can be issued a CL or can use the “early working” provision. It appears to me that the CL benefactor is saying, "The high cost of your innovator drug’s R&D is yours and yours alone; the losses of your non-successful or non-profitable drug molecule are yours and yours alone. But your successful and profitable drug invention is also MY invention too."

Government can give in a silver platter, certain favored local companies this kind of privilege. Luckily, CL has never been issued so far. I think the main reason is not that government regulators and politicians suddenly have a change of heart and decided not to issue CL. Rather, there are no more blockbuster drugs with long patent life remaining in the market. Most if not all have their patents expiring in 2 years or less. The cost of litigation is high compared to just waiting for those patents to expire naturally.

I have argued before and I will repeat it here – government’s multiple taxes on drugs (import tax 3 to 5 percent; VAT 12 percent; local taxes, etc.) that contribute to expensive medicines were never touched or withdrawn by RA 9502. Government taxes, over-regulations and local cronyism conspired to discourage the entry of more innovator companies.

The good thing is that competition in the generics drugs is intensifying among more and more players. Major players producing different drugs from the same drug molecule only compete in branding and brand loyalty by customers.

FDA Watch 2: Inspection of cGMP Compliance

A friend from the pharma industry here in Manila commented on my article last week, Competition, sans coercion, will bring drug prices down . He wrote,

Hi Nonoy,

I fully agree with you that it is competition and not price control which can sustainably reduce drug prices. The government's role is to level the playing field so companies can compete. The problem now is there is no regulatory level playing-field. The FDA conducts cGMP audit and ensures compliance (which it should) among local drug manufacturers, but it does not even inspect facilities in other countries like India. I find this reckless... I have visited India to meet various companies and look at their facilities. A lot of Indian companies have excellent facilities, some with USFDA, UKMHRA and EMEA certifications even. However, these companies are also complaining because quite a number of companies which will never pass any cGMP inspection are able to register and sell their products in the Philippines. At the very least, the FDA should inspect those coming from non-PICS countries to ensure cGMP compliance and thus ensure a level playing field. To their credit, FDA has long wanted to conduct such audits, but for whatever reason they have been unable to do so. The FDA needs our support so they can perform their functions without fear.

As to GSK, I am happy with their current thrust of lowering their drug prices, but note that it was initially not voluntary for them (as with the rest of PHAP) as the threat of MRP was used against them. In any case, competition has become very stiff in the pharma industry, which is good and is what should be. The private sector continues to find ways to have products that are low in price but which do not compromise quality. As we have shown, it's doable. However, we are still waiting for government to do its part through PhilHealth. Everyone agrees that the next inflection point in pharma pricing is when PhilHealth uses its power (and money) as a third-party payor. It too is doable. All it takes is a firm resolve and working with stakeholders who can help them.

I thanked my friend for allowing me to post his comments, minus his name and affiliation. The mad rush for "cheaper medicines at all cost" can often backfire as we might be getting super-cheap but super-ineffective drugs. I read somewhere a comment that "the most expensive drugs are those that do not work or cannot cure."

My friend added that "Technically, it's not parallel importation as many of the products which have been allowed to enter without cGMP audits are already off-patent or not patented here at all. They're also not the brands owned by other companies."

So, what keeps the Food and Drugs Administration (FDA) from conducting wide compliance inspections of certificate of Good Manufacturing Practices (CGMP)?

I remember during the 3rd MeTA-Philippines Forum last January 2010, FDA Director, Dr. Nancy Tacandong, shared during the open forum that they wanted to implement bio-equivalence testing for many drugs, but they got a temporary restraining order (TRO) to implement such. Although she did not mention publicly the party/ies who requested the TRO, I assume those are the guys who are importing or locally manufacturing just anything cheap drugs which are most likely candidates to be either counterfeit or substandard.

I have repeatedly argued that to encourage more competition and hence, cheaper products -- medicines, food, cell phones, shoes, etc. -- government should respect market segmentation by competing players in each sector and sub-sector. Those players that produce really new and more useful products as a result of endless innovation and R&D, should be allowed to price their product at any level they wish. They have the right to recoup their huge investments, and they also have the right to commit business suicide if they price their new products too high so that only a few will buy. What is important is that consumers, the patients especially, should have lots of choices. From the most expensive to the cheapest drugs.

* See also FDA Watch 1: BFAD Strengthening Bill, May 06, 2009

FDA Watch 1: BFAD Strengthening Bill

A proposed law strengthening the Bureau of Food and Drugs (BFAD) under the Department of Health (DOH) is now in the bicameral committee of the Philippine Senate and the House of Representatives. It's called the Food and Drugs Administration (FDA) bill.

I did not know that less than a year after the enactment of "Cheaper medicines law" or RA 9502 where a chapter for BFAD strengthening was included, another law will soon be enacted on BFAD alone.

A friend informed me that this BFAD bill has been there for several years. But since the IPR and patent aspect of pharmaceutical products was the "hot" issue then, it was pursued and the BFAD strengthening was included as a "rider" chapter in the law. Not bad because it is now a law with implementing rules and regulations (IRR).

My main observation of the proposed new law is that the important "ingredients" to strengthen BFAD are already in RA 9502 -- retention of income, continue receiving annual appropriations for at least 5 years, freedom to review and hike fees and charges. If money is the problem for BFAD, then the current law already provides it with enough flexibilities. So, I am wondering why pursue this new, separate bill and nearing enactment into a law.

