Drug Price Control 37: Four Years of the Policy

* This is my article yesterday in thelobbyist.biz.

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This week, the drug price control or maximum retail price (MRP) policy has turned four years old. The policy was laid out in late July 2009, with the issuance of Executive Order 821 on the day former President Global Arroyo delivered her 9^th and last State of the Nation Address (SONA). With a two-weeks additional preparation period, price control became effective in August 16, 2009.

The main and unstated purpose of imposing the policy was electioneering. The May 2010 election was just nine months away and the former President and her arch critic that time, former Senator Mar Roxas who was aspiring to run for President under the LP, they both needed to appear “pro-poor, pro-patients” to get more voters support.

The stated purpose was to make popular but expensive medicines become cheaper, even if alternative generic, cheaper medicines were available at that time.

So, after four years of forcible 50 percent price discount on certain popular brands, have the poor patronized the innovator (or originator or multinationals’) brands?

In a “Policy Dialogue on UHC and Access to Medicines” last July 25-26, 2013, sponsored by the DOH, Zuellig Center for Asian Business Transformation (ZCABT), and MeTA Philippines, held at the Asian Institute of Management (AIM),  Deejay Sanqui of IMS Health made a presentation, “Pharmaceutical Market Perspective.”

For a start, here’s a situationer. The total Philippine pharmaceutical market as of end-2012 was valued at P131 billion. Minus the nutritionals, it was worth P124.5 billion.

The most popular molecule that was put under price control was amlodipine, an anti-hypertension drug. And the most popular brand was Norvasc, made by Pfizer. Since it was a highly popular, highly saleable brand but considered “high-priced”, forcing its price to be slashed by half would result in the poor and middle class shifting to it away from the cheaper generic brands of amlodipine. Did this happen?

No. From the IMS data, even before the MRP policy was imposed in mid-August 2009, the vertical line in the chart below, there were plenty of generic brands of amlodipine already available, and many people were buying them. When Norvasc 5mg tablet’s price was slashed from P44 to P22, the poor did not shift to it because there were already amlodipine 5mg generic brands that were selling for only P10, even P7.50, so the P22 was still high. The main beneficiaries of the drug price control policy were the rich and upper middle class who were patronizing Norvasc, whether its price was P50 or P30 or P20 a tablet.

For simvastatin, an anti-cardiovascular (heart) diseases drug molecule, the same trend was developing – many cheaper generic drugs were already available for the poor even before price control was imposed, again marked by the vertical line in the chart below. In fact, the share of the innovator brands that time was already small, perhaps below 15 percent of the total market value for simvastatin. There was really NO need to impose price control for this molecule.

But then again, “helping the poor” was just an alibi for the two political camps then. Their goal was simply to look “pro-masa, pro-mahirap” even if the poor would not directly benefit from such coercive and arm-twisting in forced price discount.

Another popular drug molecule against breast cancer and related diseases, Tamoxifen, was also put under price control.  What was ironic was that the share of the innovator or originator brand was almost nil. Prescription for generic variants was already very high, before, during and after MRP policy.

One may wonder, if the policy did not benefit the poor but only the rich and upper middle class, why is the policy not withdrawn?

That is one ugly aspect of heavy government intervention. Once a policy or regulation was imposed, it almost always becomes permanent and long-term, never temporary or short-term. The two main protagonists, now Congresswoman Gloria Arroyo and DILG Secretary Mar Roxas, plus former DOH Secretary who became Civil Service Commission (CSC) Commissioner Francisco Duque, have been out of medicines policy after the 2010 elections, yet the damage done by their policy remains until today.

What is that damage? The politics of envy, that if a company is able to produce useful, popular and revolutionary products, the politics of envy and government coercion will penalize that company by forcing it to give mandatory, forcible and coercive price discount. And since all the affected companies were multinationals, the message across other foreign investors and suppliers was negative.

There are no government moves or attempts to withdraw this policy. All the innovator/originator and generic manufacturers, the drugstores and hospitals, have already adjusted to that ugly reality.

