Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

\

SEVENTEENTH CONGRESS ° wy
E inn SY

Second Regular Session

HOUSE BILL NO. 7127

Introduced by Representative MICHAEL L. ROMERO

EXPLANATORY NOTE

The “Universally Accessible Cheaper and Quality Medicines Act" or Republic
Act 9502 was in place since June 2008.

There are several programs that should make medicines more affordable
under the new law.

These are the intensification of competition through “parallel importation" of
patented cheaper medicine; increased production of generic medicine,
compulsory licensing of patented drugs, reimbursement by the Philippine
Health Insurance Corp. (Philhealth) of money spent by consumers on drugs,
imposition of a maximum retail price (MRP) on drugs, and a drug
consignment selling scheme.

There are other systems that will be in place to help accelerate reduction in
price and encourage consumption of cheap drugs.

These are the early working provision (EWP) of the law, strengthening of the
Bureau of Food and Drugs (BFAD), and generic drug awareness.

Competition through parallel importation. Competition is really recognized to
bring down the cost of a product or service.

This is why RA 9502's Implementing Rules and Regulations (IRR) encourages
competition at each level of the pharmaceutical supply chain

Patents are territorial. Under the old system, a company holding a patent in
the Philippines is fully protected and can sell the drug at any price it wants,


even at an unaffordable level. A competitor company cannot import the
same drug that is patented locally. The exception now is in medicine.

Even if a drug is patented, an importer that has a contact abroad for the
same drug of the same brand and quality may bring in that drug as allowed
under Section 72.1 of RA 9502. “With ‘international exhaustion,’ once a
product is introduced anywhere-else in the world, anyone can import this.

Intemational exhaustion is accepted under the Trade-Related Aspects of
Intellectual Property Rights (TRIPS) Agreement between World Trade
Organization member-countries.

Since 2001, state-owned Philippine International Trading Corp. (PITC) has
been allowed to import medicine in order to cut local medicine costs.
Unfortunately, PITC's mandate until RA 9502 was ratified was only to import
off-patent drugs, those not protected by a Philippine patent. PITC's
importation of off-patent drugs was just about P90 milion in 2007,

Allowing importation only of off-patent drugs must be illogical since the real
way to cut price is to provide drugs that can compete with high-priced
patented drugs that carry brands offered by multinational companies that
once heavily dominated the Filipino market. With the law, anyone can import
from any country a branded drug in the Philippines that is also produced in
another country (same manufacturer, same quality, same brand), only with a
cheaper price.

Pfizer that offers a more expensive drug in the Philippines may be producing
the same drug at a cheaper price in India. So, importing this from India,
known to be one of the world’s cheapest source of medicine, may
substantially cut price.

One of the reasons why India may have cheaper medicine, according to
pharmaceutical suppliers, may be due to Indian firms’ not having to pay for
research and development (R&D).

With RA 9502, drug importation may actually be done in bulk by the PITC
even for the private sector in order to bring down cost through economies of
scale.

The Department of Health (DOH) said government also plans to cary out
collective importation for all government agencies’ drug requirements in
order to consolidate volume and bring down import cost. The real long-term
factor to cutting medicine price will really be the production of generic
medicine.


The expansion of generic medicine manufacturing will be the key to the long-
term cut-down on local drug price Importation will only be a stop-gap
measure.

Filipinos are brand-conscious. That's why we came up with parallel
importation. But eventually, when Filipinos get used to generic, parallel
importation will generally die because why will we import if there's generic
counterpart that is cheap (that's equal in quality).

DOH said that once a drug becomes off-patent, or its 20-year protection
expires, then the original company that developed it, the innovator, will be
compelled to manufacture a generic of that medicine. “Innovator
companies that have already eared a lot from their patents over a long
time are required to produce generic counterpart of their drugs once the
patent expires.

DOH officials assure that both imported and locally-manufactured generic
medicine will be strictly monitored for quality.

BFAD said that once an import shipment arrives, drug samples are sent to
BFAD laboratory for testing.

We collect samples and undergo additional test. So we're very assured of
quality of medicine brought in through parallel importation.

Similarly, generic drugs are tested by BFAD. These drugs are also tested from
samples that are already in the market.

