Drug Price Control 43, Mar Roxas and the Cheaper medicines law of 2008

During the 3rd and final Presidential debate last Sunday, Sec. Mar Roxas said, "Alam mo, Karen, sa kasaysayan ko, binangga ko mga malalaking interes. Pharmaceutical industry, cheaper medicine law, banking industry..."

Then a friend reposted a comment from someone attacking the Secretary saying, "You (Mar) lied by proclaiming you are instrumental in cutting the prices of medicines. On July 2009, there was a Senate press release....

"...Authors of the Cheaper Medicines Act in the House or Representatives urged Roxas to support the move to reinstate provisions on automatic price regulation.

"Authors of the Act in the House noted that Roxas vehemently opposed the automatic price regulation, which is the 'heart and soul' of the House version because it could have reduced the prices of more or less 1,600 medicines by at least 50 percent," Sen. Loren Legarda said in response to a question by members of the audience after her speech.

"Mar's amendments on the Cheaper Medicines Act killed the spirit of that law, and instead set a limit to its mandate in regulating pharmaceutical companies' pricing practices," Loren stressed.

The drug price control policy of 2009 affected about 20 or so molecules, usually the most saleable products by multinational pharma. What Cong. Biron, even Sen. Manny Villar, also Sen. Loren? wanted was the creation of a new bureaucracy, the drug price regulation board (DPRB) with a new set of bureau directors, asst directors, staff, office, travel, etc. to be incorporated in the cheaper medicines law of 2008 (RA 9502).

That law was mainly about amending the intellectual property (IP) code so that some newly-invented, patented medicines by multinational pharma, the patent can be confiscated by the government so that local pharma like Unilab will benefit, they can also manufacture and make good profit of those newly-invented medicines. The chapter on price control was a rider in the law, not part of the original draft bill.

So did Mar lie on his role in the cheaper medicines law?

No. He delivered on that amendment to the IP Code, something that I personally did not support, but the law was created nonetheless. Mar was correct in opposing the creation of that permanent bureaucracy DPRB (likely would have been headed by ex-Cong. Biron) and endless drug price control policy.

The threat of patent confiscation by the state from innovator pharma to local generic pharma (silent cronyism actually) created some downward pressure on patented drugs. The off-patent drugs that constitute about 95% of all essential medicines list (EML) of the DOH, again off-patent, are not affected by that law.

The advocates of the creation of DPRB are mostly socialists, explicit or implicit, or plain bureaucrat extortionists. They argue that private pricing of their products is wrong, it should be the state that should price those products. Then the state and the price bureaucrats may allow some pharma products not to be included in the mandatory price control, in exchange for bribes and extortion.

The world health org (WHO) has its global essential medicines list (EML) and from what I read once, 99% of them were off-patent, meaning only 1% of those EMLs in the WHO list are newly-invented and still patented ones. In the DOH's EML, I read that it's between 90-95% are off-patent. Meaning RA 9502 has zero effect on these non-patented, non-IP protected medicines. Like the famous anti-fever paracetamol molecule, it's been off patent since 30 or more years ago.

Generics medicine was given a huge boost since 1988, the Generics law under DOH Sec. Flavier. So the cheaper medicines law of 2008 (20 years after) has contributed very little to generics promotion. The compulsory licensing (CL) and special CL provisions of RA 9502 were also meant to align PH's IP law with WHO's TRIPS flexibilities. 

Funny thing about drug price control/regulation, the head of PCPI, the local pharma lobby, said during one DOH meeting that perhaps it's the first time that the local pharma + multinational pharma (represented by PHAP) were united in opposing a govt policy. Before, it was easy for them to take a stand. If PHAP takes position A, PCPI almost always takes position B that's opposed to A.

Death from infectious or communicable diseases is falling worldwide. So since all of us, 100% of us will die anyway, that means that more and more of us will die of non-infectious diseases, like cancer, stroke, hypertension, etc. That is where many of medicines innovation are directed, like there are perhaps 200 different types of cancer, then varieties like a patient with prostate cancer + diabetes vs a patient with prostate cancer + hypertension vs a patient with prostate cancer only.

Also during the 3rd and final Presidential debate, Sen. Miriam Santiago said that her physician sister or friend said that there are new anti-cancer drugs that come out in the US almost every week. These are never-heard before, not part of "orig" nature, science-invented molecules and medicines. They are very expensive, to compensate for very high cost of R&D and long processes of clinical trials, and usually very effective. Miriam added that she feels like new, so alive, because of the new medicines she is taking but are very expensive.

Actually the most expensive medicines are those that don't work. Even a P1 tablet is "expensive" if it does not heal a patient, if it allows the disease to evolve into something more sinister and fatal inside a person's body. A drug that costs P1 M or P5M treatment but can heal a cancer patient, can be considered "cheap" if a patient survives to live more years or decades of productive life.

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See also: 

Drug Price Control 39: Presentation at USC, Cebu, March 2014, March 25, 2014

Drug Price Control 40: CWF Wants Price Dictatorship for Lipitor, September 12, 2014

Drug Price Control 41: Exchanges with Joey Ochave at MeTA PH, September 17, 2014 

Drug Price Control 42: New Round of India Price Caps, September 25, 2014

Election PH 17, Questions for Binay, Poe and Roxas

Reposting (with permission) some comments and questions by a friend, JB Baylon, posted in his fb wall. Then my additional comments below. The photos I got from the web, added here and not part of JB's original posting.
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September 13. 

