Price control – drugs or medicines?

Price control – drugs or medicines?

Republic Act No. 9502 also known as the Cheaper Medicines Act and its subsequent Implementing Rules and Regulations that will take effect on November 21 of this year ought to be a piece of landmark legislation courtesy of this 14th Congress. Central to its various themes, the law vests upon the Secretary of the Department of Health the authority to set price caps for all kinds of drugs or medicines – patented, non-patented, branded, generic – as if it were not more proper for the Department of Trade & Industry to have been taken to task in so far as price control is concerned. Joker always reminds us of ‘redundancy’ and this one surely is.

A cursory reading of RA 9502 tells us that it amended at least three existing laws, namely – RA 8293 or the Intellectual Property Code, RA 6675 or the Generics Act of 1988, and RA 5921 or the Pharmacy Law. Literally enough, this shotgun approach hits more birds than necessary. A more studied reading of the law however shows that it must have been a work in legal engineering, the implications of which may yet to boomerang. For instance, it took the short route to invent for BFAD a new budget source that does not have to come from the annual budget pie. It tinkered with existing provisions of the Intellectual Property Code that possibly enough, could be violative of patent rights of legitimate owners at least in the context of the old law. It is not as if the Generics Act of 1988 has not likewise been overhauled as it is with the Pharmacy Law – the repercussions are yet to appear on the surface and therefore backfire. This will be graphically demonstrated as soon as the State – by force of law – chokes to death businesses found violating its many salient provisions.

So-called Universally Accessible Cheaper and Quality Medicines Act of 2008 simply aims – by theoretical fiction, that is – to cut in half prices of drugs and medicines and be made accessible to the poor, this by vesting the President through the health secretary sole power to regulate or control prices in what appears to be almost absolute given that only the Supreme Court, not any other lower court, can issue the temporary restraining order or preliminary injunction in the event legal questions will arise as regard price control and regulation. Not remotely, this law appears to strengthen PGMA’s ‘Gamot Mabisa, Abot-Kaya’ program with the end in view of expanding so-called Botika ng Bayan down to the barangays. Perhaps, as election 2010 nears, politicians will be allowed funds for the purpose in what will, in later days, be known as the grand medicine scam.

RA 9502 sets its eye on lowering prices of drugs in the market through competition or what it calls leveling the playing field. To this end, the new law allows for parallel importation where government largely or other favored individuals or groups buy cheaper drugs – both branded or generic – from a third country where they are sold cheap. Why indeed that the retail prices of medicines in Malaysia and Indonesia are 40 to 70% lower than in the Philippines? True enough, this could bring down prices of drugs and medicines to as much as 60%. With the number of Botika ng Bayan increasing, they serve as distribution outlets that will make available drugs and medicines to the poor.

What appears clear from the outline is that the law is designed to break drug cartel or for that matter ‘moderate greed’ so far as the big players are concerned such as multinational pharmaceutical companies. Thus it opens wide the door for small players to import drugs or medicines in countries where they are sold cheap such as India that is seen to result in a situation where retail prices will have to be lowered by the bigger drug monopolies to shield themselves from radical if uncommanding price attacks. The State, by and large, will be in the business of buying and selling drugs at affordable rates to benefit the poor. Effectively perhaps, bigger drug companies will lose their significant market share when buyers prefer to buy at other smaller drug outlets, or even in supermarkets for non-prescription or over the counter medicines. A shadowy ‘National Drug Authority’ at work to the peril of the Philippine drug market that is dominated by US-run drug companies?

If for example, reputable drugstores will soon be selling less and less in an evolving situation where people no longer patronize branded drugs but rather generic drugs, it simply means that there will be lesser sources of revenue or income for the government at the other end of the economic ledger. That would result in lower revenue collection in business taxes from what used to be are highly patronized drugstores. It can even perhaps, trigger, capital flight. When the market is no longer viable or conducive to business, what reason is there left but for badly affected drugstores to rather close shop or fold tent and go where business prospects are better?

It appears, in the higher scheme of things, that private sector must give way to every form of public investment if in this case allowing the government to flood all available outlets with half-priced drugs or medicines. Bringing back retail prices of drugs or medicines back to their 2000 or 2004 rates might really be difficult. If we go by simple economies of scale, increasing the number of Botika ng Bayan or Botika ng Barangay outlets necessarily require a lot of government subsidy when in fact, this should be borne out of private sector initiative. In an ideal free market economy, there ought to be less of state intervention. Later on, perhaps, we can expect this government to be the one to buy – in quite a similar mode – gasoline and diesel for our transport’s fuel requirements and sell them too at pretty much lower rates. That way, there are no prices to regulate or control saved its own – RP, Inc.

From where I stand, to run corporate RP this way – is a mere experiment – the results of which are yet unknown. Taking more drugs or medicines from the shelves of multinational pharmaceutical companies will mean that the State would want businesses now to go bankrupt under a regime of state-run price control mechanisms that are oppressive, cruel and unstudied. If this grand experiment fails to yield its intended results, everything reverts back to the old way. Paradoxically, Secretary Duque, in case he throws hat in the political ring, might use this launching pad to his own political advantage. Still, in the general context of health care system, lowering the prices of drugs or medicines that the patients buy from available markets remains an ambiguity unless hospitals and doctors are to be subjected to a similar mechanism that sets to regulate or control the table of fees demanded from patients under treatment. Absent that, the law is only cosmetic even perhaps useless for its shortsighted motive.

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