Less than a year after it was signed into law on June 6, 2008, things are shaping up for Republic Act No. 9502 or the Universally Accessible Cheaper and Quality Medicines Act (QAMA). The law has inspired polarized reactions—some optimistic and some skeptical—over its capacity to work toward bringing health care to the people who need it most.
Sensible and compassionate
On April 16, the Supreme Court applied RA 9502 and ruled in favor of a local drug company, Roma Drug Co., in its legal battle against the local arm of international pharmaceutical giant GlaxoSmithKline. Roma Drug, which operates a pharmacy in Guagua, Pampanga, was prosecuted for supposedly violating RA 8203 or the Special Law on Counterfeit Drugs (SLCD) by directly importing and selling Augmentin tablets, Orbenin capsules, Amoxil capsules, and Ampiclox capsules. These drugs, although neither adulterated nor mislabeled, were alleged by the Pampanga Provincial Prosecutor as “counterfeit” under the SLCD based solely on the fact that they were imported from abroad and not purchased from GlaxoSmithKline, the Philippine-registered owner of the patent or trademark of such drugs.
The Supreme Court ruled that the QAMA grants private third parties the “unqualified right … to import or possess ‘unregistered imported drugs’ in the Philippines.” Furthermore, the Court held that Section 7 of RA 9502 repeals Section 4(a) of the SLCD insofar as the latter imputes criminal liability on persons who import, possess or sell unregistered imported drugs. According to the Court, since RA 9502 contains the latest legislative expression as regard importation of patented drugs or medicines, it prevails over the SLCD, which is an earlier statute. “Where a statute of later date, such as Republic Act 9502, clearly reveals an intention on the part of the legislature to abrogate a prior act on the subject, that intention must be given effect,” Justice Dante O. Tinga stated in his ponencia.
Describing the SLCD as a heartless, soulless legislative piece, Tinga declared it as one of doubtful constitutionality. “As written, the law makes a criminal of any person who imports an unregistered drug regardless of the purpose, even if the medicine can spell life or death for someone in the Philippines. It does not accommodate the situation where the drug is out of stock in the Philippines, beyond the reach of a patient who urgently depends on it,” he explained. “The absurd results from this far-reaching ban extend to implications that deny the basic decencies of humanity. The law would make criminals of doctors from abroad on medical missions of such humanitarian organizations such as the International Red Cross, the International Red Crescent, Medicin Sans Frontieres, and other like-minded groups who necessarily bring their own pharmaceutical drugs when they embark on their missions of mercy.”
In contrast, Justice Tinga continued, the QAMA allows “for a sensible and compassionate approach with respect to the importation of pharmaceutical drugs urgently necessary for the people’s constitutionally-recognized right to health.”
Prof. Dina Lucenario of the UP College of Law, in an interview with the UP FORUM, pointed out that the Roma Drug Case has been criticized for the confusion in concepts on which it was based. The term in dispute is “unregistered.” She said the Supreme Court construed “unregistered” in the phrase “unregistered imported drugs” to mean lack of registration with the Intellectual Property Office. Thus, the High Court’s premise was that the SLCD criminalizes the importation of drugs by persons who are not the registered owner of the patent or trademark used in such drugs. Such a premise, however, is being questioned since “unregistered” may mean lack of registration with the Bureau of Food and Drugs (now replaced by the Food and Drug Administration).
Prof. Dina Lucenario of the UP
College of Law
Those who are against the Roma Drug ruling point out that the Food, Drugs and Cosmetic Act as well as the Consumer Act require that all drugs imported or marketed in the Philippines must first be registered with the FDA. Through such registration, FDA is able to examine whether the drugs are safe, pure, and efficacious.
Lucenario said that this requirement is not thrown overboard by the passage of RA 9502 which merely allows private third persons the right to import or otherwise use drugs whose patents and trademarks are owned by another. “While private third persons can import or otherwise use drugs protected by patents and trademarks of another, such importation or use is still subject to the requirement that the subject drugs must be registered with the FDA to ensure their safety, purity, and efficacy,” she explained. “Opponents of the Roma Drug ruling emphasize that the lack of registration with the FDA makes the ‘unregistered imported drugs’ counterfeit under SLCD as the safety, purity and efficacy of such drugs were not determined by the FDA as they were not registered with the FDA.”
Three months later, on July 27, President Gloria Macapagal Arroyo issued Executive Order No. 821, which prescribes the Maximum Drug Retail Prices (MDRP) for selected drugs and medicines. Out of the 22 essential medicines which were recommended by the Department of Health, only five made it to the final cut for compulsory compliance. These medicines are for hypertension, diabetes, cancer, bacterial infections, and amoebiasis. Seventeen others were listed for voluntary compliance only.
By reducing to half the original prices of selected medicines, the MDRP is supposed to concretize the intention of RA 9502, which is to make inexpensive and quality medicines accessible to the public. Already, however, it is being touted as “deceitful and illusory.”
In a statement, Eleanor M. Nolasco, convener of Consumers’ Action for Empowerment, pointed out that EO 821 “does not include the most widely used essential, first-line medicines needed for the treatment and cure of more prevalent diseases in the country.” Nolasco said it should have included medicines needed to treat the 10 leading causes of morbidity and mortality in the country, such as respiratory diseases, pneumonia, and tuberculosis.
