THIRTEENTH CONGRESS OF THE REPUBLIC ) 
OF THE PHII..IPPINES 
First Regular Session 
Introduced by Senator Flavier 
i / v  
EXPLANATORY NOTE 
The high cost of drugs in the Philippines is a common complaint of 
citizens from all walks of life and a perennial issue among policy makers, local 
and foreign drug companies and medical practitioners. A comparison of drug 
prices obtained from the Department of Health (DOH) reveals that retail 
prices of commonly used drugs are much higher in the Philippines than in 
most Asian countries 
One of the major factors affecting the cost of drugs in the Philippines is 
the heavy dependence on imports. Our drug industry does not yet have 
sufficient capacity to produce the active substances of basic raw materials 
used in drug manufacture except for a few firms. Most of the players in the 
industry merely buy finish bulk chemicals from abroad and then re-compound, 
reformulate and/or package them into finish products. 
Another related factor is the common and well-known practice of 
transfer pricing prevailing in the industry that begins from the moment raw 
materials and sells them to a drug company, either a subsidiary or a holder of 
a voluntary or compulsory license, at a price higher that that prevailing in the 
world market, Almost fifty percent (50%) of the cost of branded drugs in the 
local market are “transferred price”. 
R.A.8203, otherwise known as the “Special Law on Counterfeit Drugs” 
classifies, among others, an unregistered imported drug product, except 
drugs brought into this country for personal use, as counterfeit drugs. 
Because of this drug disfributors specificallj drug importers resort to exclusive 
distributorship that prevents importations of the same brand by companies 
other than those that have foreign Agency Agreements transnational 
suppliers (BFAD Administrative order 56.S. 1989). The Bureau of Food and 
Drug’s (BFAD) exclusive distributorship policy allows drug manufacturers to 
dictate drug prices enabling them to monopolize the market. 
Under present conditions, Filipinos also do not have much choice as to 
what drugs to buy because drug companies have found a way to go around 
the Generic Law (R.A.6675). Drug companies, recognizing the significant role 
of the prescribers in their marketing strategies, offer doctors attractive 
incentives in exchange for pushing their product to the consumers. No penal 
sanctions on R.A. 6675 on either from the professional Regulation 
Commission (PRC) is meted for the highly unethical practice of accepting 
gifts, rewards and incentives by medical practitioner for prescribing certain 
drugs. The industry player’s high expenditure on marketing advertising and 
promotion all the more contribute to the high cost of drugs. The Generic Law 
has been ineffective in a sense that it has failed to give consumers any choice 


or alternative because compliance with generic prescription is not strictly 
enforced and monitored. 
Another factor that slows down the full implementation of the Generics 
Law is the long period that drug manufacturers have to wait for a patent to 
expire before it is allowed to manufacture cheaper drug products, R.A. 
8293,otherwise known as the “Intellectual Property Code of the Philippines” 
grant the term of a patent twenty (20) years from the filing of the application of 
the Philippines. Amending the law exempting pharmaceutical products will 
shorten the patent period and once these brand names become off patent, 
compulsory licensing should be allowed. 
Moreover, there is that prevailing perception among consumers of the 
low quality- as to safety and efficacy-of generic products of the local market. 
The proliferation of sub-standard and fake drugs, and the lack of 
administrative and technical capability of the Department of Health (DOH) and 
Bureau of Food and Drug (BFAD) to conduct laboratory tests on newly- 
produced drugs have raised doubts as to the efficacy of generic drugs. This 
puts the consumers at the mercy of expensive branded products. 
The Pharmacy Law as amended in 1978 needs to be reviewed to 
make it more relevant to present times. Liberation of trade outlets will allow 
the selling of over-the-counter drugs in supermarkets and other similar 
establishments thereby making them accessible to the masses. As it is now, 
going to an accredited drug outlet entails transportation expenses that add up 
to the total cost of the medicine. 
The World Health Organization identifies the determinant of drug 
pricing as cost of production, discovery, distribution and dispensation. These 
are mostly given factors that we can do nothing about. Yet there are special 
measures that would lower the cost of medicines. These include setting stiffer 
penalty for 
non-compliance with 
generic 
prescription 
requirements, 
multinational corporations (MNCs) disclosure of selling prices in different 
countries, liberation of trade outlets, apending the policy on granting 
distributorship, amending the provision on patents and conducting 
congressional oversight on the implementation of the Generic Law and 
national drug policy. 
In view of all the foregoing reasons, passage of this bill is earnestly 
sought. 


