Medicine importers seeking relief after exclusion from VAT

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THE Pharmaceutical and Healthcare Association of the Philippines (PHAP) said it will lobby for an amendment to the Tax Reform for Acceleration and Inclusion (TRAIN) law to provide relief for importers of medicine who cannot pass on value-added tax (VAT), after some prescription drugs were declared VAT-exempt at the start of the year to benefit consumers.

“Those who import the medicines are forced to absorb the VAT. They cannot pass this on,” PHAP Executive Director Teodoro B. Padilla said at an event hosted by the European Chamber of Commerce (ECC) on Thursday.

Mr. Padilla said the law did not exempt importers from the 12% VAT but waived the fee for retail buyers of drugs for selected cardiovascular and related diseases particularly diabetes, hypertension and high cholesterol, all of which have to be imported.

The VAT treatment of importers was outlined in Revenue Regulation 25-2018 issued by the Bureau of Internal Revenue (BIR).

“Those are maintenance medicines. It’s definitely a big chunk of the market. They’re considered VAT-exempt down the chain except when you import it,” Mr. Padilla said in an interview.

PHAP membership is around 50 and includes GlaxoSmithKline Consumer Healthcare Philippines Inc., Pfizer, Inc., Novartis Healthcare Philippines, Inc. and Mercury Drug Corp., among others.

“That makes the cost of doing business more expensive for our members. As a result of absorbing the cost they will have to make some adjustments, maybe adjusting the pricing later on which defeats the purpose of having cheaper medicine,” he added.

Health Secretary Francisco T. Duque III has estimated that the current share of domestically-manufactured medicine at about 10%.

Mr. Padilla said added: “The key for us is to sit with (lawmakers) to ensure an amendment to include importers… We are already speaking with other stakeholders about this but since it’s the election period it will be very difficult to do anything,” he added.

Asked if its members are planning to cut down on imports of the medicine covered by the exemptions, Mr. Padilla said members are committed to continue servicing the country’s needs but will be challenged in bringing in new treatments.

“The challenge is to continue operate at a certain elevel where you might not necessarily get the latest innovation because again it’s not conducive for a company when they see certain laws make it untenable to continue with certain product lines,” he added. — Janina C. Lim