Prior to the importation of a drug, Rule 74 of the Implementing Rules and
Regulation (IRR) indicated that the World Health Organization should certify
that imported products in finished dosage forms should conform with
international purity and quality standards as established in the International
Pharmacopoeia.

As part of widening generic drug consumption, all government health
agencies and government-owned and controlled corporations (GOCC) are
required to use generic names in all transactions.

For private medical practitioners, they are required to prescribe a medicine
using the generic name of a drug. However, they can include a drug's brand
name as an option.

Compulsory Licensing. When a national emergency situation arises, a
patented invention may be opened by the government for licensing to other
manufacturers even without the consent of the patent holder.


Where the public interest, in particular, national security, nutrition, health or
the development of other vital sectors of the national economy requires, the
Intellectual Property Office (IPO) may grant a license to exploit a patented
invention.

Reimbursement by Philhealth of money spent on medicine. Since the major
objective of RA 9502 is to “eliminate out-of-pocket expenses” of patients and
promote social health welfare, Philhealth is mandated to make cheaper
drugs available to the public.

Philhealth will help implement the following:

* Setting up of an Outpatient Drug Benefit Package,

* Accreditation of all health-related units—hospital and commercial
pharmacies, DOH-recognized drug outlets, and

* Penalty imposition for medical professionals failing to use generic
medicine on their prescription.

Philhealth's reimbursement of drugs will be through hospital pharmacies.
Primarily, it will reimburse a Philhealth member's expense for drugs covered
by prescriptions in generic names based on the list of drugs under the
Philippine National Drug Formulatory System (PNDF).

The PNDF will be set up by the DOH and will be updated quarterly. It is a list of
drugs that are used often by the public. Drug list will be based on mortality
and morbidity rates.

DOH said reimbursement by Philhealth will only be valid for PNDF drugs. This
PNDF list will also be the basis for procurement of medicines by all
government agencies and local government units.

Consignment of drugs and medicines. Philhealth will also set up a
consignment program under which drug producers will be allowed to display
their products on consignment basis or payable only once the drugs are sold.

DOH already accredits drug outlets called Botika ng Barangays which
improves people's access to important drugs.

BFAD will further issue guidelines for the licensing of drug distribution through
non-traditional outlets. Moreover, DOH has released guidelines for this
consignment system

Maximum Retail Price. This may be a difficult measure, but the imposition of
an MRP on drug manufacturers is one of the strongest provisions of RA 9502.


Under this, the Philippine president may impose MRP on any drug or all drugs
or medicines under a national emergency situation. Imposition of the MRP
may be issued by the president anytime when this is needed.

The goal is to bring down the price of medicine by not lower than 50 percent
(from 2003 drug prices).

The MRP may be imposed on all levels of the supply chain—the
manufacturer, trader, distributor, wholesaler, and retailer.

To be subjected under MRP are drugs in PNDF's Essential Drug List, all drugs for
chronic illnesses and life-threatening conditions, disease-preventing drugs
(vaccines, immunoglobulin, anti-sera), pregnancy-preventing drugs,
anesthetic agents, and intravenous fluids.

DOH will consider the following factors in setting the maximum price- retail
price of drugs, supply availability, cost to each level of the supply chain,
foreign exchange rate, labor costs, transport and distribution costs, and costs
on research, promotion, advertising, and taxes.

When price manipulation is suspected in the market, hoarding may be
investigated based on a person's or entity's accumulation of drugs beyond
his normal inventory level (50 % higher), unreasonable limitation or refusal to
dispose this drug, and unjustifiable withdrawal of a drug from channels of
production.

RA 9502 may also rule profiteering of traders if a product has no price tag, if it
is misrepresented as to weight or other measurement forms, and. is
adulterated or diluted. It can also charge carte! against two or more
enterprises if they perform uniform acts to increase price for competing
products that are pharmaceutically the same.

Senior Citizen Law and People with Disability Law. With RA 9502 and provisions
like the MRP already in place, government will still recognize rights of senior
citizens and the disabled.

If MRP will have to be imposed, we'll continue to honor the senior citizen law
and people with disability law. So even if the price is already low, price will
continue to go down.

Early Working Provision in the Intellectual Property Code. Since patents carry
@ lengthy 20-year protection during which no one can manufacture the
same drug formulation, an early working provision (EWP) allows for a
preparatory period by which any future generic drug manufacturer can
begin registration and experimentation of the product.