If one goal is to further strengthen post-marketing, post-sale monitoring of pharmaceutical products, then that "order" is already in RA 9502 and its IRR. Besides, BFAD only has to worry or keep watch of those cheap and parallel imported medicines from lesser-known pharmaceutical companies. The bigger pharma companies have strict pharmaco-vigilance corporate practices imposed upon them by (a) their own shareholders and stockowners, and (b) industry associations, both national and international, where they belong.

My daughter's pediatrician for instance, told us once that she sticks to the products of one or two pharma companies because of a single criteria: medicine quality and strict pharmaco-vigilance. Just a single incident of negative effect to patients, if confirmed, immediately results in product recall, recall the medicines and other health products before the public and media will report any negative side effect to patients. So all the products they sell are only of good quality medicines, no counterfeit, no substandard, no mis-stored or mis-handled products.

She added that there are plenty of medical representatives from other pharma companies, usually from India, approaching her to endorse their product. She asks them if they have BFAD clearance, any pharmaco-vigilance procedures, these guys cannot produce any. They simply want to sell cheap and affordable medicines, with possibly questionable quality, that can possibly worsen the situation of patients.

I also notice in the bicam bill, that the proposed FDA is creating new offices or divisions within it. And perhaps expanding existing ones. If BFAD wants to expand itself into a huge bureaucracy, I think there is nothing in the current law that prevents it from doing it. They got plenty of money, with continuing appropriation from Congress + retention of income, it is possible for BFAD to perpetuate its own bureaucracy. All they have to do is to justify and explain their move to the Congressional Oversight Committee every year. If Congress will not object to the expansion of the BFAD bureaucracy, then they can continue the expansion. No need to create a new law for that.

It seems a lousy bill. BFAD could have waited for a few years and work with the current provisions given by RA 9502 on BFAD strengthening.

However, since that bill will soon become a law as it is now in the bicameral committee, the provisions on drug assessment for locally manufactured and parallel imported drugs should be strong. Patients can easily be hoodwinked into buying any cheap medicine, without knowing that they are taking fake or sub-standard medicines that will not help them get cured, or will even allow the virus in their body to mutate as they stay longer, resulting in even prolonged treatment period, if not produce another diseases in the body.

With the current proliferation of counterfeit medicines, sub-standard medicines, which I feel will be amplified under the parallel importation scheme, then BFAD should indeed be strengthened. I find the parallel importation scheme lousy. The drug manufacturer abroad, the wholesaler, importer, retailer at home, are different entities. When a drug is defective, say can cause negative side effects and bad allergies to the patient, or it lacked its effectivity due to wrong handling, wrong storage, wrong temperature control, etc, who will be accountable? The foreign manufacturer, or the importer, or the drug store, or the local patent holder (but did not sell those drugs), or the physician, or BFAD, or DOH, or the legislators?

But that provision is already in the law, RA 9502, it's now implemented. BFAD or the proposed FDA should therefore monitor those parallel imported drugs, especially from India where the WHO itself says is the origin of about half (or 70%?) of all counterfeit medicines in the world.

Meanwhile, I wrote this last February 11, 2009.

Biomedical research does not need fiscal stimulus

There’s an article from thescientist.com the other day forwarded by a friend, entitled “Biomedical research is ripe for a stimulus” written by Garret FitzGerald. The author is the Director of the Institute for Translational Medicine and Therapeutics at the University of Pennsylvania, and serves on the Peer Review Advisory Committee of the NIH and the Science Board of the FDA.

http://www.the-scientist.com/templates/trackable/display/news.jsp?type=news&o_url=news/display/55405&id=55405

In his paper, Mr. FitzGerald is clapping the injection of taxpayers’ money, aka fiscal stimulus, to the biomedical research sector through the following mechanisms, among others:

1. Restore funding for the National Institutes of Health (NIH). The new director must have resources to fuel innovation by individual investigators and invest in infrastructure.

2. Integrate the disparate missions of the NIH and the Department of Health and Human Services -- particularly its Agency for Healthcare Research and Quality and the Food and Drug Administration (FDA).

3. Reward innovation and foster the progressive personalization of medicine. Fund programs that foster interaction of the FDA with academia.

This is one of many statist literatures that circulate in praise of more fiscal stimulus, more government borrowings and subsidies, and indirectly, more taxation in the future. Expansion of NIH, government – not the consumers and the public – rewarding innovation, more funds for FDA and the academe.

I thought it’s the consumers and patients, the physicians and other health professionals, who determine who among the many pharmaceutical and biotechnology companies, are the most innovative, the ones who produced the most effective and most useful medicines and other health products. Now it is the government officials who will determine who and what are the most innovative companies and products.

People value their health a lot. That is why many of them are very careful with their body, while a few are very irresponsible with their body and yet very vocal in demanding that quality health care is their “basic right”. For the responsible people, they would wish that personal income and other taxes are lower so that they can save more, and they can invest more for their personal and family healthcare. And for the responsible and innovator companies, they also wish that corporate income and other taxes are lower so they can have more corporate surplus to pump into more biomedical research and development, and to reward their investors and shareholders who put their money in biomedical and pharmaceutical companies, and not in other industries or sector.

In short, the biomedical sector does not need fiscal stimulus and other forms of government subsidies, if the distortions to personal and corporate endeavors invented by governments are few or absent.