Presentation at Univ. of San Carlos, Cebu, March 2014

1. Access to safe and affordable medicines:
Probing the effects of price control and
mandatory discount policies
Bienvenido “Nonoy” Oplas Jr.
Presentation at the Pharmacy Economics classes,
University of San Carlos (USC) Talamban campus
Cebu City, 15 March 2014

2. Outline
I. Dreaming a single national price
II. Drug price control of RA 9502
III. Senior citizens discount of RA 9994
IV. Conclusions

3. I. Dreaming a single national price
• Basis: same product with same dosage made by the same
manufacturer in the same country should have only one
price nationwide. Medicine price by same manufacturer
should be the same regardless of outlets.
• Any difference is explained by greed; the wider the price
difference, the bigger the greed, so government should
control or limit that greed in the name of public health and
welfare.
• Applied internationally: same product with same dosage by
same manufacturer made in different but similar
developing countries should have little price differentials.

4. • This is the
philosophy
adopted when
the Cheaper
Medicines Bill
was being
discussed, until it
became a law in
June 2008.
• Huge price gap
observed for PH
vs India and
Pakistan prices.
• Source:
Explanatory note
of a Senate
Committee
Report, Octoberr
2007

5. • Single national price is not possible. Take a can of Coke 350 ml made by the same
manufacturer in the same country, PH. It has different prices in different retail
outlets -- a sari-sari store, carinderia, average resto, 7-11/Mini-Stop, SM, Rustans,
Robinsons, Shangrila, Manila Hotel, Mandarin,… – prices range from P25 to P100+.
• No single price to represent a “national price” of that can of soda, or any other
commodity. Different “equilibrium price” for each outlet. This can be said in other
countries with generally higher or lower price levels as the Philippines.

6. a. same or comparable retail outlet, say only from Watsons
(not hosp. pharmacy in country A vs. small drugstore in
country B)
b. same reference period for price, say December 30, 2012
(not end-January in A vs end-December in B of same year)
c. Same reference period for exchange rate in converting
different currencies into a common currency, PhP or US$,
say as of end-June 2013
d. taxes and fees, national and local, applied on each
commodity
e. subsidies or mandatory discount or price control, if any,
applied on each commodity;
f. other factors.
To make meaningful price comparison of a commodity
country by country, one must show:

7. RA 9502’s main concerns
• Amending the Intellectual Property Code (IPC) to allow
TRIPS flexibilities in the intellectual property rights (IPR) like
patents of innovator drugs and allow compulsory licensing
(CL), special CL, “early working” and parallel importation.
• Drugs and medicines price regulation through the issuance
of maximum retail price (MRP, not MDRP or GMAP).
• Non-discriminatory clause, amending the pharmacy law
and generics law and strengthening BFAD, now FDA.
• Only one goal: cheaper and safe medicines be more
accessible to the poor.

8. II. Drug Price Control of
RA 9502
• Targetted initial 21 molecules
because they were among the
most saleable products by the
innovator/multinational firms.
 Average prices already declining
even before the drug price
policy of August 2009, due to
competition. Case of amlodipine
(anti-hypertension) drugs.
 Indonesian prices higher than
those in the PH.
 Source: B. Agana, PCPI, May
2012

9.  Competition has resultedin
average prices already declining
even before the drug price
policy of August 2009,. Case of
Co-amoxiclav (anti-infection)
drugs.
 Indonesian prices higher than
those in the PH.
 Source: B. Agana, PCPI, May
2012

10. Companies Value P
Bill.
Share in
%
Companies Value
P Bill.
Share
in %
TOTAL 138.53 100 Johnson 3.599 2.6
United Lab 35.130 25.4 Roche Phils. 3.309 2.4
Pfizer Inc. 9.701 7.0 Natrapharm 2.693 1.9
Glaxo SmithKline 9.264 6.7 Bayer Pharm 2.486 1.8
Abbot Lab 5.511 4.0 Servier Phils 1.824 1.3
Merck Sharp&Dohme 4.787 3.5 Merck Inc 1.672 1.2
Novartis 4.765 3.4 Menarini 1.350 1.0
Boe. Ingelheim 4.573 3.3 Wyeth Phils 1.210 0.9
Sanofi-Aventis 4.474 3.2 Bristol-Myers SQB 0.903 0.6
AstraZeneca 3.721 2.7 GX Intl 0.840 0.6
Pascual Labs 3.608 2.6 Others 33.108 23.9
Out of 864 Registered Manufacturers, Distributors, Traders, the Biggest, Nov. 2013
Source: IMS PPI + PHPA. In red are local or national pharma companies