There is something wrong with headlines of news items about the LP.

This one says Sec Mar's mom stopped a party leader from quitting. Another one says PNoy has chosen Leni Roberedo to be the running mate.

Excuse me. It is Sec Mar who is the candidate now. It should be he who is making these decisions - or at the very least delegating to others the making of these decisions. He needs to be seen as his own man now - and these headlines are not helping. Either the stories are not accurate - or something has to change in the way the LP makes its decisions.

We want to know that we will be voting for Mar Roxas the man qualified to be President -- not for PNoy the soon former President, or Judy Roxas the mother of the candidate for President for goodness' sake!

September 19.

ISSUES I THINK THE THREE CANDIDATES HAVE TO ANSWER: (SHARE IF YOU AGREE!)

As a political science student, and looking at our three declared candidates, these are what i would like to ask them in a public forum:

To Vice President Binay: how do you respond to all the allegations of corruption beyond claiming they're politically motivated? Why is your close associate Mr Limlingan still unaccounted for till now? Could he by any chance be on the space shuttle to Mars?

To Secretary Roxas: why should I vote for you given your dismal record at the DOTC and the unremarkable record at the DILG? You claim that politics never figured in your work, but what about the Yolanda brouhaha with the Tacloban Mayor? And the fact that the President sidelined you on Mamasapano - isn't that a reflection on the amount of trust - or lack of it - that he has in you?

To Senator Grace Poe - the citizenship issue aside, you have the thinnest public service record among the three candidates. We require commercial pilots to have a certain number of flight hours before we entrust them with a commercial aircraft. I will not agree to being operated on by a fresh graduate of Medicine. Explain to me why in your case we the voters are effectively being asked to put our trust in someone who in other professions wouldn't be the lead and yet is aspiring for the Presidency of the Republic!

Now aren't these the questions we should be pressing on our candidates???

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And here are my questions to the three declared Presidential candidates.

For VP Jojo Binay: You promise more subsidies, more welfare programs nationwide if elected President and yet you also support cutting income tax rates. How do you plan to sustain the budget for more welfarism without resorting to higher taxes elsewhere plus endless borrowings? Or you are silent about your hidden plan to raise taxes elsewhere and continue endless borrowings?

For Sen. Grace Poe: Lots of questions about your citizenship, you voluntarily gave up your PH citizenship (to become a US citizen) and reacquired it later. Your kids remain US citizens until now. Answer those questions convincingly. And you justified the Iglesia illegal, stupid occupation of Edsa for 3D/3N that created heavy traffic, cancelled flights, meetings for many people. Do you still justify the Iglesia bullying and arrogance?

For Sec. Mar Roxas: DOTC during and after your term (succeeded by another LP leader Sec. Jun Abaya) is lousy, inefficient and corrupt. I don't even have a plastic driver's license, don't have that new car license plate until now, after fully paying for them last May and April, respectively. As a Liberal leader, do you intend to keep the current BIG and bureaucratic government size, or trim it down?

Pahabol kay VP Binay: You are lying when you repeatedly declared in your provincial sorties that "you made Makati rich" in your nearly 30 years leadership (you, your wife, young son Junjun). What, Makati before was poor and you made it rich??? First time I set foot in Makati as a probinsyano from Negros Occidental was in 1980. I saw the high rise buildings, clean streets of Ayala ave. and surrounding areas. Makati was already rich even before you were appointed as OIC Mayor. 

Please stop your lies, VP Binay.

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See also:

Election 13, Bernard Ong's Analysis, June 21, 2015 

Election 14, The Middle Earth of PH Politics, by Doy Romero, June 24, 2015 

Election PH 15, Who's the least welfarist?, August 07, 2015 

Election PH 16, The Presidentiables and the Iglesia militants, August 29, 2015

Election PH 15, Who's the least welfarist?

Yesterday during the Ateneo Eagle Watch briefing, the third speaker was Rappler's Maritess Danguilan-Vitug. Her talk was about "Scenarios for 2016."

She talked mainly about the four leading candidates. I mix her 2 slides in one image here, to save space.

Personally, I can support Sen. Grace Poe's candidacy as her being a "newbie" or "inexperienced" means being inexperienced in heavy political populism and welfarism, or corrupting the minds of the public that they can be less responsible about their lives, anyway government will do many things for them, from education and books for the poor, healthcare and medicines for the poor, to housing and relocation for the poor, to cash transfer and condoms for the poor, to iPad and cars for the poor, soon?

Mar Roxas used to be free market-leaning, then  he became populist as he was getting desperate in 2009 for his 2010 Presidential ambition. How he can go back to being market-friendly is a big question mark. But at least he's not involved in large-scale corruption and robbery scandals. But his wife, ahh.... no comment.

Jojo Binay, definitely corrupt, can  surpass Marcos robbery if he becomes President. From a bright, poor human rights lawyer until February 1986, he was appointed by former President Cory as OIC Mayor of Makati in  March 1986, he and his family taught that Makati City is their political kingdom forever. They got very rich, super rich, and they are not  known for any fair business acumen, just being in dirty politics.

Duterte, at one time I thought that he is mentally sick because the words "Patayin", "barilin","kill", were too frequent in his mouth. I thought that  only very violent minds can say those things, repeatedly, in national media, and not feeling  sorry about it. I can understand  the impatience of many Filipinos that there are too  many rotten  eggs in government, both local and national, both civilian and armed, including the businessmen they are protecting. But resorting to  outright murders, state-sponsored murders, is not the way to address it.

