FOURTEENTH CONGl 
THE REPUBLIC U E  I HL I'HlLlI'l 
First Regulur Session 
_._" 
S E N A T E  
COMMITTEE REPORT NO. 
Submitted jointly by the Committees on Trade and Commerce, Health and Demography, 
and,Financeon 
OCT D I 2007 
Re: 
%No. 
1 6 5 8 
, prepared by the Committees. 
Recommending approval in'substitution of S. Nos. 90, 101, 755, 1404, 1420 and 1530, 
taking into consideration P.S. Resolution No. 49, with Senators Villar, Roxas, Trillanes 
IV, Pia Cayetano, Zubiri, Legarda, Lapid and Enrile as authors thereof. 
Sponsors: Senator M A R Roxas, Senator Compaiiera Pia S. Cayetano, Senator Juan 
Ponce Enrile. 
Mr. President: 
The Committee on Trade and Commerce jointly with the Committees on Health 
and Demography, and, Finance to which were referred the following: 
Senate Bill No. 90, introduced by Senator Manny Villar, entitled: 
AN ACT 
PROVIDING FOR CHEAPER MEDICINES 
AND FOR OTHER PURPOSES 
Senate Bill No. 101, introduced by Senator MAR Roxas, entitled: 
AN ACT 
TO MAKE THE LAWS ON PATENTS, TRADENAMES AND 
TRADEMARKS MORE RESPONSIVE TO THE HEALTH CARE 
PATENTABLE INVENTIONS, ALLOWING THE IMPORTATION 
AND EARLY DEVELOPMENT OF PATENTED MEDICINES, 
AND MODIFYING GOVERNMENT USE PROVISIONS FOR 
DRUGS OR MEDICINES, TO LOWER PRICES AND INCREASE 
ACCESS TO AND 
SUPPLY OF QUALITY DRUGS OR 
MEDICINES, AMENDING FOR THIS PURPOSE CERTAIN 
PROVISIONS OF REPUBLIC ACT NO. 8293 OTHERWISE 
KNOWN AS THE INTELLECTUAL PROPERTY CODE OF THE 
PHILIPPINES 
NEEDS OF THE FILIPINO PEOPLE BY CLARIFYING NON- 
1 


Senate Bill No. 755, introduced by Senator Antonio F. Trillanes IV, entitled: 
AN ACT 
PRESCRIBING SPECIAL MEASURES TO LOWER THE PRICE 
OF MEDICINES AND OTHER RELATED PURPOSES 
Senate Bill No. 1404, introduced by Senator “Compafiera” Pia S. Cayetano, entitled: 
AN ACT 
TO MAKE THE LAWS ON PATENTS, TRADENAMES AND 
TRADEMARKS MORE RESPONSIVE TO THE HEALTH CARE 
PATENTABLE INVENTIONS, ALLOWING THE IMPORTATION 
AND E A m Y  DEVELOPMENT OF PATENTED MEDICINES, 
AND MODIFYING GOVERNMENT USE PROVISIONS FOR 
DRUGS OR MEDICINES, TO LOWER PRICES AND INCREASE 
ACCESS TO AND 
SUPPLY OF QUALITY DRUGS 
OR 
MEDICINES, AMENDING FOR THIS PURPOSE CERTAIN 
PROVISIONS OF REPUBLIC ACT NO. 8293 OTHERWISE 
KNOWN AS THE INTELLECTUAL PROPERTY CODE OF THE 
PHILIPPINES 
NEEDS OF THE FILIPINO PEOPLE BY CLARIFYING NON- 
Senate Bill No. 1420, introduced by Senator Juan Miguel F. Zubiri, entitled: 
AN ACT 
PROVIDING FOR CHEAPER MEDICINES AND FOR OTHER 
PURPOSES 
Senate Bill No. 1530, introduced by Senator Loren B. Legarda, entitled: 
AN ACT 
TO FIX THE MAXIMUM RETAIL PRICE OF MEDICINES 
UNDER CERTAIN CONDITIONS AND INCREASE ACCESS TO 
CHEAPER MEDICINES BY CREATING A DRUG PRICES 
REGULATION BOARD AND BY AMENDING RELEVANT 
PROVISIONS OF REPUBLIC ACT NO. 8293 OTHERWISE 
KNOWN AS THE INTELLECTUAL PROPERTY CODE OF THE 
PHILIPPINES, AND FOR OTHER PURPOSES 
and taking into consideration, Philippine Senate Resolution No. 49, introduced by 
Senator Manuel M. Lapid, entitled: 
RESOLUTION 
DIRECTING THE SENATE COMMITTEE ON HEALTH AND 
DEMOGRAPHY, AND OTHER APPROPRIATE COMMITTEES 
IN THE SENATE TO CONDUCT AN INQUIRY, IN AID OF 
ECONOMIC AND MARKET FACTORS WHICH MAKE THE 
PRICES OF ESSENTIAL DRUGS AND MEDICINES IN THE 
PHILIPPINES AMONG THE HIGHEST IN ASIA, WITH THE END 
IN VIEW OF PROVIDING A COMPREHENSIVE AND HOLISTIC 
HEALTH POLICY INTERVENTION THAT WOULD LOWER 
THE COST OF ESSENTIAL DRUGS AND MEDICINES IN THE 
COUNTRY 
LEGISLATION, 
INTO 
THE 
DEMOGRAPHIC, 
SOCIO- 


have considered the same and have conducted three (3) public hearings where the 