What the policy can teach us is to avoid, to refrain, inviting government to come and impose price regulation and price control. In whatever sector or sub-sector of the economy.

Government can do better if it will encourage and allow more players and competitors, local and foreign, to come in. More competition almost always results in price reduction or stability, benefitting the consumers, patients especially.

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See also: 

Fat-Free Econ 22: Three Years of Drug Price Control Policy, August 30, 2012 

Drug Price Control 33: Debate with a Cat, June 15, 2013 

Drug Price Control 34: No Single National Price, And a Wailing Cat, June 17, 2013 

Drug Price Control 35: DOH Procurement Price and Lobbying for Another Price Coercion, June 29, 2013 

Drug Price Control 36: Advisory Council, James Auste and China, July 12, 2013

IPR and medicines 12: Expanding generics

I attended the 2nd Generics Summit organized by the Department of Health (DOH) and one of DOH's big office, NCPAM. It was held the past two days, September 7-8, at the Richmonde Hotel in Eastwood, Libis, Quezon City.

Day 1 morning session was about welcome messages from top officials of key players in the generics industry in the country -- DOH Secretary Enrique Ona, FDA Director Suzette Lazo, WHO Philippine Office Soe Nyunt-U, PCPI Beau Agana, and PHAP Eufe Tantia (in behalf of Reiner Gloor who followed later). Then generics exhibit at the Eastwood Mall.

Then a generics expo exhibit was formally opened late morning that day, at the 2nd floor of the Eastwood Mall. I had the chance to have a photo here with Beau Agana, President of the Philippine Chamber of Pharmaceutical Industry (PCPI) and CEO of Pharex Pharma, and Reiner Gloor, President of the Pharmaceutical and Healthcare Association of the Philippines (PHAP). PCPI is composed of mostly if not entirely Filipino companies (manufacturers, drugstores, more than 120 member-companies) while PHAP is composed of mostly multinational and innovator pharma manufacturers, also some local drugstores).

Afternoon session was packed with many discussions and some debates. First session was on Improved Healthcare Access and the four speakers were:
1. Oscar Picazo of PIDS who spoke about access to cheaper medicines via the Botika ng Barangay (BnB), Botika ng Bayan (BNB), DOH treatment pack and other programs.
2. Ruth Natividad of IMS Health who spoke on impact of the Cheaper Medicines Law with their survey of both physicians and patients, their knowledge of the drug price control policy and related provisions,
3. Romeo "Al" Castro also of IMS Health who spoke on the overall generics picture in the country, and
4. Catherina Timmermans, Technical Director of WHO, spoke on the global picture of generics.

(From left: Picazo, Natividad, Castro and Timmermans) Here's one twist. I went to the Summit as an ordinary participant, not a speaker nor a reactor. While the last speaker, Ms. Timmermans, was delivering her talk, I was asked by a friend at the DOH if I can be one of the reactors as two scheduled reactors from the consumers and civil society were not around.

Perhaps being used to spontaneous writing and thinking as a blogger, I said YES, even if I have just about 10 minutes to compose my thoughts, write comments and draft questions, to the four speakers. Tough job eh.

In those roughly 10 minutes (or less) from the time I was informed to be an instant reactor to the time I went to the reactors' table, this is what I said.

I speak here as a consumer and as a taxpayer. As consumers, our interest is simple: more choices, more options, from more competition among more players, from innovator and generic manufacturers, from more drugstores. Getting subsidies is not much a major concern.

Thus, government policies that inhibit if not kill competition among players, like the drug price control policy, is wrong and against our interest.

As taxpayers, it is unfair for us if we pay plenty of taxes so that government will have more money to subsidize those who over-drink, over-smoke, over-eat, over-sit, over-fight, over-sex, and when they have frequent stab wounds, have AIDS, have fat bodies, etc. they run to government to demand that "health is a right."

Now to my questions.