Ok, who's the least welfarist, least enamored to BIG government, big and many taxes and borrowings, more regulations and  permits, of these 4 or  more Presidential candidates?

Hard to answer that. But maybe Grace Poe and Mar Roxas, maybe. But definitely not Binay.
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See also:

Market Reforms in the 2016 Elections, May 25, 2015

Election 11, Dr. Doy Romero on Binay, Roxas and Grace Poe, June 01, 2015 

Election 12, JV Bautista and Toilet Politics, June 05, 2015 

Election 13, Bernard Ong's Analysis, June 21, 2015 

Election 14, The Middle Earth of PH Politics, by Doy Romero, June 24, 2015

Election 13, Bernard Ong's Analysis

I do not want to do serious political analysis of the coming May 2016 Presidential, Senatorial and local elections in the Philippines for several reasons. First, my hands are full  with other papers to write and I often miss deadlines. Second, there is no single free market-leaning national candidate or political party. And third, there are so many analysts of this subject around, it is entertaining to read them, from the sensical ones to the absurd. 

So I resort to reposting the ideas of some friends whom I think make useful analysis. Below, some random thoughts posted by a friend way back from UP Diliman in the 80s, Bernard Ong, in his fb wall. Reposting these with his permission.

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June 16:  

Serge Osmena is the premier campaign strategist of the Philippines. Local version of Karl Rove or David Axelrod. He saved the Pnoy candidacy in 2010. Villar was polling well vs Pnoy, until Serge took over the campaign management & messaging.

Here's what he has to say for 2016: Grace Poe should run as an independent. She can win w/o a party. Like Miriam or Roco before, plus the FPJ magic. Poe should drop Chiz. He will be a baggage to Poe for people who don't like him.

Exactly my thoughts. The added bonus is she can govern w/o political debts afterward. Our current party system is a joke - local parties are mainly a mix between personality cult, marketplace for exchanging political favors, and exclusive club for rich families.

June 18-20: 

Binay went to 3 markets in Antipolo - shaking hands, asking for votes, giving away wheelchairs & T-shirts with his face & slogan. Typical trapo & epal stuff. HIndi daw campainging. Part daw ng kanyang official duties (which are Housing & OFWs).

Law on premature campaigning is flawed. It only covers acts after one files his candidacy. Any campaigning before that is allowed. It should be amended to cover retroactive acts by eventual candidates. Meanwhile we should not vote those who use technicalities to go around the spirit of the law. Like this thief & liar.
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Biggest gainers in lastest survey: Poe & Duterte. Biggest losers: Binay & Others. Shortlist seems to be Poe, Duterte, Binay, Roxas (unless he drops out). Erap only comes in if Binay can't run. Otherwise, he "endorses" Binay but his followers vote FPJ/Poe.

Poe can win this 1-on-1. Or 1-on-3. Duterte not so because of narrower base & appeal. Nice to have both "outsiders" trending positively. Major parties (UNA & LP) should be on panic mode. All the e-pal, premature campaigning & preemptive strikes aren't working. Probably thinking of Plan B which is PCOS & Smartmatic.

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Drilon said "No party convention needed. Mar is the man." Good. I'd like Mar to run for President. It will cure his itch & redistribute some of that fabled Roxas-Araneta-Ayala wealth.

More important, it will keep Grace Poe free of Liberal Party baggage. Beyond May 2016, those responsible for PDAF, DAP & Mamasapano should be held accountable. Without political debts to worry about.

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"A P-Noy endorsement of Roxas is clearly a secret vote for Binay. Roxas is one weak challenger to Binay and it is doubtful public sentiment will drastically change."

It is Poe vs Binay now. I've said this before: Poe can beat Binay 1 on 1. Poe can beat Binay + Roxas + Duterte 1 on 3. Machinery is over-rated. The game has changed.

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Binay's preemptive strikes (residency, citizenship) & half-baked apologies backfired big time. It firmed up Poe's resolve. And changed the storyline from Binay-vs-Others (where he had a comfortable lead) to Binay-vs-Poe. Or more accurately Looter-vs-Orphan. Unwinnable for him without Smartmatic intervention.

In effect, Binay annointed Poe to be the anti-Binay alternative. Drove most of the "Anybody But Binay" millions into one candidate. Under the spotlight, Poe parried the attacks skillfully. And now we have Poe-vs-the-Rest. Salamat Toby Tiangco!

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Personally, I wish that Sen. Grace Poe will run for President. Her being a "newbie" compared to Binay, Roxas, Duterte, Estrada, etc. is for me, an advantage. It means less political baggage and old compromises. When a candidate is financially- and politically-indebted to certain economic interests, it  is hard to decline their political and business "requests." Thus, it is easier for that "newbie" to further advance trade and investment liberalization in the country than candidates who were long indebted or engaged to local monopolists, duopolists and oligopolists.
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See also:

Election 9: India's Political Dynasties vs. Democracy, April 21, 2014 

Election 10: Comelec Critics and Commissioner Luie Guia, December 26, 2015 

Market Reforms in the 2016 Elections, May 25, 2015

Election 11, Dr. Doy Romero on Binay, Roxas and Grace Poe, June 01, 2015 

Election 12, JV Bautista and Toilet Politics, June 05, 2015

Election 11, Dr. Doy Romero on Binay, Roxas and Grace Poe

The Presidential and national + local elections in the Philippines are just 11 months away. I am reposting below a commentary, a good analysis, from a political scientist who does real political science analysis and shares his frank ideas in facebook and social media, Dr. Segundo "Doy" Romero. He was my former teacher in Pol. Science 14 (PH politics and government) in UP Diliman, sometime in 1983 or 84. 

