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Price caps on drugs ‘populist,’ hurt revenues

By CHINO S. LEYCO

The impending implementation of the government’s “populist” price cap regulation on medicines next month would ultimately hurt consumers, a group of pharmaceutical and healthcare companies claimed.

In a statement, Pharmaceutical and Healthcare Association of the Philippines (PHAP) said the Duterte administration’s price caps on more than a hundred drugs and medicines will not benefit the public, but hurt government revenues.

“It is a populist proposition but discourages production, creating scarcity that will likely hurt those in need of the medicines the most, and shrinks an industry,” the association said.

According to PHAP, the government stands to lose ₱28 billion in revenues as a result of price controls on medicine, which is under Executive Oder (EO) No. 104 signed by President Rodrigo R. Duterte in February.

Beginning June this year the EO 104 will slash the retail and wholesale prices of selected drugs and medicines used for hypertension, diabetes, pulmonary disease, cancer, among others.

But PHAP explained that while the executive order will slash the prices of medicines from the manufacturers’ level, it however will not reduce all prices at the patient level. “The industry projects its sales to drop by ₱57 billion from ₱200 billion once the full price control plan of the DOH [Department of Health] is fully implemented,” PHAP said.

“Projected government revenue losses are broken down into: ₱4 billion in foregone customs duties; ₱7 billion in lost value-added tax; and ₱17 billion in corporate taxes,” it added.

For this reason, PHAP said the EO does not benefit the public in the end as of the formula used to compute the price adjustments, thus “we continue to appeal for a thorough review on the impact of this policy.”

“Price control has not been effective based on global experience,” PHAP said. “We appeal that the measure be withdrawn until further studies especially at this time when the government needs funds to fight Covid-19.”

Instead, PHAP said the government should continue the practice of buying in bulk and price negotiation to assure both supply and price stability.

The EO also covers drugs related to some immune-suppressants, analgesics, anti-asthmatic and chronic obstructive pulmonary disease preparation, anti-coagulants, anti-agina, and agents affecting bone metabolism.
It also covers the antiemetic, anti-depressants, iron chelating agent, antiviral, fibrinolytic, mucolytic, and other drugs for treatment of psoriasis, seborrhea and icthyosis.

The maximum retail price will be imposed on all public and private retail outlets, including drug stores, hospitals, hospital pharmacies, convenience stores, and supermarkets.

The maximum wholesale price will be imposed on manufacturers, wholesalers, traders and distributors.


Source: Manila Bulletin (https://business.mb.com.ph/2020/05/25/price-caps-on-drugs-populist-hurt-revenues/)

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