FORMULATING a cheaper-medicines law is not the solution to high medicine prices but cutting medicine taxes and value-added tax (VAT), as well as encouraging greater competition among pharmaceutical companies through a healthy business environment.

In his paper, titled “Making Medicines Affordable: The Role of Innovation, Competition and Taxation,” Minimal Government Thinkers president Bienvenido Oplas Jr. said the cheaper-medicines law does not assure that medicine prices will go down.

“One obvious solution is to expand the number of innovator companies, whether local or multinational, and let them compete with each other in giving us more effective medicines. It is competition, not over-regulation and high taxation [as done by many governments] that can bring down the price of anything,” Oplas said in his study.

Further, Oplas said that instead of a cheaper-medicines law, Congress should enact a law that will drastically cut the taxes on medicines, if not exempt medicines from at least import tax and VAT.

Oplas said Congress should also work to relax the business environment to attract the entry of more reliable pharmaceutical companies, domestic or multinationals, that will increase price and quality competition in the local pharmaceutical industry.

“Thus, ‘cheap at all cost’ is not the way to go. We are only after good quality, effective and safe medicines. So the big challenge is how to make these medicines more available and more affordable to our people, and a corollary challenge is how to eradicate the entry and sale of those cheap but ineffective, unsafe, if not fatal, drugs,” Oplas said.

In the Senate version of the bill, the President, upon the recommendation of the Department of Health (DOH) and Department of Trade and Industry (DTI) secretaries can regulate or control medicine prices under certain circumstances for no specific period of time.

The House of Representatives, on the other hand, proposes the creation of the Drug Price Regulation Board, which will be tasked to implement price-control measures.

“When prices are controlled, producers who can possibly make some “miracle” products and medicines at sky-high costs will be discouraged from innovating and producing those products. It is unfair when the government puts up uncontrolled taxes, fees and regulations, then control the price of commodities later. What can rein in prices is more competition among manufacturers and sellers, not more bureaucracies,” Oplas said.

At present, medicines are slapped with an import tax of 5 percent and VAT of 12 percent. Aside from these, other indirect taxes and fees on medicines that are applied in other countries are port charge, inspection fee and pharmacy-board fee.

The total burden of combined taxes, charges and fees slapped on medicines, as a percent of retail-medicine prices, can be as high as 55 percent (India) to 34 percent (Nigeria), 33 percent (Pakistan), 29 percent (Bang-ladesh), 28 percent (China) to 24 percent (Mexico).

Oplas said that if these taxes are drastically cut by half at least, then medicine prices can immediately go down, and Filipinos can have cheaper quality medicines.

Further, he said that while there are about 45 multinational pharmaceutical companies in the country, not all of them are competing against each other on certain product category.

Oplas said some companies do not have pediatric products, so they do not compete with other pharmaceutical firms that sell medicines for babies and children.

He said that one time-proven mechanism to reduce the price of something is to have as many producers and innovators of good quality products and let them compete with each other.

However, Oplas said the two bills in Congress may even discourage the entry of more innovator companies, and attract more generic companies that do not engage in expensive and time-consuming research and development.

“If existing government regulations—from local governments to the Bureau of Internal Revenue and the DTI to the Bureau of Food and Drugs and the DOH—are relaxed, plus proposed measures that weaken Intellectual Property Rights for their products and innovation are shelved, then there should be more multinational pharmaceutical companies that can come in and pose additional competition to the incumbent firms here,” Oplas explained.

“It will also be a better alternative to parallel importation. If the foreign manufacturer, foreign wholesaler, importer and local patentee are the same, then identifying who will be accountable in cases of ineffective or unsafe and counterfeit drugs will be clearer and easier,” he added.

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