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Maximum Retail Drug Price May Apply in Philippines Within a Year

Published: 11/11/2008
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The Philippines' Department of Health (DoH) has revealed that it may impose a price cap on retail drugs 6 to 12 months after the new Cheaper Medicines Act comes into effect.

Global Insight Perspective

 

Significance

The Philippines DoH is to set maximum prices on retail drugs after the Cheaper Medicines Act has applied for six months to one year, in a bid to bring down drug prices by at least 50% from the 2001 level.

Implications

The new cheaper medicines law has 6 to 12 months' time to lower the drug price through parallel importation and mandatory generics prescribing rules.

Outlook

RA 9502 is the government's heavy hand on drug price reduction and will provide patented drug firms, mainly multinationals, with significant pressure to reduce their prices to compete with cheaper patented drugs from other countries and local generic drugs. On the other hand, they will have to increase promotional spend to maintain the prescribers and retailers' loyalty.

The Philippines DoH has revealed that it may turn to price caps on retail drugs within a year of the new cheaper medicines law, RA 9502, coming into effect, reports Philippine Daily Inquirer. Health Secretary Franciso Duque III said that the ultimate goal of these actions would be to bring down the drug prices by at least 50% from the medicine price level in 2001, when president Arroyo swore she would reduce drug prices. The drug prices have soared by over 50% since then.

Signed last week, the implementing rules and regulations (IRR) of RA 9502 will be effective on 21 November (see Philippines: 10 November 2008: Philippines' Cheaper Medicines Act to Take Effect from 21 November). Based on this newly-enacted Cheaper Medicines Act, parallel importation is permitted so that cheaper patented drugs from other countries can force down the prices of drugs sold in the Philippines. Previously, the government has been sued by foreign drug firms for trying to encourage parallel importation to lower drug prices.

A mandatory generics prescribing rule will also apply, under which the public doctors and health workers should only put generic names of the drugs on the prescriptions while leaving out the brand names. Private doctors working in government facilities should abide by this rule as well. Drug retailers are requested to provide sufficient information to customers on the availability and prices of generic drugs. Government doctors breaching the generics-only provision will face a reprimand on the first offence and a 10,000 peso (US$204.9) to 20,000 peso fine on the second offence. On the third and subsequent offences, the fine rises to at least 100,000 pesos and suspension for at least a year will apply.

RA 9502 has also given the President the authority to approve price caps recommended by the Health Secretary to certain drugs in the interest of the public health need.

Outlook and Implications

The soon-to-be effective Cheaper Medicines Act is to have significant impacts on the pharmaceutical industry of the Philippines, whose drug prices have been some of the highest in Asia. During the eight years since President Arroyo vowed to tackle the high drug price, the Philippines' drug price has jumped over 50%. The new act RA 9502 has shown the government's resolution to solve this issue with heavy measures.

With a price cap as the last resort, the government's actions, both parallel importation and the mandatory generics prescribing rule, are effective means to bring down the drug prices. Importing patented drugs from cheaper markets will force the drug suppliers in the Philippines to lower their prices in order to survive in the competition. They will also have to compete with generics under the generics-only prescription rule. The patented drug manufacturers in the Philippines will be under mountint pressure to reduce their prices. Meanwhile, they are likely to increase already-heavy promotional expenditure to win over both prescribers and retailers, so that they can recommend their drugs when asked by patients or pharmacists.

In terms of the Philippines' pharmaceutical market on the whole, the current 92 billion peso market has been growing rapidly and rising prices have been one of the main propellers. With RA 9502 in effect, the growth rate in the pharmaceutical market is likely to slow down, although the volume of demand won't be influenced much.
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