Copy-pasting with zero alteration, from his raw and informal posting in his fb wall the  other day. The photos I got from the web and adding them here.

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1. On VP Jojo Binay:

BINAY FOR PRESIDENT! Part of the wisdom of the Filipino people is their ability to gravitate towards personalities that have that quality they need in a leader during specific periods in the nation's life. Charisma brings magic to the way a presidential candidate and the people find themselves invigorating each other. Even now, people remember fondly Ramon Magsaysay, Corazon Aquino, and the would-be presidents who never were -- Ninoy Aquino, Fernando Poe, and Jesse Robredo. When there is no charisma, when there is a nagging suspicion of pandaraya o pagnanakaw, It takes a lot of money to buy the people's favor when it is not there. That Manny Villar found out in 2010. I hope Jejomar Binay gets the chance to find out for himself in 2016, so that he will have a way of giving back to the people what his family has creatively appropriated for themselves, in the thought that like in war, elections are a matter of preparing a large enough war chest. Let us not dissuade Binay from running from President in 2016. Our people would know how to put him in his right place.

2. On Sec. Mar Roxas:

THE GREATEST DISSERVICE OF THE LIBERAL PARTY TO THE FILIPINO PEOPLE ... is in continuing to half-heartedly promote the candidacy of Mar Roxas in the 2016 presidential elections. Most people know Mar has no eye-contact with the Filipino people, and just like in basketball, he has stayed too long under the basket without the ball and needs to free the space for new players. The Liberal Party over the last five years has not really looked for an alternative to present to and excite the people, a grossly over-confident, even negligent course of action for a party in power.

3. On Sen. Grace Poe:

The Liberal Party should now put itself squarely behind Grace Poe as candidate for President. In signing the Senate Committee report that recommended Binay to be investigated by the Ombudsman for corruption, Poe has shown she is of sterner stuff than many imagined. She would be my candidate any day of the week, and twice on Sunday.

But Grace Poe should be a candidate of more than the Liberal Party -- she should remain independent going into the elections, as the Liberal Party has unnecessarily alienated many voters and absorbed many poisonous creatures, even as President Aquino's administration over the last five years has had high approval from the people.

What the Liberal Party can constructively do is to help build the organizational and managerial scaffoldings of a Poe presidency, so that she hits the ground running in July 2016. She must have a strong cabinet, a coherent strategy and vision, workable relationships with Congress, the courts, and the Constitutional Commissions, a good public information system, shared command of local governance with LCEs, and must be able to spot and avoid hiccups like the Luneta hostage-taking crisis that rattled the Aquino Presidency early on.

Because she knows it is necessary, Grace Poe is a fast and willing learner. She must be given the systematic briefings and experiential involvement she needs to be presidential in mind and performance. The heart, I think, is already there, as oftentimes it is the main asset "inexperienced" politicians bring into politics. Heart and morality are the first things that politicians lose in trying to gain experience against low-life personalities that chose public service as their career.

4. On Mar Roxas-Grace Poe tandem:

If that is the best combination we offer the Filipino electorate in 2016, then the next Philippine President for 2016-2022 might either be Erap or Binay, with Poe as Vice-President. Let us remember that Erap was second only to PNoy in the 2010 Presidential elections and Binay won over Mar Roxas as Vice-President. Only Poe will clearly beat Erap or Binay for the Presidency. Fielding Mar Roxas as President will not only lose the Presidency to somebody else, but will also mean another minority President, as his candidacy will encourage so many others like Ping Lacson, Rodrigo Duterte, Miriam Santiago, apart from Erap and Binay, who would think they have a reasonable chance of beating Roxas for the Presidency. Roxas would also consolidate all the anti-PNoy forces and sentiments against him. On the other hand, a Poe candidacy will ride on the combined endorsement of Pnoy and Erap, apart from the silent endorsement of FPJ, the loud support of all the weighty movie stars in the Philippine firmament, and a natural gaan ng loob of the masses towards Grace Poe. By the way, an Erap-Poe result in 2016 might not be too bad if Erap again "resigns" in mid-term and allows another woman to serve out his remaining term, and run for and win her own term until 2028. An interesting version of Tadhana for us.

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See also:

Election 7: My Candidates for Senators, May 12, 2013 

Election 8: Growth, Debt and the 2013 Polls, May 30, 2013 

Election 9: India's Political Dynasties vs. Democracy, April 21, 2014 

Election 10: Comelec Critics and Commissioner Luie Guia, December 26, 2015

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

Fat-Free Econ 22: Three Years of Drug Price Control Policy

* This is my article yesterday in TV5's news portal,
http://www.interaksyon.com/business/41795/fat-free-economics-three-years-of-drug-price-control-policy
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The drug price control policy turned three years old in mid-August. The Maximum Retail Price or MRP was imposed through Executive Order No. 821 and Advisory Council Resolution 2009-001 - both issued in July 2009 and took effect August 16, 2009.

The imposition was driven by a political emergency and not a health emergency, as the Presidential and local elections were just nine months away back then.

