Drug pricing EO a threat to pharma firms’ operations, says Fitch

New regulations on drug pricing in the Philippines will escalate pressure on the pharmaceutical industry and threaten the operations of multinatio­nal drug-makers, think tank Fitch Solutions said.

In a research note dated June 18, Fitch Solutions said the executive order signed by President Duterte in February to regulate the prices of certain drugs and medicines would gnaw heavily on multinational pharmaceutical firms.

Executive Order (EO) No. 104, or Improving Access to Healthcare Through the Regulation of Prices in the Retail of Drugs and Medicines, imposed a maximum retail price (MRP), a maximum wholesale price or both on at least 86 drug molecules or 133 drug formulas, selected based on a set of criteria. The MRP will be imposed on all public and private retail outlets, including drugstores, hospitals and hospital pharmacies, health maintenance organizations, convenience stores and supermarkets.

The MRP was intended to widen access to medicines particularly those that address leading diseases and conditions such as hypertension, cardiovascular disease (CVD) and cancers and improve health outcomes.

“The majority of the drugs affected by the MRP are newly introduced products for the treatment of chronic conditions such as cancer, diabetes and CVD conditions,” Fitch Solutions said.

Many of the affected products are complex drugs, the research said, noting that large drug makers from Europe and the United States were most exposed to the price limits.

“However, the scheme will also affect local distributors, pharmacies and private hospitals,” the research said.

Fitch Solutions noted that the Pharmaceutical Healthcare Association of the Philippines (PHAP)—representing the interests of research and development-based firms—had objected to the scheme, warning that it would also affect small retailers and force manufacturers to reconsider plans to launch new medicine in the country. This may also lead to pharmaceutical companies withdrawing existing products, which would in turn harm the public, the research said.

But over the longer term, Fitch Solutions said price controls could be positive for the market as these may spawn higher sales volume and greater competition in the market.

“If patients and other payers are attracted to the new lower-priced pharmaceuticals, greater demand should attract more suppliers to the Philippine market, which is often overlooked by firms seeking opportunities in Asia Pacific,” Fitch Solutions said.

The 40-member PHAP, for its part, has requested the suspension of price cuts on medicines, citing significant losses incurred during the coronavirus pandemic.

In the meantime, the research noted that local health authorities had also started taking steps toward employing generic substitution policies.

“Over the longer term, as is common throughout the Asia region, market growth will decelerate due to increasing cost-containment and initiatives to improve the cost-efficiency of pharmaceutical spending,” Fitch Solutions said. —DORIS DUMLAO-ABADILLA