concerned government agencies and industry representatives of the affected sectors, 
including consumers, were represented and heard. These hearings were held on 
September IO, 12 and 17,2007. 
Further, all the records and position papers gathered in the 13th Congress during 
the deliberations for then Senate Bill No. 2139 filed by Senator MAR Roxas, which was 
unanimously passed by the Philippine Senate on third and final reading as Senate Bill No. 
2263, have been adopted as part of the official records of the present committee hearings 
since it deals with the same subject matter. It is worth noting that then Senate Bill No. 
2263 was finalized after taking into consideration the proposed amendments introduced 
by Senators Miriam Defensor-Santiago, Edgardo J. Angara and Ma. Consuelo Madrigal. 
Based on the foregoing and after a careful scrutiny of the aforementioned 
resolution and bills, together with the evaluation of all testimonies and documents 
gathered during the hearings, the Committee on Trade and Commerce together with the 
Committee on Health and Demography, and, Finance provide herein the specific findings 
and its recommendation to address the issue of broadening access to quality affordable 
medicines for the benefit of all Filipinos. 
I. 
Problem ofAccess to Oualiw Affordable Drum and Medicines 
The problem of access to affordable drugs and medicines in the Philippines is 
clearly stated in the UNDP Human Development Reports for 2003 which stated that in 
1999, of the whole Philippine population, only 50-79% had sustainable access to 
affordable essential drugs.' 
For the year 2000 census of the National Statistical 
Coordination Board, the population of the Philippines was 76.5 million.* On the best 
scenario, this translates to 15.3 million Filipinos who have no access to essential drugs or 
medicines. On the worst case, 38.25 million or half of the Filipinos have no access to 
essential drugs or medicines. Based on the Philippine National Health Accounts, further 
aggravating this fact is that annual per capita health spending in 2003 at current prices 
was only P1,817 and for 2004 it was P1,979.3 It should be noted that this per capita health 
spending is inclusive of all healthcare costs and not just limited to drugs and medicines. 
In short, millions and millions of Filipinos have no access to affordable drugs and 
medicines and for those who have access, their budget for total health related expenses is 
a measly P2,OOO per person per annum. A weak and ailing workforce will not do the 
economy any good since it will have a bearing on the nation's long-term stability. It is 
against this backdrop of facts that this piece of legislation to protect public health is being 
advocated. 
II. 
Protection of Public Health and the Philippine Intellectual Proper& Svstem 
A. The Philippine Constitution 
The protection of public health is of primordial importance especially as this 
echoes the constitutional mandate for the State to protect the health of the people? 
Further, the Constitution mandates that the State must adopt an integrated and 
comprehensive approach to health development, which shall endeavor to make essential 
goods, health and other social services available to all the people at affordable cost. The 
' http://www.undp.orglhdr2003/indicatodcty1 
2 http://www.nscb.gov.ph/secstat/djopn.asp 
http://www/ncsb.gov.ph/stats/pnha/2004ihealtliexp.asp 
Sec. 15, Art. I1 Declaration of Principles and State Policies, 1987 Constitution: The State shall protect and 
promote the right to health of the people and instill health consciousness among them. 
