No COVID-19 vaccine

The COVID-19 pandemic is highlighting the mistake of regulating prices. The Department of Health (DOH) has issued Executive Order No. 104, which will reduce the price of some 133 of what it calls essential drugs by up to 50 percent. On top of this, the DOH is targeting to cut prices of another 72 products by 51 percent and up, to an incredible 96 percent. Obviously, this will result in great losses to the pharmaceutical companies. They will have to think seriously about whether to bring these drugs in at all. The last time the government forced price reduction on drug prices in 2009, one company withdrew from the market completely.

A subsequent review found that price reductions had insignificant impact. As I mentioned in my June 21, 2018 column, “Health is wealth,” simply forcing a reduction in prices doesn’t work. It was tried during the Arroyo administration when a law was passed. Five years later (September 2013), a study was conducted by the Philippine Institute for Development Studies (PIDS) funded by the DOH. Titled “The Impact of Cheaper Medicines Act on Households in Metro Manila: A Qualitative Study,” it was principally written by Dr. Eleanora de Guzman.

The study stated: “The Cheaper Medicines Act does not seem to have resulted in significantly reducing the financial burden of medicine costs among households. Respondents from all socioeconomic classes claimed that their expenditures for medicines were still heavy. The law has had little effect on low-income respondents (Class DE) who rarely buy branded medicines, but avail [themselves] of free medicines from government health centers or purchase low-cost generics.” In other words, the price reductions had insignificant impact on the consumer, particularly the consumer that matters, the poor—who don’t pay anyway, they get for free.

The COVID-19 pandemic has caught the medical industry without a vaccine or cure, and the urgent need to discover one. The industry is pouring huge amounts into research, amounts running into the billions of dollars. Billions that will have to be recovered. Since the investments are huge and lives are at stake, pharmaceutical companies have entered into partnerships even with competitor companies.

The cure and vaccine for COVID-19 will be an essential drug people must have. But under EO 104, because it is an essential drug, it will fall under price control. If the government excludes these COVID-19 cures and vaccines from the controlled list, what argument will it use? The medicines for diabetes and heart ailments, respiratory illnesses, and cancers are just as essential as COVID-19 cures, even more so as an estimated 300,000 deaths occur in the country per year as a result of these illnesses, versus 904 so far for COVID-19.

Their prices will be reduced by EO 104. So COVID-19 vaccines and cures must be, too. That will result in the suppliers of these COVID-19 drugs, where demand will outstrip supply, prioritizing other markets where they can be sure of recouping the huge cost of research. The Philippines will not get the expected relief from COVID-19.

It’s the case with many of the drugs on the list whose prices will be reduced: Suppliers will rethink delivery to the Philippines. And when other new ones are discovered—for cancer, for instance—EO 104 will result in the Philippines being last on the list to supply, if at all. You’ll have to travel overseas to get the drugs you need. But overseas travel is not a particularly enticing thought at the moment, and will not even be allowed for many months yet.

A disturbing side note on this is that EO 104 introduces price cuts at the wholesale level (MDWP) as well as at retail (MDRP). Why? The only concern of the DOH should be what the patient pays. Even stranger, some wholesale prices are cut, but the retail price isn’t. Wasn’t the whole point of EO 104 to help the patient? Take the price of Fluticasone (an anti-asthma drug) at P85 per pill; under the executive order, the reduced MDWP price will be P59.02, while MDRP will be 85. The net effect is zero reduction in retail price, while pharmacies benefit from a margin of 44 percent, significantly higher than the 10-15 percent they generally enjoy.

This is a very strange regulation that will do more harm than good. It’s a populist stance whose goal (lower prices) could be achieved in better ways. The DOH should meet with the manufacturers for pooled procurement and other ways that are mutually agreeable to achieve the same price reductions, without loss to the companies but with benefit to the patients. But it has declined to do so.

EO 104 should be canceled so we still get the essential drugs sick people need, and be on the list for COVID-19 vaccines and cures.

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