Three to five years before a patent of a drug expires, a generic manufacturer
can begin these processes including manufacturing of this drug, provided this
is not yet sold in the market. EWP's aim is by Day One after the patent expires,
this drug can immediately be distributed to the market.

They can already stockpile, although they cannot sell it yet. This will improve
competition because under the old regime, a generic company cannot
begin developing a drug until the drug patent expires.

With the permit to start developing the drugs, generic companies can cary
out reverse engineering in developing an equivalent drug as permitted under
the EWP as stated under the “Limitation of Patent Rights” of the RA 9502.

Generic companies can do reverse engineering. But information disclosed
(by patent holders) with BFAD like pre-clinical trial and pre-clinical tests are
(usually) trade secrets. So those are protected and BFAD won't give that.

Strengthening of BFAD. To effectively implement RA 9502, BFAD's operation
will be strengthened through the retention of its income. BFAD does not need
to remit its income to the national government.

The fees, fines, royalties, and other charges that BFAD collects from its services
will be used to fund upgrading of facilities and investments in equipment and
human resource development. The national government has already
supported the beefing up of BFAD's workforce:

Generic Drug Awareness. When a patented product becomes off patent,
Section 39n of RA 9502 indicates that manufacturing companies will be
required by DOH to manufacture their generic counterparts. Priority for this
are PNDF drugs. The awareness of the equal quality of generics medicine is
really envisioned to make cheap generics medicine replace high-priced
medicine manufactured by multinational firms.

Even now, the Philippine Chamber of Pharmaceutical Industry (PCPI) reports
that generic drugs that are beginning to be recognized as having an equal
quality as those of branded drugs have already gained a foothold on a
substantial 40 percent of the 107 billion industry.

Quality assurance is also given by DOH to generic products as it has been
imposing on local companies the adoption of Good Manufacturing
Practices. To create generic awareness, both the government and Filipino
generic companies inevitably have to invest in spreading information about
generic medicine's good quality.

The local industry has to come out with generic counterpart. That is why DOH
is doing generic awareness. This has made a big dent on information. When


the buying public are aware of the generic product, they will naturally buy
the lower-priced generic product compared to the branded ones.

International monitoring of drug price. One way to ensure that local drugs will
remain cheap is the active monitoring of international price. Aside from DOH,
the Department of Trade and Industry (DTI) has the mandate to monitor
international price. This can be through Philippine Health attaches and
Philippine Missions.

This House Bill seeks to protect public health, public interest and
circumstances of extreme urgency so requires, it shall adopt more
appropriate measures to promote and ensure access to affordable quality
drugs and medicines for everyone.

Thus, the early passage of this bill is earnestly requested.

HABYA. ROMERO Ph.D.


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
Second Regular Session

7127

HOUSE BILL NO.“

Introduced by Representative MICHAEL L. ROMERO

AN ACT

AMENDING REPUBLIC ACT 9502, OTHERWISE KNOWN AS THE
“UNIVERSALLY ACCESSIBLE CHEAPER AND QUALITY
MEDICINES ACT OF 2008” TO FOSTER THE IMPOSITION OF ALL
EXISTING POLICIES AND GUIDELINES, PROVIDING STIFFER
PENALTIES AND SANCTIONS, AND FOR OTHER PURPOSES
Be it enacted by the Senate and House of Representatives of the Philippines

in Congress assembled:

SECTION 1.
Section 19, Chapter 3 of Republic Act No. 9502 is hereby amended to read:

SEC. 19. Functions and Responsibilities of the Secretary of the
Department of Health. - Pursuant to Section 18 of this Act, the Secretary
of the Department of Health shall have the following powers

(A) Power to Recommend the Maximum Retail Price of Drugs
and Medicines Subject to Price Regulation - (1) Upon application
or motu proprio when the public interest so requires, the
Secretary of the Department of Health shall have the power to
determine the maximum retail prices of drugs and medicines


which shall be recommended to the President of the Philippines
for approval. In order that affordable prices of drugs and
medicines from the different manufacturers, importers, traders,
distributors, wholesalers, or retailers shall be made available to
the public, the Secretary of the Department of Health, as he/she
may deem fit and after a proper determination, shall have such
approved maximum retail prices of drugs and medicines
published;

(2) In recommending the maximum retail price, the
Secretary of the Department of Health shall consider the
following factors:

(a) Retail prices of drugs and medicines that are
subject to regulation in the Philippines and in other
countries;

(b) The supply available in the market;

(c) The cost to the manufacturer, importer, trader,
distributor, wholesaler or retailer of the following, but
not limited to:

(i) The exchange rate of the peso to the
foreign currency with which the drug or any of
its component, ingredient or raw material was
paid for;

(i) Any change in the amortization cost of
machinery brought about by any change in
the exchange rate of the peso to the foreign
currency with which the machinery was
bought through credit facilities;

(il) Any change in the cost of labor brought
‘about by a change in minimum wage: or

(iv) Any change in the cost of transporting or
distributing the medicines to the area of
destination;


{d) Such other factors or conditions which will
aid in arriving at a just and reasonable
maximum price; and

(3) No retailer shall sell drugs and medicines at a retail
price exceeding the maximum retail price approved by
the President of the Philippines as provided in Section 17 of
this Act: Provided, That, the Secretary of the Department
of Health shall immediately undertake a study on the
prevailing prices of drugs and medicines subject to price
regulation and provide an initial list of drugs and
medicines, which maximum retail prices he/she shall
recommend to the President of the Philippines.

(B) Power to Include Other Drugs and Medicines in the List
Subject to Price Regulation - Upon application or motu proprio
when the public interest so requires and after proper
determination, the Secretary of the Department of Health may
‘order the inclusion of drugs and medicines to the list subject of
price regulation under Section 23 hereof.

(C) Power to Implement Cost-Containment and Other Measures
- (1) The Secretary of the Department of Health shall have the
power to implement the fair price of drugs and medicines for
purposes of public health insurance and government
procurement based on the order of the President of the
Philippines imposing maximum retail prices; and

(2) The Secretary of the Department of Health shall have the
Power to implement any other measures that the government
may avail of to effectively reduce the cost of drugs and
medicines that shall include, but not limited to, competitive
bidding, price volume negotiations, and other appropriate
mechanisms that influence supply, demand and expenditures on
drugs and medicines.

(D) Power to Impose Administrative Fines and Penalties - After
due notice and hearing, the Secretary of the Department of
Health shall have the power to impose administrative fines
against any person, manufacturer, importer, trader, distributor,
wholesaler, retailer, or any other entity, in such amount as it may
deem reasonable, which in no case shall be less than Two
hundred Fifty thousand pesos (Php250,000.00) nor more than Five
million pesos (Php5,000,000.00) for violations of the maximum
retail price approved by the President of the Philippines pursuant
to the provisions of this Chapter.


(E) Power to Deputize Government Entities - The Secretary of the
Department of Health shall have the power to call upon and
deputize any official, agent, employee, agency, or
instrumentality of the national and local government for any
assistance that it may deem necessary to carry out the purposes
of this Chapter.

(F) Other Powers Necessary to Implement Provisions of this
Chapter - The Secretary of the Department of Health shall
exercise such powers and functions as may be necessary to
implement and enforce the provisions of this Chapter of this Act,
including the power to require the production and submission of
records, documents, books of account, bills of lading, input
documents, records of purchase and sale, financial statements,
and such other documents, information and papers as may be
necessary to enable the Secretary of the Department of Health
to carry out its functions, duties, and responsibilities. Accordingly,
within thirty (30) days from the effectivity of this Act and every
December 31st of every year thereafter, every manufacturer,
importer, trader, distributor, wholesaler, and retailer of a drug
and medicine whether included in or excluded from the list of
drugs and medicines that are subject to price regulation shall
furnish the Secretary of the Department of Health alist,
containing on the minimum the corresponding prices and
inventory, of all drugs and medicines it manufactures, imports,
trades, distributes, wholesales, or retails, data pertaining to the
factors enumerated under Section 19(A)(2), and any and all
necessary information that the Secretary of the Department of
Health may require.

SECTION 2.
Section 25, Chapter 3 of Republic Act No. 9502 is hereby amended to read:

SEC. 25. Penalty for illegal Acts of Price Manipulation. - Any person or
entity who commits any act of illegal price manipulation of any drug
and medicine subject to price regulation shall suffer the penalty of
imprisonment for a period of not less than five (5) years nor more than
fifteen (15) years or shall be imposed a fine of not less than Two
hundred Fifty thousand pesos (Php250,000.00) nor more than Ten milion
pesos (Php10,000,000.00), at the discretion of the court. The court may


also order the suspension or revocation of its license to operate (LTO),
professional or business license.