For Mr. Picazo of PIDS, you know the bad fiscal situation of the government, the high annual budget deficit, the high public debt burden and the high interest payment to pay for those public debt. Consider for instance, interest payment alone, principal amortization not included yet, of the national government: P294 B in 2010, P357 B this year, and P333 B in 2012. Would you recommend that government should limit, if not get out of the Botika ng Barangay (BnB) since many of them are not performing well financially, in order not to further bloat the spending and the public debt? There are many private generic drugstores now that are entering more and more small municipalities and even poor barangays, like The Generics Pharmacy, independent and non-chain drugstores.

For Ms. Natividad and Al Castro, since IMS data show that the current drug price control policy did not achieve its main goal, and IMS data are for subscribers only and its rather expensive to get subscription, would you be wiling to show your data to Congress, especially on the deliberation of Cong. Biron's bill to expand the price control and an idiotic and wrong policy of creating a new government bureaucracy called the Drug Price Regulations Board?

For the WHO, while promoting generic drugs which is a good policy, but aren't you spearheading some anti-innovation and IPR-busting policies like compulsory licensing, early working, parallel importation?

Their reply were, as far as I can remember them, as follows:

1. Picazo: Yes, the fiscal burden is big, so I recommend that for those BnBs that are going under, they should be allowed to close and not be subsidized further.

2. Castro: Yes, we are willing to show our data if it will help promote good public health. Provided also that we will not be cited for contempt or be harassed.

3. Timmermans: No, we are not advocating IPR-busting policies, it's just that some policies to enable governments to deal with health emergencies should be on hand.

After the panel speakers and reactors went to their seats, I was approached by some friends and other participants in the audience, saying that they liked my reaction, yeah! One of those who approached me was the President of The Generics Pharmacy. I think people appreciate it when I emphasize the personal responsibility aspect of healthcare, it's not all about government responsibility, or pharma manufacturers and drugstores responsibility.

The next panel that afternoon was on Private Sector Efforts in Improving Access to Generic Medicines. The speakers were the respective heads of Reiner of PHAP, Beau of PCPI, and the Philippine Medical Association (PMA), Dr. Oscar Tinio.

This is one slide shown by Reiner. I think this will help people realize the role of drug innovation, that without innovator drugs, there will be no generic drugs. Or without innovator companies, there will be no generic companies. Thus, continued efforts, explicit or implicit, to bust the patent and IPR system, will have both short- and long-term negative impact on drug innovation.

And here is one of the many slides that Beau showed, showing an important point that even prior to the drug price control policy of the government, the average price of drugs for co-amoxiclav molecule (anti-biotics, anti-infection), simvastatin (anti-high cholesterol), amlodipine, and other important molecules, have been going down.

What the drug price control policy has done is to force, to coerce, further price reduction of the innovator drugs, but several generic drugs were also eased out of the market as they have little leeway for major price reduction. Beau said he will send me his presentation, so I can write more about the subject.

The next panel was on the Retail Landscape and Intellectual Property Landscape. The speakers were Janet Estranero of The Generics Pharmacy, Epifanio Evasco of the Bureau of Patents, Intellectual Property Office (IPO), and Catherina Timmermans of WHO. I would have wanted to be a reactor in this panel as IPR and medicines is among my favorite topics. But the reactors that afternoon were also great minds, like FDA Director Suzette Lazo, from the Philippine Pharmacists Association (PPhA), others.

. Mr. Evasco showed this among his many slides. He said that while compulsory licensing (CL) is clearly in the Cheaper Medicines Law, they have not accepted any CL application yet from any of the local pharma companies. They received one CL application in 1998, and there was no successor application then.

I think this is good. All the big and blockbuster drugs like amlodipine, clopidogrel and atorvastatine already lost their patents. There are now plenty of branded generic drugs on these molecules sold at much lower price than the innovator brands, so consumers and patients have more choices now. There are a few remaining patented drugs in the Philippine market but these are not blockbuster drugs, like anti _____ cancer. Any CL applicant will spend huge money anyway in legal battles, so why spend big on lawyers and PR guys when you can spend your money developing and marketing new and more branded generics of the blockbuster off-patent drugs. Or wait for those patents to expire in a few years and spend your savings and resources developing new generic drugs.