Prevailing drug prices data at that time contradicted the necessity of imposing price regulation. Competition among various brands from different drug manufacturers and drugstores was healthy at that time, such that consumers had various options for their needs.

Three examples of drugs are given below. Data came from Tomas Marcelo “Beau” Agana, who is president of the Philippine Chamber of Pharmaceutical Industry. Beau prepared a PowerPoint for the public hearing of the Congressional Oversight Committee on Republic Act No. 9502 last May at the Senate. But due to limited time, Beau was unable to present it. The event became a “public speaking” -instead of a public hearing - by Rep. Ferjenel Biron and Sen. Manny Villar, as both were pushing their respective bills creating a new bureaucratic layer, the Drug Price Regulation Board.

First is amlodipine, an anti-hypertension drug. While the leading brand, Norvasc by Pfizer, was selling for around P38 for the 5 milligram tablet, similar drugs were selling for P25, P15, P11 and P10. Consumers had choices, but the politics of envy centered on Norvasc. So their solution was more politics, more government coercion.

Source: Agana, May 2012. Primary data for the second chart - prices of different brands - is from the Drugstore Survey, March 2012.

Beau showed that for the average retail price for various brands of amlodipine, Philippine prices were cheaper than those in Indonesia, but more expensive than those in Malaysia, Singapore, Taiwan and Thailand.

Now consider this: some countries - such as Malaysia - do not slap taxes on medicines. Philippine taxes on medicines include an import tax of 3-5 percent and value-added tax of 12 percent - all of which result in a 15 percent price spike. If other taxes and fees are included - local taxes and fees and Food and Drug Authority fees - the government share could rise up to 20 percent of the retail price.

Then there are indirect taxes on medicines, namely the corporate income tax and the mandatory social security contributions by drug manufacturers, wholesalers and importers, and drugstores. Those taxes and fees, direct and indirect, are passed on to consumers.

Thus, the price difference of amlodipine between the Philippines and Malaysia could pretty much approximate the difference in tax treatment they both applied (or not applied) on medicines and on corporations: 12 percent VAT in the Philippines vs. zero in Malaysia; and 32 percent CIT in the Philippines vs. 20 percent for the first RM 500,000 and 28 percent on the balance.

Second case is co-amoxiclav, an anti-infection drug. Before the MRP policy three years ago, the leading brand, Augmentin by GSK was selling for nearly P83 for the 625 milligram bottle. But consumers had other options that were selling for only P59, P47, or P35.

Comparing again with some Asian countries, drug prices here for co-amoxiclav were similar with those in Indonesia and Thailand. The price difference with Malaysia because of a different tax treatment appears to explain why they are cheaper in Malaysia.

Comparing with prices in Singapore, VAT in the city-state stands at only 5 percent and CIT at 17 percent, or almost half that in the Philippines.

The third case is simvastatin, a drug against high cholesterol and certain cardiovascular diseases. See the different prices for different brands.

And here are other drugs and their respective price ranges. Again, basic data is from the Drugstore Survey, March 2012.



The bottomline for all these data is clear: there is competition, there are various options for the consumers, and therefore government intervention in drug price setting was unnecessary and unjustified. Only then Senator Mar Roxas (who pushed for the policy in the Senate) and then President Gloria Arroyo knew why the MRP was imposed.

When the MRP was being cooked and debated, Roxas was desperate to raise his low approval rating for the May 2010 Presidential elections, while Arroyo signed the EO to steal the show from him. Then Health Secretary Francisco Duque was also looking at the possibility of running for the Senate, but did not push through with the plan because of the Arroyo administration's poor showing in surveys.

In short, the MRP imposition in August 2009 was a political gimmick for political ends by politicians looking at the elections just nine months away. While their political horizon was short term, the social and economic damage was long term. EO 821 has no sunset provision.

A year after the MRP was imposed, the key sponsors of the policy had dropped the drug sector like a hot potato: Arroyo won a congressional seat, Roxas was appointed transport and communications secretary, and Duque was appointed head of the Civil Service Commission.

Two weeks ago, I attended the emergency meeting of the DOH Advisory Council for RA 9502, the Cheaper Medicines Law, and the important question requiring an answer was: What should the DOH do, to deal with repeated if not rising cases of water-borne diseases like leptospirosis due to flooding? Should the government impose another round of MRP on drugs used to treat those diseases?

Luckily the lesson of the past three years of MRP is clear in the minds of the Advisory Council members. Competition among different brands and drugstores provides the poor some access to cheap drugs, whereas price control has upset the market for the same.

Below is data presented during the said meeting. The drug against leptospirosis, doxycycline, has various brands with a wide price range. The prices are in pesos per 100 milligram capsule.

So consumers have the option of buying at P169, P74, P49, P5 or P2. Furthermore, many drugs against diseases that arise during calamities are given away not only at low prices, but sometimes for free through donations from various civil society and charitable organizations like the Red Cross, Rotary, Mason, Lions, JCI, etc. The DOH also has its own stock of medicines for distribution to the poor.