SECTION 3.

Section 35, Chapter 5 of Republic Act No. 9502 is hereby amended to read:
SEC. 35. Penalties. - Any person or entity who shall refuse to carry or sell
drugs and medicines pursuant to the provisions of this Chapter shall be
punished with a fine of not less than Two hundred Fifty thousand pesos
(Php250,000.00) but not more than Five hundred thousand pesos
(Php500,000.00), at the discretion of the court. For the succeeding
offense, the penalties shall not be less than Five hundred thousand
pesos (Php500,000.00) but not more than Two milion pesos
(Php2,000,000.00), at the discretion of the court, and suspension or
revocation of its license to operate (LTO), business or professional
license, as the case may be.

SECTION 4,
Section 41, Chapter 6 of Republic Act No. 9502 is hereby amended to read:

SEC. 41. Section 12 of Republic Act No. 6675, otherwise known as the
Generics Act of 1988, 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 the penalty graduated hereunder,
viz:

"(a) for the first 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 Twenty-five thousand pesos


(Php25,000.00) but not exceeding Fifty thousand pesos
(Php50,000.00), at the discretion of the court.

"{c) for the third conviction, the penalty of fine in the
amount of not less than Fifty thousand pesos
(Php50,000.00) but not exceeding One hundred thousand
pesos (Php100,000.00) and suspension of his license to
practice his profession for One hundred twenty (120) days
at the discretion of the court.

"(d) for the fourth and subsequent convictions, the penalty
of fine of not less than Two hundred Fifty thousand pesos
(Php250,000.00) and suspension of his license to practice
his profession for two (2) years or longer at the discretion of
the court.

"(B) Any juridical person who violates Sections 6(c), 6{d), 7 or 8
shall suffer the penalty of a fine of not less than Two hundred Fifty
thousand pesos (Php250,000.00) and suspension or revocation of
license to operate such drug establishment or drug outlet at the
discretion of the court: Provided, That its officers directly
responsible for the violation shall suffer the penalty of fine of at
least One hundred thousand pesos (Php100,000.00) and
suspension or revocation of license to practice profession, if
applicable, and by imprisonment of not less than one (1) year
nor more than two (2) years or both fine and imprisonment at the
discretion of the court: and, a list of drug products with the same
generic name and their corresponding prices.

Provided, further, That if the guilty party is an alien, he shall be
ipso facto deported after service of sentence without need of
further proceedings.

"(C) The Secretary of Health shall have the authority to impose
administrative sanctions such as suspension or cancellation of
license to operate or recommend suspension of license to
Practice profession to the Professional Regulation Commission as
the case may be for the violation of this Act.

"The administrative sanctions that shall be imposed by the
Secretary of the Department of Health shall be in a graduated
manner in accordance with Section 12.A.

"An administrative case may be instituted independently from
the criminal case: Provided, That, the dismissal of the criminal
case or the withdrawal of the same shall in no instance be a
ground for the dismissal of the administrative case."


SECTION 5. TRANSITORY PROVISION ~ Existing industries, businesses and
Offices affected by the implementation of this Act shall be given six (6)
months transitory period from the effectivity of the IRR or such other
period as may be determined, to comply with the requirements of this
Act.

SECTION 6. IMPLEMENTING RULES AND REGULATIONS ~ The departments
and agencies charged, to be led by the Department of Health (DOH)
with carrying out the provisions of this Act, shall within sixty (60) days
after the effectivity of this Act, formulate the necessary rules and
regulations for its effective implementation.

SECTION 7. REPEALING CLAUSE - All laws, decrees, executive orders,
tules and regulations, or parts thereof inconsistent with the provisions of
this Act are hereby repealed or modified accordingly.

SECTION 8. SEPARABILITY CLAUSE - If, for any reason, any section or
provision of this Act is held unconstitutional or invalid, the other sections
‘or provisions hereof shall not be affected thereby.

SECTION 9. EFFECTIVITY CLAUSE — This Act shall take effect after fifteen
(15) days from its publication in the Official Gazette or in at least two
(2) national newspapers of general circulation whichever comes
earlier.

Approved,