FITCH SOLUTIONS Macro Research flagged the Maximum Drug Retail Price (MDRP) scheme that aims to impose price controls on commonly-used drugs as a possible risk that will hinder pharmaceutical innovations in the future.

In a commentary sent to journalists Friday, Fitch Solutions said the proposed price cuts will likely hit large drugmakers in Europe and US, which are “most exposed to the initiative,” as well as affect local distributors, pharmacies and even private hospitals.

It said majority of the drugs under the proposed MDRP scheme are newly-introduced products, many of which are considered “complex biologicals” or drugs produced through living organisms or biologicals.

“We believe that the scheme may not deliver the intended benefits and could hinder the introduction of future pharmaceutical innovations,” the report read.

Further, it noted that “price controls will diminish attractiveness of the Philippines pharmaceutical market to foreign drugmakers.”

The Department of Health (DoH) released last September the proposed list of 120 drugs under the MDRP scheme where price will be regulated and “are expected to have a mean price reduction of 56% from the prevailing market.”

Those included in the list are drugs addressing common diseases in the country such as hypertension, diabetes, cardiovascular disease, chronic lung diseases, neonatal diseases and major cancers, as well as those that have high cost of treatments, including chronic renal disease, psoriasis, and rheumatoid arthritis.

However, the scheme will only be implemented once President Rodrigo R. Duterte issues an executive order.

The DoH hopes to lower prices of some expensive medicines through the scheme but a group of pharmaceutical firms said the government can reduce prices by buying in bulk and selling them through state hospitals, instead.

The Health department had said they are targeting to have the list to be approved before 2019 ends but as of writing, the executive order that will effectively implement it is yet to be approved.

Despite the perceived risks from the proposed price regulation, Fitch Solutions said the recently-signed 2020 budget will likely improve the country’s healthcare sector mainly due to the higher budget allocation for health-related programs.

It said the country’s healthcare spending likely contributed around 4.5% of last year’s overall gross domestic product and is seen to “grow steadily” until 2029, “rising from P897.4 billion to P3.111 trillion.”

“The 2020 budget for the Philippines will enhance healthcare access and with it, the commercial opportunities for pharmaceutical companies and healthcare provider,” it said in its report.

With higher budget, it said the DoH can hire more health personnel and build and upgrade medical infrastructures across the country, including those in hard to reach areas.

“To this end, the Philippines healthcare and pharmaceutical market will experience robust growth driven by the country’s concerted effort to improve the health and well-being of its population,” it said.

The P4.1-trillion budget for this year, signed on Monday, allocated 38% of the total for education, healthcare, housing and social welfare, where P164.7 billion is earmarked for the health sector.

Of this amount, P67.4 billion will go to the Philippine Health Insurance Corp. which aims to reach 15.4 million indigent families and around 5.4 million senior citizens this year.

“As such, health insurance coverage in the Philippines will expand, alleviating the reliance consumers have on out-of-pocket spending to finance healthcare expenditure in the country — a financial barrier to medical services,” it explained.

The remaining P59.6 billion will be used for hospital services while P34.2 billion will go to public health services

Meanwhile, the health department has allocated funding for other programs as well, including the national immunization program, programs that will prevent and eliminate infectious diseases, the health facilities operations program, the health facilities enhancement program and the medical assistance program, which aims to provide financial assistance to one million indigent patients.

Some funds will also be used to prevent and control non-communicable diseases through services and medicine, for purchase of drugs, vaccines and supplies for state health facilities and for hiring of needed health personnel. — Beatrice M. Laforga