Intellectual Property vs Public Health

Multinational pharmaceutical firms and their local representatives have always argued that high R&D costs associated with developing medicines justify their high pricing regime.

They argue that the high prices are not predatory in nature, but merely allow the companies' stakeholders to recover the investments they made into developing these life-saving drugs.

On the other hand, advocacy groups critical of the industry argue that pharmaceutical firms companies benefiting unduly from the misery of impoverished Filipinos, many of whom pay through the nose for medication that these same firms make available abroad at lower prices.

The debate has pitted the interests of multinational drug companies, which want to protect their intellectual property rights and patents, versus the interests of the broader public, which is clamoring for more affordable healthcare.

At stake is the future of the country's P65-billion pharmaceutical industry, and more importantly, the health of millions of impoverished Filipinos, many of whom can barely afford to make ends meet, much less spend for medication when they get sick.

So far, however, the battle has been one-sided, with local drug prices still among the most expensive in the region -- and some claim, in the world -- mainly because the local system continues to prioritize the protection of foreign companies' intellectual property rights over making drugs more affordable.

For example, a 500 mg capsule of Ponstan (generic name: mefenamic acid) costs as much as P20.98 in local drugstores. In India and Pakistan, however, where state policies are more egalitarian, the same medication would cost only the equivalent of P2.80 and P1.48 a capsule, respectively.

Government intervention

With this in mind, some lawmakers, regulators, and industry players are now pushing to amend local laws to help bring down the prices of medicine.

Recently, Senate trade and commerce committee chairman Manuel Roxas II filed Senate Bill No. 2139, which aims to lower drug or medicine prices by amending provisions of the Intellectual Property Code of the Philippines.

Supported by Senator Juan Flavier, a medical doctor and former secretary of health, the bill has gathered a significant amount of support from local regulators and industry groups, but is being opposed by the influential Pharmaceutical and Healthcare Association of the Philippines (PHAP), an umbrella organization dominated by multinational drug makers.

The salient features of the bill include institutionalizing the following:

Parallel importation -- The importation of patented medicines from another country where they are cheaper into the Philippines.

At present, state-owned Philippine International Trading Corp. (PITC) can only import "off patent" medicines from abroad. Even if these are off patent, PITC is still being sued for infringement by foreign pharmaceutical companies.

Early working doctrine -- This will allow local generic drug manufacturers to start studying and testing of generic equivalents of patented drugs before the expiration of the relevant patent.

Only commercial manufacturing and selling are prohibited. This principle is applied in the United States and is recognized in Japan, Canada, Israel and Thailand. At present, local generic manufacturers are allowed to start studying, testing, manufacturing and selling of generic equivalents only after a patent has expired. The period of studying and testing alone takes approximately two to three years, and thus, delays the introduction of generic medicines beyond the date when a patent expires.

Government use -- This will create an exception to the application of compulsory licensing rules for cases involving the protection of public health, like outbreaks or epidemics. Based on present laws, compulsory licensing applications take around six to eight years before approval. Hence, any government action is unnecessarily delayed.

Legal protection for government officials -- There is also a need to create a legal indemnity clause for government officials engaged in parallel importation and compulsory licensing for government use. This will ensure appropriate legal cover from harassment suits or temporary restraining orders.

Debate rages

In his book, the head of the world's biggest pharmaceutical firm argues that "sunk costs" like R&D spending are "irrelevant" for drug pricing considerations.

"If we let sunk costs influence our decisions, we would not be evaluating a pricing decision exclusively on the merits of its own business case," Pfizer's McKinnell wrote. "Pricing decisions should be based on future possibilities, not biased by 10-year-old decisions."

While the Pfizer chief justified the pharmaceutical industry's policies, he himself shot holes in the argument most commonly used by drug firms in defending their high prices, even as he stressed that prices need to come down to make health care more affordable.