3 


State must also prioritize the needs of the underprivileged, sick, elderly, disabled, 
women, and ~hildren.~ On the basis of the foregoing, it is clear that the protection of 
public health with priorities over the interests of the underprivileged is a top State 
objective which is an overriding parameter to the manner by which the State, through 
Congress, regulates the acquisition, ownership, use, and disposition of property and its 
increments. 6 
In relation to intellectual property, the State is mandated to protect it particularly 
when it is beneficial to the p e ~ p l e . ~  
In incorporating this principle into the basic charter, 
the Philippines occupies a unique position in the global stage. It is perhaps the only 
country to aclcnowledge in its basic law the social function of intellectual property and to 
expressly recognize the intellectual property (IP) system as an instrument of government 
for use in advancing the welfare of its people. Unfortunately, because of its highly 
technical and abstruse nature, multinational companies and their lawyers have dominated 
the application of the intellectual property law in the Philippines.’ 
Corporation 
1998 
1999 
2000 
B. The Philippine Pharmaceutical Industry 
The dominance of multinational corporations in the application of intellectual 
property law in the Philippines is visibly apparent in its pharmaceutical industly. In terms 
of market revenue share, this is clearly illustrated in the schedule below:9 
2001 
2002 
Rank 1 
Sales 
1 
Yo 
1 Share 
’ Sec. 1 I ,  Art. XI11 Social Justice and Human Rights, ibid: The State shall adopt an integrated and 
comprehensive approach to health development which shall endeavor to make essential goods, health and 
other social services available to all the people at affordable cost. There shall be priority for the needs of 
the underprivileged sick, elderly, disabled, women and children. The state shall endeavor to provide free 
medical care to paupers. 
Sec. 1 ,  Art. XI11 Social Justice and Human Rights, ibid: The Congress shall give highest priority to the 
enactment of measures that protect and enhance the right of all the people to human dignity, reduce social, 
economic, and political inequalities, and remove cultural inequities by equitably diffusing wealth and 
political power for the common good. To this end, the State shall regulate the acquisition, o@nership, use, 
and disposition of property and its increments. 
’ Sec. 13, Art XIV Education, Science and Technology, Arts, Culture, and Sports, ibid: The State shall 
protect and secure the exclusive rights of scientists, inventors, artists, and other gifted citizens to their 
intellectual property and creations, particularly when beneficial to the people, for such period as may be 
grovided by law. 
Paragraphs I and 2, Position Paper of the Philippine Chamber of Pharmaceutical Industry on Senate Bill 
No, 2139, as Introduced by Hon. Mar Roxas; submitted to the Senate Committee on Trade and Commerce 
on January 26,2006. 
’ Page 67, Philippine Pharmaceutical Industry Fact Book, 6Ih Edition, July 2003, PHAP. 
4 


Bayer Phann 
Schering Plough 
Based on the schedule, at least 60% of the market is controlled by the 
multinational companies. This clearly establishes the marketing and distribution power 
of the multinationals in the Philippines. Only United Laboratories and Pascual 
Laboratories are owned by Filipinos. The rest of the market revenues share of around 
17% were earned by various small and medium sized pharmaceutical companies some of 
which are still foreign owned but which may not be classified as multinational 
companies. 
At present, rough industry estimates pegged the Philippine pharmaceutical 
industry marlcet at around PlOO to P85 billion with the market revenue sharing still the 
same as the trends of the previous years which shows a clear dominance by the 
multinationals. It is also worth noting that the division between Filipino and multinational 
companies is also manifested by its two umbrella organizations: (1) Philippine Chamber 
of Pharmaceutical Industry, Inc. (PCPI)",and, 
(2) Pharmaceutical and Healthcare 
Association of the Philippines (PHAP)". Majority of Filipino-owned corporations are 
members of PCPI while all multinationals are members of PHAP. Each association has 
its own advocacies and projects. 
The multinational companies justify their dominance of the, Philippine 
pharmaceutical market on the ground that the drugs or medicines that they produce are of 
good quality with its efficacy and safety assured. Hence, the consumers patronize it more: 
In relation to the alleged high prices that they impose, they justify such because of the 
quality and the need to recoup their research and development costs in relation to each 
successlul patent which is given exclusive rights by the intellectual property law of the ' 
Philippines. In other words, the strength of the multinationals lies in the patents of the 
drugs or medicines. 
