For profitable RP drug industry, price cut is a pill that’s hard to swallow

In the battle to slash the prices of medicines, the Arroyo administration seems to have won the first round, but the drug industry is proving to be a tough adversary. Several drug stores and hospital pharmacies have failed to comply with price cuts imposed last month, prompting the Department of Health (DOH) to warn erring establishments of fines or closure.

The problem is nothing new. Making drugs accessible to the poor has been the battle cry of the government since then President Corazon Aquino came up with a national drug policy that resulted in the 1988 Generics Act, supposedly Asia’s first powerful drug price reduction law.

But the battle cry has since turned into a broken record. More than 20 years after the generics law was implemented, the DOH found that with a measly four percent share, cheaper generic products have failed to corner a sizeable market.

“There are significant problems in the access to medicines for the poor," the DOH reported in its 2005-2010 National Objectives for Health, which provides the road map for the country’s health sector.

“The pharmaceutical market is dominated by expensive branded medicines, making drug prices in the Philippines among the highest in Asia," the report said.

The DOH’s findings are similar to those of the World Health Organization (WHO), which included the Philippines in the list of countries where less than 30 percent of the population has regular access to essential medicines.

Drug prices in the Philippines are 34 to 184 times higher than the international reference prices, according to the 2006 WHO Health Action International survey.

For instance, a 500-milligram tablet of pain-reliever Ponstan costs P21.82 in the Philippines. But in India, the same brand of medicine with the same dosage only costs P2.61. Meanwhile, a 100-microgram inhaler of the salbutamol-based asthma medicine Ventolin costs P315 in the Philippines, but only P123.31 in India. (See: WHO Western Pacific Region: Essential Drugs and Medicines Policy, Issue No. VII, 2007)

The WHO also found out that due to the high prices of drugs, a Filipino government worker taking Ranitidine for a month's treatment of ulcer has to spend 8.5 days of his income for originator drugs, which are manufactured by companies holding the patent for that medicine.

Meanwhile, a worker battling depression through an originator brand of fluoxetine will have to spend wages equivalent to 32.8 days for a month's treatment, according to the survey.

Larger than many nations

Both the government and its critics agree that trade monopoly is the reason behind the exorbitant prices of drugs in the country.

“There’s failure of competition," says DOH Undersecretary Alex Padilla, who has been with the department for the last eight years.

“The drug industry is raking super-profit from the pockets of the poor," adds Dr. Darby Santiago, chairman of the Health Alliance for Democracy, a non-government organization of medical practitioners that is critical of the government’s health policies.

Major players in the drug industry claim otherwise, saying the 50-percent cut in the prices of medicines will have a negative impact on their operations and even force them to lay off workers.

“It looks like it’s hitting the big multinational companies, but the most affected are actually the local companies," Oscar Aragon of the Pharmaceutical and Healthcare Association of the Philippines (PHAP) said. (See: Price cuts on drugs could lead to retrenchment)

Private hospitals claim they are hurting, too. On September 15, the Private Hospitals Association of the Philippines said its members had increased the prices of their services after the government imposed the price cuts. “We are affected. Where are we going to get the money to pay salaries for our nurses, our pharmacists?" said Dr. Rustico Jimenez, the president of the group.

But the statistics tell another story.



Sixteen of the top 20 drug companies in the Philippines are multinational firms with combined sales of P58.23 billion in 2007, nearly eight times more than the Philippines’ P7.39 billion GDP in 2008.

The companies are Glaxo Smithkline, Pfizer, Wyeth, Sanofi-Aventis, Abbott, AstraZeneca, Novartis, Roche, Johnson and Johnson, Boeringher Ingelheim, Bristol Myers Squib, Bayer, Schering Plough, Merck Sharpe & Dohme, Servier, and Merck Inc.

Their sales represent about 82 percent of the total volume sales of foreign pharmaceutical firms in the country, according to data from the PHAP.

The 16 companies' average compound annual growth rate of 8.5 percent in 2007 is higher than the Philippines' real gross domestic product (GDP) growth rate of 7.3 percent in the same year.

At least 10 of the multinational drug firms were among the Philippines’ top 1,000 corporations in 2007, with a total net income of P6.91 billion. Other major players in the Philippine drug industry that package, distribute, and sell drugs -- Zuellig Pharma Corp., Interphil Laboratories, Inc., Metro Drug Inc. and Mercury Drug Corp. -- are also in the list and had a combined profit of P1.49 billion in 2007. (See Table)

In 2008, industry data from the international firm IMS Health showed that the global drug industry generated sales of $733 billion (P35.18 trillion), about 20 times more than the $29.78 billion (P1.22 trillion) national budget of the Philippines for the same year.

With the drug industry “economically larger than many nations," governments find it difficult to regulate their quest for profit at the expense of millions of poor people who cannot afford essential drugs, according to the advocates’ group Consumers International. (See: Drugs, Doctors and Dinners: How drug companies influence health in the developing world)