Competition, not more government coercion. Deregulation, not more government regulation and taxation. The public and the politicians would be better off if they will heed this simple lesson from the three years of drug price control.
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See also:
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
Drug Price Control 29: MRP Attempt Over Anti-Leptospirosis Drug, August 16, 2012 

Fat-Free Econ 8: Drug Price Regulation is Wrong, May 04, 2012
Fat-Free Econ 9: Drug Pricing Bureaucracy is Not Cool, May 11, 2012
Fat-Free Econ 18: Healthcare Corruption and Physician Entanglement, July 30, 2012

Drug Price Control 21: Illegalities in the Implementation of the Policy

A fellow NGO leader in our health NGO federation, the Coalition for Health Advocacy and Transparency (CHAT0, suggested that CHAT and perhaps MeTA Philippines should conduct a seminar or forum assessing the drug price control policy of July 2009, implemented in mid-August 2009. I suggested that there may be no need for it, for the following reasons.

1. The DOH Advisory Council on Price Regulation has been transformed already to Advisory Council on Healthcare. The DOH itself through the NCPAM, has implicitly recognized that price control did not achieve its goal, but there is no explicit and official assessment yet, none that is available publicly and online at least,

2. The two pharma associations, PHAP for the innovator companies and PCPI for the generic companies, have spoken repeatedly, that the policy is wrong. Their latest position papers were presented in a big forum during the 2nd Generics Summit last September 7-8, 2011, organized by the DOH itself.

See my discussions of the PCPI data here, Drug Price Control 19: Why is the Policy not Withrawn Yet, and PHAP presentation here,  IPR and Medicines 16: Wikileaks and the Cheaper Medicines Law, November 08, 2011.

3. The other industry and professional associations, like the Philippine Hospital Association (PHA), the Philippine Pharmacists Association (PPhA), have also spoken on several times saying that the policy is wrong.. The Philippine Medical Association (PMA) have also spoken against it.

4. The various drugstore chains (Watsons, Mercury, The Generics) and the Drugstore Association of the Philippines (DSAP) were also very vocal in not supporting the policy.

5. Various data from IMS, the main source of DOH itself in designing the policy, showed that prices of many drugs in various molecules, including those slapped with price control, were falling.

6. Former DOH Secretaries Alran Bengzon and Quasi Romualdez have also spoken against the policy. Alran spoke during one of the Advisory Council meetings, said that they at the Medical City (he's the President of the hospital, I think) are in the business of healthcare, not drug retailing. The policy has affected the pricing of various healthcare services of the hospital.

7. During the various meetings of the Advisory Council on Price Regulation at least since June 2009, none of the members there except representatives from the Cancer Warriors Foundation (CWF) and somehow from the Cut the Cost, Cut the Pain Network (3CPNet), supported the policy.

8. PhilHealth and PITC representatives, being government agencies, have a relatively neutral position on the matter. Their mother agencies are either the DOH or the Office of the President (OP), that's why.

9. The Chairman of MeTA Philippines, former Gov. Obet Pagdanganan himself, has also spoken against the policy even if initially he supported it.

But since it was a government coercion through the Senate (then Sen. Mar Roxas), the DOH (through former Sec. DOH-que), DTI and the OP, all private players have to sheepishly obey. When things were finally settled by late July 2009, the Presidential election was less than 10 months away, and Gloria Arroyo would be giving the last of her 9 State of the Nation Address (SONA) that month. It was hours before or after the last SONA of Gloria Arroyo, July 27, 2009, that EO 821 or the real maximum retail price (MRP) order, was signed. But MRP was politically twisted and officially called as Maximum Drug Retail Price (MDRP).

See this comparison that I made. It shows that the criteria used by the DOH has zero basis in the law or its IRR.

And here are two more illegalities, they may be minor or major items. One is the illegal use of MDRP not MRP (which then was coined to mean "Mar Roxas for President", so OP used MDRP), and the introduction of new term, GMAP.

The third illegality is the absence of reporting by the DOH (twice a year to the President, once a year to Congress) assessing the policy, and such assessments should be made public.

The tongue twisting of MRP into MDRP and GMAP -- both are illegal terms, both are nowhere to be found in RA 9502 or its IRR -- is additional proof that the policy in 2009 was all about politics and politicians, especially the May 2010 elections.

The DOH was lucky that none of the affected players sued it in court. Well, it was difficult to fight government then because the DOH position was heavily supported by then President Arroyo and then Sen. Mar Roxas, a powerful Senator and a Presidential candidate of the Liberal Party at that time.

I have no "axe to grind" against the DOH for re-discussing these issues again. In fact, I am thankful to the DOH because they knew perfectly that I am an advocate of less government, that I never supported drug price control from the start, and yet they kept inviting me to different meetings of the Advisory Council on Price Regulation, now Advisory Council on Healthcare. It's just that the DOH need to recognize once and for all, that the policy is wrong, that the longer that it keep implementing a wrong policy, the more that it allows the damage to the investment environment of the country for multinational investors in general, and the innovator companies in particular, to linger further. Enough of continued illegalities of the policy.

So may I call again on the DOH-NCPAM and DOH Secretary Enrique Ona -- Withraw the drug price control policy, recommend to President Noynoy Aquino to throw away EO 821 issued by former President Arroyo.

Drug price control 18: Wikileaks and former US Amb. Kenney on price control

(This is my article yesterday in the lobbyist.biz, with original title, Wikileaks on Drug Price Control)

Wikileaks is becoming more popular as it becomes more controversial. Leaking to the public what are supposedly secret and classified documents of the US government and its embassies abroad is yummy to the public.

Some of the wikileaks documents that are freely available on the web now are the supposed cable reports by former US Ambassador to the Philippines, Kristie Kenney, on the drug price control policy that has adversely affected many multinational companies, mostly American and Europeans.

