Health Department Patent Remedies to Cut Drug Prices

1. (SBU) Summary: The Philippine Department of Health is close to
ordering pharmaceutical companies to stop marketing their products
with discount cards, seeking to require companies instead to sell to
all customers at the lowest price already available. The pending
order may stem from frustration among legislators that the year-old
Cheaper Medicines Act has not led to lower retail drug prices, and
particularly from Senator Manuel Roxas' desire to kick-start his
presidential campaign. End summary.



2. (U) Many international pharmaceutical companies distribute
discount cards as a marketing tool in the Philippines. Philippine
law prohibits advertisements for prescription medicines, so a number
of companies have issued the cards to doctors, who distribute them
to their patients. Patients present the card together with the
doctor's prescription at pharmacies, and receive discounts on the
full retail price of the prescription. In many cases, the discount
amounts to over 50%. Pharmaceutical companies claim that the cards
encourage patients to consult doctors instead of self-medicating,
and assist patients to take the full course of a medication instead
of just one or two doses and stopping. Discount cards have now
become part of the debate over the implementation of the Cheaper
Medicines Act.



3. (SBU) The Philippine Congress passed the Cheaper Medicines Act
in May 2008. On this first anniversary, media and legislators have
noted that the retail prices of drugs have not fallen over the past
year. Political pressure is again building for lower drug prices.
During a May 12 hearing, Senator Manuel Roxas, the sponsor of the
Cheaper Medicines Act and a 2010 presidential candidate, told
Department of Health officials he was giving them two weeks to lower
medicine prices. Soon afterward, the Health Department seized upon
banning discount cards and requiring drugs to be sold at the
discounted price as a quick fix.



4. (SBU) Pharmaceutical companies have expressed varying degrees of
worry about the proposal. Pfizer, whose marketing in the
Philippines centers almost exclusively upon its discount card,
requested a meeting with Embassy to seek our intervention. Pfizer
claims that over 80% of its local sales are to cardholders.
GlaxoSmithKline also uses discount cards in the marketing of its
patented medicines, although with off-patent drugs, its strategy
focuses upon direct price reductions. Merck told us that when the
Department of Health banned new card-based discount programs in
2005, it saw the writing on the wall and began to wind down its card
program.



5. (SBU) While Pfizer, due to its marketing strategy, is the most
affected, all three companies complained of their frustration with
repeated arbitrary policy changes by the Department of Health.
GlaxoSmithKline pointed out that the Health Department card policy
would establish maximum retail prices on specific brands, but
according to the Cheaper Medicines Act, only the President can
impose price controls and they must be placed upon classes of drugs
based upon the compounds in them.



6. (SBU) Comment: Senator Roxas can be counted upon to continue
pressing for quick pharmaceutical price reductions, as the passage
of the Cheaper Medicines Act is one of the key accomplishments he
points to in preparing for the presidential run. We will ensure in
upcoming meetings with government officials that they realize that
we are interested in the issue and that such extra-legal actions as
imposition of price controls via arbitrary Department of Health
actions would be unacceptable.

Memmott