The WHO recently is going almost full throttle on the campaign to control non-communic-able diseases (NCDs) or lifestyle-related diseases. The infectious diseases are now generally under control except for some disease outbreaks like SARS and H1N1.

My position on the matter is simple: If people will over-drink (have liver cancer, intestinal disorder, etc.), over-smoke (have lung cancer, throat cancer, etc.), over-eat and over-sit (have hypertension, high cholesterol, diabetes, etc.), is it other taxpayers' problem via governments and the WHO? Self-inflicted diseases should be addressed by self-financed healthcare, with assistance from friends, family, private and charity foundations. Government assistance and subsidy may be expected -- no one can stop now those politicians and legislators if they will coerce getting more of our money via more and high taxes to spend on things that whet their political appetites -- but this should be limited.

More stories and pictures later.

AsPac pharma market and government

There is a good article on the global and Asia Pacific pharma market yesterday by Dr. Tej Deol, The APAC pharma markets; connecting the dots by Jan-Willem Eleveld, Vice President Consulting & Services IMS Health. It's about a presentation by Mr. Eleveld, IMS' VP, last October this year.

Dr. Deol showed 10 slides from Mr. Eleveld's presentation. For this paper, I will use only 4 of them and give my own discussion about them. Readers can check Dr. Deol's paper at the link given above. To see larger image of the graphs and illustration below, just click on the image.

By 2014, the global pharma market is projected by the IMS to reach some US$ 1.2 trillion, from an estimated $850 billion this year. Look at the "Pharmerging" markets, projected to have $260 to $290 billion by 2014. The list of those "pharmerging" economies does not include the Philippines. Thailand, Indonesia and Vietnam though were included.

The Asia-Pacific region excluding Japan, is projected to have 17 percent of global pharma sales by 2014, up from only 8 percent in 2005 to 11 percent this year. Japan will keep its estimated 13 percent of global share up to 2014.

The generics market will keep its rapid growth, which is a good response to high consumer demand for generics, branded or non-branded. This sector has grown from $28 B in Q3 2006 to $55 B in Q2 2010, or a doubling of sales in just 4 years! The innovator drugs have also experienced growth, from $14 B in Q3 2006 to $23 B in Q2 2010.

In terms of annual growth rate, while the originals experienced 11 percent growth from 2006 to 2010, branded generics grew by 15 percent and unbranded generics grew by 19 percent over the same period. At this rate, even innovator companies will consider moving into generics manufacturing as well because of the huge business potential due to high consumer demand for cheaper generic drugs.

See the list of Asian countries with government-mandated price regulation, which is mere euphemism for what it really is -- price control. They include India, Vietnam, Indonesia, Philippines and China. The degree or mechanisms of price control differ among these countries though. Malaysia has no price control yet, but the possibility of the policy being imposed there remains. And Thailand has no price control policy, but it has imposed compulsory licensing (CL), which has a similar negative effect on innovator companies.

This chart shows a new trend in some Asian countries -- the movement from "self-pay" to "semi-reimbursed" markets. Wider government health insurance coverage is projected to make this possible.

Semi-reimbursed or fully-reimbursed markets do not mean that only the government will provide the universal health insurance. Private and non-profit health insurance corporations or organizations can also do the job. But in most if not all policy proposals being considered in the Philippines and other Asian countries, only bigger government is being considered.

Healthcare and health insurance should take a cue from the pharma sector. There is no government pharma company except in Thailand, but the competition among many private pharma companies -- innovators, branded generics, non-branded generics -- result in lower prices of drugs as more drugs at declining prices are being introduced. It is actually government taxation of medicines -- like import tax (5 percent) and value added tax (VAT, 12 percent) as in the case of the Philippines -- that contributes to expensive medicines.