One report is this, Philippines Imposes Pharma-ceutical Drug Price Controls created September 11, 2009. I am posting two of the seven paragraphs of the report here and supply some data and my own observations.

Local Drug Firms Also Not in Favor

5. Contacts at domestic generics pharmaceutical firms and drug distributors profess that the majority of local drug companies are against the new pricing regime. These controls have significantly reduced their cost advantage over brand-name medicines, and some claim they will lose market share as former generics consumers choose to pay the smaller additional cost to purchase cheaper brand name pharmaceuticals.

As a member of the DOH Advisory Council on Price Regulation (now called the DOH Advisory Council on Healthcare), I can confirm that this is true. I was there in several meetings from June to 2009 onwards of the Council, and the President of the Philippine Chamber of Pharmaceutical Industry (PCPI) and a few other federation leaders were very explicit in opposing the price control policy. Why?

Consider drugs A, B and C, same molecule and generic category, from companies 1 (multinational), 2 and 3 (locals) respectively. Drug A is branded innovator drug while B and C are branded generic drugs by the locals. Before price control, A’s price is P30 per tablet, B’s is P18 and C’s is P13. At this price range, they all serve specific markets and buyers, they all make sufficient profit, and they can comfortably co-exist and compete with each other.

After price control, A’s price becomes P15. B’s price is now the “expensive drug” and C’s price is not that far from A. To keep up with competition and retain their buyers, prices of B and C must significantly go down too, say to P10 and P6 respectively. Everyone is now adversely affected, their profitability is significantly reduced, if not eroded. What if C’s price cannot be brought down to P6-P7 without incurring losses? Then it will be forced to quit the market, temporarily or permanently (and company 3 must lay off some personnel if they cannot introduce new other products) while the number of drugs available to the consumers has declined.

Below is data from Watsons’ Drugstore. I am very thankful to their Director for Health Business Unit for giving me the go signal to share this to the public.

With a few exceptions, growth rate in both value and volume of the price-controlled innovator drugs by the multinational pharma has significantly increased to 22-23 percent this year over the previous year. And sales of those drugs 2010 were higher than their 2009. Which means one important thing: people, at least for the Watsons’ customers, have shifted to the innovator drugs and most likely, away from the generic drugs in the same molecular and generic category.

The Generics Act of 1988 was enacted precisely to promote the local generics. The price control policy of 2009 was enacted precisely – though implicitly – to promote the innovator drugs. These policies are clearly contradictory and both policies are implemented at the same time by the DOH.

Back to the wikileaks report. There are some points in the final paragraph, the supposed commentary of the US Ambassador, that need clarification.

Comment

7. Although the government conducted public consultations on the implementation of this law, industry officials have a point about the lack of thorough scientific or economic studies underlying the government's actions to halve the price of these medicines. On the other hand, there is intense pressure for the current government to reduce medicine prices as the election season is nearing (reftel A), and calls for affordable medicines increase from civil society groups (reftel B). Prescription medication prices in the Philippines are the second highest in Asia (next to Japan), in a country where about a third of the population subsists below the official poverty line. In this instance, some multinational companies failed to recognize that cheaper medicine for the masses is an emotional and political issue. When price controls were placed on several of their most profitable products, it affected some companies' whole business model. Investment, and therefore, job creation by research pharmaceutical companies in the Philippines, will continue to be inhibited by such government market interventions. Furthermore, Philippine civil society's and government's success in lowering prices might encourage further interventions.

KENNEY

It is true that the DOH Advisory Council has met several times prior to the actual price control policy in August 16, 2009, especially on June 5, 2009, on whether a price control policy should proceed or not. There was also no list of drugs that were “candidates” for price control. Weeks before that, there was sustained, intensive and heavy pressure by then former Senator, former Presidential aspirant, Mar Roxas, to proceed with drug price control.

But to the big surprise of the members of the Council, by June 8, 2009, former DOH Secretary Francisco Duque and former Sen. Roxas already have the list of drugs to be put under mandatory 50 percent discount and presented to media. The criteria for selecting those 22 molecules were also illegal – they cannot be found in the Cheaper Medicines Law (RA 9502) nor in its implementing rules and regulations (IRR). The new four criteria were jointly designed by the IMS and DOH. There was also no scientific or economic basis for imposing a flat 50 percent discount – not 25 or 38 or 70 percent on specific drugs.

The supposed commentary above mentioned the high prices of drugs in the country. To a certain extent, true. But it failed to mention that government taxes on medicines – 5% import tax + 12% VAT + local government taxes – also contribute to high medicine prices here.

It is good that wikileaks has released these classified US government documents publicly. I am not sure though if these are indeed 100 percent correct, or some sentences and paragraphs were added or omitted. Nonetheless, my comments and data above stand, whether the stated document is correct or altered.
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See also Part 17: Wikileaks on the planned Pfizer drugs withrawal, September 22, 2011.

Drug price control 17: Wikileaks on the planned Pfizer drugs withrawal

Where there is political and economic coercion by governments, there is also product and service non-availability or withrawal by the affected players and companies. The stronger the coercion, the plentier the amount of goods and services that are non-available in the market.

A clear example are the highly-repressive governments of North Korea, Myanmar, Venezuela, Congo and many other African countries. Private companies, especially multinationals, would hardly consider setting up businesses in those countries as the political threat of price control, product confiscation, raids and other forms of harassment are very clear and real. Contrast that with free trade economies like Hong Kong (unilateral free trade policy actually), where almost anything and everything is available from so many countries and territories.