THIRTEENTH CONGRESS OF THE REPUBLIC) 
First Regular Session 
OF THE PHILIPPINES 
S E N A T E  
Introduce by Senator Flavier 
AN ACT 
PRESCRIBING SPECIAL MEASURES TO LOWER THE COST OF 
MEDICINES, AND FOR OTHER PURPOSES 
Be it enacfed by the Senate and the House of Representatives of the 
Philippines in congress assembled: 
SECTION 1 Declaration of Policy. 
It is hereby declared the 
policy of the State: 
a) To promote, encourage, and require the use of generic terminology in 
the importation, manufacture, distribution, marketing, advertising and 
promotion, prescription, and dispensing of drugs and other drug 
preparations; 
b) To emphasize the moral obligation of medical and para-medical 
practitioners relative to their drug prescription or advise; 
c) To ensure the adequate supply of drugs with generic names at the 
lowest possible cost and the availability of over-the-counter drugs in 
establishments other than accredited drug outlets: 


d) To promote drug safety and efficacy simultaneous with the full 
implementation of the Generic Law; 
e) To set the patent for pharmaceutical products at twenty (20) years from 
application, regardless of the place of application; and to amend the 
policy on granting distributorship to allow parallel imports. 
SEC. 2. Strengthening the Generic Law. - Section 12 of the Generic 
Act of 1998 is hereby amended to read as follows: 
“Sec.12. Penalty. - A) any person who shall violate Section 6(a) 
or 6(b) of this act shall suffer penalty graduated hereunder, viz: 
a) For the fist conviction, he shall suffer the penalty of 
reprimand, which shall be officially recorded in the 
appropriate 
books 
of 
the 
Professional 
Regulation 
Commission; 
b) For the second conviction, the penalty of fine in the amount 
of not less than [two %ousand pesos] TWENTY FIVE 
THOUSAND PESOS, at the discretion of the courts; 
c) For the third conviction, the penalty of fine in the amount of 
not less than [five thousand pesos] TWENTY FIVE 
THOUSAND PESOS and suspension of his license to 
practice his profession for [thirty] SIXTY days at the 
discretion of the courts; 


d) For the fourth and subsequent convictions, the penalty of 
fine of not less than [ten thousand pesos] ONE HUNDRED 
THOUSAND PESOS ar,d suspension of his license to 
practice his profession for one year longer at the discretion 
of the court. 
SEC. 3. Amending the Pharmacy Law. Section 2 of P.D. 1363 is 
hereby amended to read as follows: 
“Sec. 25. Sale of medicines, pharmaceuticals, drugs and 
devices. 
No medicine, pharmaceutical or drug, except for those 
which are non-prescription or over-the-counter, of whatever nature and 
kind, or device shall be compounded, dispensed, sold or resold, or 
otherwise be made available to the consuming public except through a 
prescription drugstore or hospital pharmacy, duly established in 
accordance with the provision of this Act. NON-PRESCRIPTION OR 
OVER-THE-COUNTER DRUGS MAY BE SOLD IN THEIR ORIGINAL 
PACKAGES BOTTLES CONTAINERS OR IN SMALL QUANTITIES 
NOT IN THEIR ORIGINAL CONTAINERS TO THE CONSUMING 
PUBLIC 
THROUGH 
SUPERMARKETS 
AND 
OTHER 
ESTABLISHMENT. 
“Pharmaceutical, 
drug 
or 
biological 
manufacturing 
establishments, importers and wholesalers of drugs, medicine or 
biological products, shall not sell their products for re-sale except only 
to retail drugstore, hospital pharmacies or to other drug wholesalers 
under the supervision of registered pharmacist, and supermarkets and 
small stores for over-the counter drugs, duly establish and licensed 
under the retail Trade Law. 