On the other hand, Filipino pharmaceutical companies, a significant majority of 
which are small and medium sized corporations, contend that there are a lot of barriers to 
a level playing field in the Philippine pharmaceutical market. As much as they 
acknowledge that they do not have that much capital, they especially note that, unlike the 
intellectual property laws of other countries, the intellectual property laws of the 
Philippines are designed in favor of heavily protecting the patents of the multinationals. 
Thus, granting more marketing monopoly in favor of the multinationals. It was 
manifested by the representative of the local pharmaceutical companies that every time 
they consider coming up with a generic drug or medicine, a significant risk they consider 
is the possibility and costs of a lawsuit that may be filed by a multinational. Also, they 
noted that their resources are limited in terms of checking which patents filed by the 
multinationals are truly innovative or actually frivolous. 
~ 
In PCPI is composed of 122 meinher companies, majority ofwhich are Filipino owned, which was formed 
by the merger of four industry associations; namely: Association of Drug Industry of the Philippines, Inc. 
(ADIP), Association of Philippine Pharmaceutical Manufacturers, Inc. (APPMAN), Chamber of Philippine 
Pharmaceutical ManuTacttirers and Distributors, Inc. (CFDMD) and Filipino Drug Association (FIDA). 
PHAP is composed of 65 member companies and all multinational companies are part of it. 
/I 


This monopoly in pharmaceutical patents by the multinationals may be clearly 
seen in the following schedules:I2 
Foreign Patents 
Local Patents 
Total 
3,113 
5 
3,118 
As may be seen from the abovestated information, the strict intellectual property 
laws of the Philippines are largely protecting the monopolies of the multinationals or 
foreign owners since almost all of the pharmaceutical patents are foreign owned and all 
by multinationals from the developed world. It is posited that as a general rule for 
developing countries, the fewer patents granted on medicines, the better, so that 
monopolies are limited and generic versions can be introduced without delay. 
III. 
Comparative Access and Affordabiliw of Drugs and Medicines 
To understand further the impact of the monopoly of the multinationals over the 
Philippine pharmaceutical industry, a comparison of drugs and medicine prices, 
particularly those sold by the same multinational companies, in other countries must be 
made. This may be understood better in the following illustrative tables: 
.*. 
Letter of Intellectual Property Office dated March 13, 2006 submitted to the Senate Committee on Trade 
12 
and Coininerce on March 13,2006. 
6 


Based on the €oregoing table, it is very clear that prices for exactly the same drugs 
are much lower in India and Pakistan in both 2005 and 2004. Further, comparing the 
presented 2005 and 2004 prices, it is observable that prices for exactly the same 
medicines in India and Paltistan have gone down while several Philippine prices have 
either gone up or just stayed the same. The selling price differences as presented above 
are observable in other drugs and medicines sold by multinational pharmaceutical 
companies. 
Multinationals contend, however, that there are cheaper generic medicines 
available in the Philippines which are priced the same as Indian and Pakistan prices. 
Other participants in the hearing noted though that the distribution and marketing reach 
of the generic drugs manufactured by local generic companies are very limited. It is also 
argued by the multinationals that economies-of-scale and recovery of research and 
development costs justify the differences in pricing strategy in the Philippines and in 
India. On this aspect, other participants in the hearing noted that what determines the 
l 3  Based on the Department of Health (DOH) Presentation to the Senate Committees on Trade and 
Commerce, Health and Demography, and, Finance Hearing held on September 10,2007 and,on the 
Philippines International Trading Corporation (PITC) Presentation to the Senate Committee on Trade and 
Commerce Hearing held on November 24,2005. Cited sources of the DON and PITC presentations are 
MIMS 2005 and 2004, Philippines; IDR 2005 and 2004, India; Red Book 2005 and 2004, Pakistan, 
respectively. 
7 


pricing strategy of pharmaceutical companies is the maximum capability of the market to 
absorb the highest possible price. 
Regardless of the arguments presented, it still does not answer the 'hation that 
the high Philippine prices have deprived at least half of the Filipinos access to medicines 
and, further, limited access for those Filipinos who have some money to purchase the 
same. 