While searching google on "drug pricing", I saw this article from InPharm, Philippines pricing controls: Pfizer 'considered taking drugs off the market', dated September 2, 2011. It said,

Pfizer considered withdrawing some of its products from the Philippines rather than face planned pricing controls, according to a US diplomatic cable released by WikiLeaks.

The March 2009 cable was sent during intense debate about drug pricing in the country as the Philippines’ Department of Health drew up a list of 25 prescription medicines that could have been affected....

The article referred to a Wikileaks cable, PHILIPPINES CLOSER TO DRUG PRICE CONTROLS, so I visited the site.

It's about the supposed cable of then US Ambassador to the Philippines, Kristie Kenney (I follow her on twitter, and just 3 days ago, she mentioned me and replied to my tweet on the subject of Rule of Law :-)) to the US Secretary of State, dated March 5, 2009. The cable said,

1. Summary. The Philippine Department of Health has listed 34 prescription medications that will be subjected to price controls under the Cheaper Medicines Act (reftel) enacted last year. The main impetus for the rapid imposition of price controls came from advocacy groups and non-governmental organizations. Local representatives of international drug companies participated in consultations on maximum retail prices, but warn that some of the controlled prices are lower than the costs of making the drugs, which could force them to withdraw many drugs from the Philippine market. End summary...

4. We met with several directors of the Pharmaceutical and Health Association of the Philippines, the trade association of foreign drug companies, who noted that the main impetus for the rapid imposition of price controls came from advocacy groups and non-governmental organizations. While the Association acknowledged that it has been invited to consult with the Health Department, it also noted that some member companies had not participated. The Association is also concerned that the final list of drugs subject to price control may contain more than 25 medications.

5. In addition, the Association asserts that the Health Department has been pressuring companies to sell drugs in small packages that can retail for 100 pesos, or around USD 2, offering to
exempt such drugs from price controls. In many cases, this can amount to a handful of tablets needed for one cycle of a course of doses. Representatives of Pfizer warned us that for certain
antibiotics, small doses can promote antibiotic-resistant bacteria, and claimed that it is being pressed to sell antibiotics that currently cost over 1000 pesos for the 100-peso fixed price. Pfizer said that if these price controls are put into effect, it will withdraw many drugs from the Philippine market.

Comment
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6. The Philippine press has recently featured stories noting that drug prices have not fallen since the Cheaper Medicines Act came into effect, creating pressure for more immediate action from the government. However, the Philippine government must tread carefully and should not ignore Pfizer's warning that it could withdraw many drugs from the Philippine market if price controls are put into effect. Pfizer's withdrawal of medicines from Thailand following laws on compulsory licensing clearly demonstrates the risks. Post will continue to remind Health Department officials that expecting pharmaceutical companies to sell products for less than it costs to produce them could prove counterproductive.

Wow. I have read other Wikileaks cable release supposedly also from then US Ambassador Kenney about her opinion about now PNoy Aquino when the latter was still a Senator. There were questions about the validity and authenticity of those "cable leaks." So I will also not take the above cable leak as 100 percent true.

But assuming for the same of argument, that the above communication was indeed true, I will not be surprised of the wording of the former Ambassador. Pfizer as (or any other) US-based company that pays plenty of taxes to the US government, would naturally seek the assistance of its own government to talk to the host (Philippine) government when the policy of the latter will adversely affect its business. The same way that some Philippine-based company/ies sought the assistance of Philippine Congress and the Executive branch in crafting the Cheaper Medicines Law (RA 9502) and amended the Intellectual Property Code so that certain patent protection of innovator drugs by some multinational pharma companies can possibly be tweaked and dishonored via provisions on compulsory licensing, special CL, early working, exhaustion of rights and government use.

While I was a member of the DOH Advisory Council on Price Regulation (now it's called the DOH Advisory Council on Healthcare), the DOH body that was referred to by Ambassador Kenney, I was not aware of the first 3 Council meetings and consultations from January to April 2009. And that was the period stated in the above cable.

I started attending only on its 4th meeting in early June 2009. I have a long discussion of what transpired in the 4th and 5th meetings of the Council on June 2009, see my book, Health Choices and Responsibilities (published January 2011, 233 pages) and turn to pages 2-7, also pages 72-73.

Anyway, these issues are now water under the bridge. Pfizer did not withraw its innovator drugs that were hit by price control (Norvasc (amlodipine), Lipitor (atorvastatin) and Azithromycin (anti-biotic), what else) and opted to absorb the losses and resorted to deep cost-cutting measures including laying off a few hundred employees.

But what will not go away is the damage done by government intervention -- particularly the Philippine Senate, the Committee then headed by former Sen. Mar Roxas, the DOH then headed by former Sec. Francisco Duque, and the former President Gloria Macapagal Arroyo -- in drug pricing. As I wrote here in the past, price control is price dictatorship.

This damage to the business environment, at least in the health sector as far as foreign investment is concerned, is long-term. And the fact that the price control policy is still not lifted until now even if all the 3 main political personalities involved are no longer in their offices, makes the damage last longer.
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See also Part 16: More on Cong. Biron's Bill, September 01, 2011, and
Part 12: Blog posts on page 1 of Google, Yahoo and Bing, August 14, 2011