The Mighty Pharmaceutical Industry

by Benjie Oliveros

MANILA (July 19) — Sen. Mar Roxas is raising hell about the alleged collusion between the Arroyo government and the pharmaceutical industry to delay if not derail the implementation of Republic Act 9502, or the “Universally Accessible Cheaper and Quality Medicines Act of 2008,” which was signed on June 6, 2008. Among the provisions the multinational pharmaceutical companies are reportedly blocking is the setting of the maximum retail price for 22 essential medicines. To sweeten the deal between the Arroyo government and pharmaceutical firms, Pfizer allegedly offered five million “sulit” discount cards to President Arroyo for distribution to indigent patients around the country. (Remember the distribution of PhilHealth cards in 2004?)

The signing of the executive order implementing a maximum retail price could have cut into half the prices of 22 essential medicines. It could have lowered the price of Norvasc from P44.50 to P22.50, Lipitor from P62.50 to P31.25, Diamicron from P14.75 to P7.35, and Ciprobay, an antibiotic, from P79.15 to P39.57.

However, Sen. Alan Peter Cayetano was right in saying that this is not even enough as Norvasc sells at P7 in India and a generic version of Pharex is being sold here at P11. Prices of medicines in India and Pakistan are less than half, nay a mere fraction, of the prices in the country.

Why? Because multinational companies dominate the market for pharmaceuticals in the Philippines.

Around 80 percent of medicines sold in the country come from multinational companies. In addition, Zuellig Pharma/Metro Drug controls 80 percent of the wholesale distribution of drugs. Thus, these multinational companies, operating as a cartel, are able to dictate the prices of medicines, much like what the oil companies are doing.

Multinational pharmaceutical companies are able to rake in enormous profits from the local market, the worth of which in 2006 was estimated to be between P80 to P100 billion a year. A primer produced in 2006 by the Third World Network revealed that the actual production cost of medicines is only five to 15 percent of its retail price. And for every peso in the price of medicines being sold in the country, 40 centavos goes to the mother company through transfer pricing, especially since almost all the active ingredients and chemicals used for the manufacture of medicines are imported by the local subsidiary from the mother company.

Local manufacturers of generic medicines are not able to do much as 97 percent of the market for pharmaceuticals is controlled by multinationals. The control of multinational companies over the production and sale of medicines is ensured by the patent system

No wonder the pharmaceutical industry is number 27 among the fastest growing industries in the world with a 4.9 percent growth in profits in 2008, despite the world economic crisis. Food and drugstores is number 18.

There are 12 pharmaceutical companies from among Fortune magazine’s 2009 list of the top 500 companies in the world. Johnson and Johnson is No. 103 with gross revenues of more than $63 billion and profits of $13 billion; it is also No. 18 in terms of profitability. Pfizer is No. 152 with revenues amounting to $48 billion and profits of $48 billion; it is the 35th most profitable company. GlaxoSmithKlline is No. 168 with revenues of $44 billion and profits of more than $8 billion; it is also No. 31 in terms of profits. The Roche Group is No. 171 with revenues of $44 billion and profits of $8 billion; it is No. 33 in terms of profits. Sanofi-Aventis is No. 181 with revenues of $42 billion and profits of nearly $6 billion. Novartis is No. 183 with revenues of $41 billion and profits of $8 billion; it is No. 34 in terms of profitability. AstraZeneca is No. 268 with revenues of more than $31 billion and profits of $6 billion. Abbot Laboratories is No. 294 with revenues of $29 billion and profits of nearly $5 billion. Merck is No. 378 with $24 billion in revenues and $8 billion in profits; it is No. 38 in terms of profits. Wyeth is No. 401 with $23 billion in revenues and $4 billion in profits. Bristol-Myers Squibb is No. 435 with $21 billion in revenues and $5 billion in profits. Eli Lilly is No. 455 with $20 billion in revenues.

Zuellig Pharma did not quite make it to the Global 500 with its $12 billion in revenues. It is a wonder why the Bayer Group also did not make it with sales of 33 billion euros or $46 billion and profits of 1.719 billion euros or $2.4 billion. Add to the list the Metro Group of food and drug stores, which is no. 50 with $101 billion in revenues and $590 million in profits.

These are the companies that refuse to reduce the prices of such an essential item as medicines. And bribe or no bribe, the Arroyo government seems to be cooperating. It has been more than a year since the law was signed and the prices of medicines have not gone down to affordable levels. It is now hesitating to sign the executive order that would set the maximum retail price of 22 essential medicines.

The law, which the Arroyo government refuses to implement, is even flawed and a mere palliative as it does not break the monopoly control of multinational pharmaceutical companies. Price control or setting the maximum retail price is merely a stopgap measure because it merely “regulates the greed” of multinational pharmaceutical companies without putting a stop to their monopoly pricing practices. Besides, it would only affect the small and medium-sized drugstores more than the multinational pharmaceutical companies as what is happening with the senior-citizen discount. The same is the case with the parallel importation of medicines with expired patents because it would still make the country dependent on imported medicines and, therefore, vulnerable to speculative attacks such as hoarding and price manipulation, which is common in international trade.

To make medicines affordable, the country should develop a national drug industry that would manufacture the medicines the people need. As a necessary first step, there is a need to restructure the patent system. India allowed only process patents on medicines and not on finished products. Thus, it enabled local drug manufacturers to produce the same medicines by analyzing it through reverse engineering then using a different process. With the flourishing of the local drug industry in India, medicines became affordable. A better measure is to shorten the duration of the patent and to require multinational pharmaceutical companies to transfer their technology to local companies. Second, the government could provide research and development and credit support, as well as tax incentives to local pharmaceutical manufacturers. Third, regulatory agencies should be strict in ensuring the quality of medicines being produced and sold in the market to build the confidence of the public.

However, these measures seem like a long shot considering the priorities of the Arroyo government. If the regime could not implement palliative measures and a flawed law, how could it implement strategic measures to develop a local drug industry? If the Arroyo government does not even try to moderate the greed of the oil cartel, how could we expect it to control the drug cartel? Clearly, the Arroyo government is on the side of multinational companies. It always cites deregulation, which it imposed itself, and the fear of losing foreign investors as reasons for not controlling multinational companies. The problem is, the Filipino people are the ones suffering. (

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