SEC. 4. Drug Price Selling Index -The Department of Health (DOH) 
shall issue an Administrative Order requiring drug companies to disclose the 
manufacturing cost and selling price of pharmaceutical products listed in the 
National Drug Formulary. The DOH will include the declared costs and 
prices in an annual bulletin with price comparisons from other ASEAN 
Cauntries. Sanction for mn-csmgliance shall be provided for in the DOH 
administrative order. 
The Drug Price Selling index will serve as 
the Philippine Health 
Insurance Corporation’s and 
other 
national 
and 
local 
government 
agencies’ 
reference for the official price of pharmaceutical products 
listed in the National Drug Formulary. It is also mandated to serve as 
the official reference for the 
pharmaceutical purchases of ail government 
agencies and basis for the COA (Commission on Audit) in auditing of 
all state supported medicine expenditures. 
SEC. 5. Distributorship - parallel importation shall be allowed by 
allowing mors than one ( I )  Philippine importer to enter into foreign Agency 
Agreement with a foreign supplier. BBFAD Administrative Order No. 56, 
Series of 1989 shall be amended to conform to the requirement of this 
provision. 
SEC. 6. Patents for Pharmaceutical Products. - Section 54 of R.A. 
8293, otherwise known as the intellectual Property Code of the Philippines, is 
hereby amended as follows: 
“See 54. Term of Patent. - The term of patent shall be twenty 
a 
(20) years from the filing date of application. EXCEPT FOR 
~ H A R ~ ~ C ~ U T ~ C ~ ~  
PRODUCTS WHICH SHALL BE TWENTY (20) 
YEARS FROM THE FILING DATE OF APPLICATION. BE IT HERE IN 
THE PHlLJPPJNES OR OUTSJDE THE PHILIPPINES.” 


Sec. 7. False claims to promote food supplements. -Any law to the 
contrary notwithstanding, any product approve by BFAD as food supplement 
shall carry the words as “AS FOOD SJPPLEMENTS ONLY” printed in 
parenthesis below the BFAD Registration Number, in all its advertisements, 
whether print, electronic or broadcast. 
In addition, in cases where unfounded claims are being publicly made 
regarding such food supplement, the BFAD may also require all its 
advertisement to carry other specific disclaimer, for the protection and 
information of the public. 
SEC. 8. Congressional Oversight on Implementation of Generics Law 
and National Drug Policy- Congress shall constitute an Oversight Committee 
to assess and monitor the implement of the Generic Law and National Drug 
Policy, and to recommend measures that would strengthen and enforce the 
same. Evaluation and assessment of the implementation of the National Drug 
Policy shall beef up the administrative and technical capabilities of the 
Department of Health and Bureau of Food and Drugs (BFAD) in the conduct 
of laboratory test to minimize, if not erase, doubts on the efficacy of generic 
drugs. 
SEC. 9. Implementing Agency. - The Department of Health (DOH) 
shall be the main agency tasked to enforce the provision of this Act. It shall, 
likewise promulgate the rules and regulation necessary to effectively 
implement the provision of this Act. 
SEC. I O .  Separability Clause. - If any provision of this Act is declared 
invalid the remainder or any provision hereof not affected thereby shall 
remain in full force and effect. 


SEC. 11. - Repealing Clause. - The provision of any law, Executive 
Orders, Presidential Decrees, and other issuance inconsistent with this Act 
are hereby repealed on modified accordingly. 
SEC. 12. -This Act shall take effect fifteen (15) days after its complete 
publication in the Official Gazette or in at least two national newspapers.of 
general circulation, which ever comes first. 
Approved,