Why did Arroyo limit the list to five medicines when Section 23(a) of RA 9502 provides a comprehensive list of drugs and medicines that may be subjected to price regulations? These include remedies for cardiovascular diseases, pulmonary ailments, systemic lupus erythematosus, even neuro-psychiatric disorders.
Nolasco also berated the national government for using the drug originator price as peg for reducing by 50 percent the prices of essential medicines in the compulsory list. “For example, the MDRP of Amlodipine 10 mg (used to lower blood pressure) is P38.50, about half the price of its originator brand medicine Norvasc 10 mg, which is sold at P77 in a leading drug store,” she explained. “Why set this amount as the MDRP for this medicine when its generic equivalent is sold at P15 at a known drugstore selling generic medicines?” In other words, despite the reduction, medicines would still cost an arm and a leg for average income earners.
“The MDRP should be pegged at prices that an ordinary worker can afford with his meager income,” Nolasco said.
There are also concerns about EO 821 triggering an increase in prices of drugs and medicines not covered by the MDRP to re-gain the revenue they would lose from those covered by the mandatory reduction. Unfortunately for consumers, this practice is legal. RA 9502 itself does not prohibit such practice. It appears that such practice may fall under the primary tool described in RA 9502’s declaration of policy. RA 9502’s declaration of policy states that competition is the primary tool and price regulation, the secondary tool. This sanctions the conclusion that with respect to those not covered by the MDRP, competition and market forces shall govern thereby enabling manufacturers and importers to set their prices. Neither does our tax law prohibit such practice. According to Lucenario, “Our tax law does not seek to prohibit such practice or scheme. It merely ensures that taxpayers properly reflect the amount of their income subject to tax. For those not covered by MDRP, the present law allows the market participants to determine their prices.”
The market participants’ decision to increase the prices of their products not listed in the MDRP, therefore, is largely dependent on market forces. “The law will only come in if there are anti-competitive practices such as profiteering as defined under the Price Act and the implementing rules and regulations of RA 9502,” she said.
A bitter pill
Even then, pharmaceutical companies might still find the MDRP too bitter a pill to swallow. Drugstore owners or distributors, who must now sell at half price the medicines listed in the MDRP, can recover the price differential from the importer or the manufacturer. But from whom can the importer or manufacturer recover their unrealized income due to the 50 percent reduction in the prices of their products? Section 2(b.1) of EO 821 simply lets them shoulder the price differentials.
Lucenario said that since the MRDP’s mandatory price reduction scheme is imposed at the retail level, the participants in the supply chain—from the manufacturer or importer down to the retailer or drugstore owner—have no choice but to reduce their prices. “The retailer will not buy the product from the distributor at a price higher than the MDRP. In turn, the distributor will not buy the product from the manufacturer or importer at a price higher than the amount which the retailer is willing to pay the distributor,” she explained. “Consequently, the reaction moves upwards compelling the manufacturer or importer to sell its product to the distributor at a price lower than the MDRP to allow some profit margin for the distributor and the retailer.”
Tax deduction is also not an option for manufacturers and importers to obtain relief for their revenue loss. Lucenario stressed that the MDRP is a mandatory price reduction, not a sales discount which manufacturers or importers can deduct from their gross receipts come the time for tax payment. “In discounts, the seller sells at a certain price but allows the buyer or patient to pay less than that price,” she said. “On the other hand, in a price reduction scheme, the seller is required to set the price to equal to or less than the reduced price and to allow the buyer or patient to pay exactly such reduced price.” Nonetheless, whether it’s sales discount or price reduction, the net effect is the same. The manufacturers or importers shouldering the price differentials will receive, and thus, report lower gross revenue or receipts.
Furthermore, instead of getting tax relief, pharmaceutical industry players are still compelled to observe the 20 percent discount on senior citizens’ purchase of medicines under RA 9257, or the Expanded Senior Citizen’s Act. Section 4, Rule 30 of the IRR of RA 9502 provides that “[f]or drugs and medicines with MRPs, Senior Citizen’s discounts and discounts for people with disabilities shall continue to be honored.” Lucenario noted that in the original draft of the IRR, the Department of Health, the Department of Trade and Industry, the Intellectual Property Office, and the Bureau of Food and Drugs initially considered those drugs and medicines subject to the MDRP be no longer subject to the mandatory senior citizens’ discount. In the end, however, the agencies changed their position and kept the 20 percent senior citizens’ discount on top of the 50 percent compulsory price reduction under the MDRP.
Ultimately, it boils down to the capacity of the manufacturers or importers to absorb the loss or reduction in price. Those who cannot, Lucenario said, would be compelled to stop selling their product in the Philippines or to shut down operations. For those who can, the picture is not too good either, since they would have to suffer a cutback in their profits.
If there is any consolation, she said, it is the possibility “that the reduced price may have the effect of increasing the sales, thereby essentially offsetting the reduction in profit for each piece of the product.” But this consolation may be too small in comparison to the losses manufacturers or importers are bound to face.
Dear Elizabeth 