11. Products Registered
Drugs,
2012-13
Drug
Application,
Feb-Sept. 2013
Products Registered
Drugs,
2012-13
Drug
Application,
Feb-Sept. 2013
Ambroxol 13 16 Co-amoxiclav 20 50
Amlodipine 45 103 Co-trimoxazole 12 0
Amoxicilin 22 44 Glimepiride 27 21
Ascorbic Acid 61 2 Levofloxacin 24 34
Carbocisteine 8 9 Losartan 51 66
Cefalexin 19 7 Mefenamic Acid 22 13
Cetriaxone 17 28 Metronidazole 16 25
Cefuroxime 43 98 Omeprazole 34 59
Cetirizine 23 40 Paracetamol 49 93
Chloramphenicol 14 3 Ranitidine 14 19
Ciproflaxacin 36 29 salbutamol 38 32
Clarithromycin 24 31 Simvastatin 37 36
Cloxacillin 11 14 Tramadol 15 39
Competition and More Competition, of Existing and New Products…

12. III. Mandaatory Price Discounts to Senior Citizens of RA 9994
(Also mandatory discounts to persons with disabilities, PWDs)
An enterprise that is forced and coerced by the government to give 20% discounts to
certain group/s of consumers will attempt to survive and not go bankrupt. Several
ways to do this.
One, stop selling those medicines and products that are highly demanded by the
senior citizens (SCs). Happening already in some small and independent drugstores in
rural areas which have little leeway for further price discounts
Two, raise the price of medicines demanded by the SCs, so that after the forced
discount, the price simply goes back to its original level and not suffer a loss.
Three, raise the price of other medicines and products demanded by the non-SCs.
They subsidize the price discount given to the SCs.

13. • If no price distortion like RA 9994, “equilibrium price” (P*) of a particular medicine
will be at point A, supply meets demand. With the law, new price with mandatory
discount (Pmd) will be at point B, lower or cheaper than point A.
• To prevent losses, an enterprise will have price hike (Ph) of medicines to point C. A
20% discount at point C will only bring back the original price at point A while giving
the illusion to patients that they are buying at point B. Or SCs pay at point B while
non-senior citizens suffer even higher prices at point C.

14. Not all SCs and PWDs are poor. Not all deserve a mandatory
discount. And not all drugstores, other enterprises are rich to
afford giving 32% forced discount.
• Henry Sy, John Gokongwei, Lucio Tan, George Ty, Jaime Z-Ayala, Manny Pangilinan,
Fidel Ramos, JP Enrile, etc. are all SCs. Yet under the law, they are entitled to the
mandatory 20% discount + 12% VAT exemption (total of 32% forced discount) for
medicines, healthcare, etc. if they will insist.
 Some drugstores, clinics, restaurants, other business sectors covered by the law are
rich and financially capable to shoulder or absorb the forced discount.
 One adverse result is “cheap but non-available” medicines to SCs in small and far
away drugstores and pharmacies. If SCs and their caretakers must travel far to
bigger cities where the bigger drugstore chains are present, the cost of travel
erases the gains of forced discounts.

15. IV. Concluding Notes
1. Government price control policy as instrument to make drug
prices become available to the poor is both wrong and a failure.
The price control of August 2009 should be discontinued, affected
companies must be allowed to raise their prices if they wish to.
2. Tinkering with high prices even if consumers have options to buy
the lower-priced products is the politics of envy. Ensuring good
and safe product quality regardless of prices per brand is the
politics of safety. Government should focus on the latter, not the
former.
3. Mandatory and forced discounts like RA 9994 should be avoided.
The law in fact should be scrapped. But this is impossible to
happen soon, so let this situation serve as additional lesson, that
government price regulations and forcible, mandatory price
discount, produce more harm than good.

16. 4. RA 9502 and RA 9994 are both failures in seeking “safe and affordable”
medicines to the poor. It is mainly the middle class and the rich who
mainly benefit.
5. The poor are courting the danger of getting cheap but unsafe,
counterfeit, or substandard medicines as government attention is
diverted or diluted from focusing on product quality to enforcing and
monitoring compliance with price control and forced discounts.
6. FDA should get out of any price monitoring function and focus on
medicines/product safety and quality. Focus requested by FDA Dir. KHGo
and he is right. FDA should focus on rule of law function, the law on
product safety and efficacy.
7. More market competition, not more government regulations and price
interventions, will ensure more public health.