MDRP* and the Philippine Pharmaceutical Industry

1. MDRP* and the Philippine Pharmaceutical Industry Jose Maria A. Ochave January 27, 2010 * Also known as the MRP.

2. Outline of Presentation • MRP in R.A. No. 9502 • Basic Features • History of the provision • Principle behind MRP • MRP Implementation • Impact on the Pharmaceutical Industry • Is a fair, rational, predictable and legally-compliant MRP process possible?

3. MRP in R.A. No. 9502Basic Features • Imposition of maximum prices at all levels of the supply chain. • By the President upon recommendation of the Secretary of Health, for a limited period. • Factors that shall be considered: • Retail prices in the Philippines and other countries; • Supply availability • Costs, including exchange rate, amortization cost of machinery, labor cost, transportation cost. • Just and reasonable determination of MRP.

4. MRP in R.A. No. 9502History of Provision • Initial bill was only on parallel importation and providing public health flexibilities in patent law. • There was general agreement among initial proponents of cheaper medicines that price control was not the way to go as it could be subject to abuse. • Inserted after the “note-passing” incident in Congress.

5. MRP in R.A. No. 9502Principle Behind MRP • Sec. 2: “(A)n effective competition policy in the supply and demand of quality affordable drugs and medicines is recognized by the State as a primary instrument. In the event that full competition is not effective, the State recognizes as a reserve instrument the regulation of prices of drugs and medicines as one of the means to also promote and ensure access to quality affordable medicines.” (emphasis supplied)

6. MRP in R.A. No. 9502Principle Behind MRP • Rule 2, IRR: “Effective competition shall encourage a milieu where there are a significant number of players at each level of the pharmaceutical supply chain that shall ensure the availability and affordability of these health products. It exists in an environment where the consumers are well-informed and are able to exercise their right to choose from a variety of variable options to access affordable, quality drugs and medicines.” (emphasis supplied)

7. MRP ImplementationFactors Used by DOH in Determining Products Under MRP • Of Public Health concern • Four-Five times more expensive than ASEAN counterpart • Less than four generic counterparts • Innovator is the top-selling product and is still the most expensive.

8. MRP ImplementationProducts Under GMAP/MDRP • Of the 22 products in the DOH list: • 5 were placed under MDRP • 16 were voluntarily reduced (GMAP) • 1 was dropped as it is no longer being sold • All at least 50% reduction in price.

9. MRP ImplementationIssues in Implementation • Negated the policy of RA 9052 to encourage competition, with price control only as a reserve instrument. • Ignored the factors laid down under RA 9052 on determining the products to be placed under MRP. • Created an environment of uncertainty and arbitrariness.

10. Impact on Pharmaceutical Industry • Still early to determine impact, but anecdotal evidence suggests that it: • Created enough uncertainties in the market to make companies rethink about launching new products, especially local generic companies. • Strengthened the MNC brands. • More importantly, what really is its impact on the target beneficiaries of the Cheaper Medicines Act?

11. Is there a better MRP? • Balancing competing equities: • Access by the poor to essential medicines • Government’s need to fulfill its role of making the right to health a reality • Fostering an environment where the private sector is encouraged to make available safe, effective and quality medicines.

12. A Better MRP? • If covered by molecular patent, no MRP. • If within six months from expiration of molecular patent and no generic competitor* that is at least 50% lower in price, government may impose MRP. • If after three years from expiration of molecular patent and generic equivalents are less than 30% of the market in units, government may impose MRP. * Generic competitors must not be owned or controlled by the originator company.

13. Final Remarks • Cheaper Medicines Law is Phase 1 of providing access to cheaper quality medicines to the people. It is not enough. • Phase 2 is universal health insurance. • Phase 3 is building new models to improve the efficiency of various healthcare sectors, including encouraging (i) greater competition where there is a monopoly; and (ii) partnerships at the international, national and sub-national levels. • The right to health is an entitlement, not a privilege.