In the course of the proceedings of the Senate Committee on Trade and 
Commerce, it has been determined that the protection given by the Intellectual Property 
Code of the Philippines in favor of the inventors has resulted in a significant imbalance 
between supply and demand of drugs and medicines. Specifically, it was also posited by 
most of the participants that the market dominance of the multinational companies has 
caused artificial barriers to the fair trade of drugs and medicines which consequently led 
to the high prices and lack of access of drugs and medicines to the detriment of millions 
and millions of Filipinos. 
1V. 
Frriniework tiir Antendirry llte Irrl~~ll~~clttrtl 
PrfJtwrri~ Code of lkr Plti/ifwit?e.$ irr 
lizltt of tlrc Cbiisrittrfio:tnl M(t:rdrttc of Protcctitty Public Heultlr 
Rnscd on tlie hregoiiig. [liere is a w e d  to i w i s i t  the fianicwork ot'tlic Intzllectuiil 
T'roperry Code of [lie Philippines so that tlic prowtion given to thc intellcctunl propert) 
owncrs will be ba1mnc;d with the grc:iter public health iiitcrcst oi' providing a inore 
sustainable access to quality afllmliiblz mcdicincs Ibr the benetit 01' tliz greater populace. 
Aside l r m i  adtlrcssing tlic primary eot1c.m of ensuring better acccss to ciffordnl>Ie drugs 
m d  mxlicinzs, the propojcd Intellectunl Property Code amcndinenrs should :ilso be 
tlexible enough to remedy v.irious possible chaIIcngcs to Philippine public health like 
biological and or chemical terror attacks and global panclcniics like biril Ilu or SAIZS. 
There nrc baiially three focus points by which thcs: goals may be achi,~ved. 
These are the following: (1) improvcnxnt of the supply of drugs anJ Inctlicincs to inxt 
the 1:irge demiind, ( 2 )  establisliment 01' greater support for I'ilipino pharinnceutie:il 
generic comp;iniL,..;. and, (3) rntiondiration and strengthening of governmein ii>e options. 
., 
11 shotild be notzd though that the overnrching parmwter ikr thew intcrvcn~ion,: 
implies rh;u there ~licliild be no arbitrary takin: 
of pri! ate properly aid that such 
interventions slioul,l be one oriented to\r.iirtls ikvcloping a more compctiti\ c and 
responsive Philippine ~~li~~r~tt:~cc~~tic:il 
indiis[ry. 
Furthcr, :imendmcnts to the Intellectual I'ropert), Code of' tile Philippines must be 
introdnce.1 in complionce with the ,\greeiiicnt on I ratlc-1<elatcd :\specls or lntzllcctu~~l 
Property Iiights ('I RIPS)" and thz Doliii Dcclxation on the 'I RIPS Agreement and P.iblic 
I.lcnitIi" of iiiz W U ~ I ~ I  
' ~ ' r a ~ c  
organiation ~\VIX)J'". AS provitlcd in I I I ~  p,)sition paper 01' 
the Intellectrial Prsperty Ofrice, tlie proposed anicndmztits, as stated in the substitute bill, 
arc in excrcisc 01' thc 1lexibilitie.l :illo\ved to developing countries undcr the TRIPS 
Agreement and the Doh;? L)ecl:irntion 
'I he TIIII'S tlcxihilitics \vere cn\ isioiietl "to 
balance the protecrisii of intcllectiiiil propcny owners with economic and social \\.~*lfiiIe, 
;IS 
well as with tcc.linulogic,d dcvelopmcnt." Tlic I h h a  Dcc1:iration \r.as a recognition b!, 
I. 
The TRIPS Agreement is Annex IC of the Marraltesh Agreement which established the WTO. 
http:/lwww.wto.orglenglish/tratop_eltrips-eltrips-e.htm 
Is DOHA Declaration on the TRIPS Agreement and Public Health was unanimously adopted by WTO 
member States, including the Philippines, on November 14, 2001 in the Fourth Session ofthe Ministerial 
Conference at Doha, Qatar. http://www.wto.orglenglish/thewto_eiminist~e/minO 
l_e/mindecl-trips_e.htm 
The Agreement establishing the WTO was ratified by the Senate ofthe Philippines on December 14, 
1994. Records ofthe Senate, page 500, Vol. 111, No. 48. 
8 


Member Countries “of the gravity of the public health problems affecting many 
developing and least-developed countries.” It also emphasized “the need for the TRIPS 
Agreement to be part of the wider action to address these problems,” and an 
acknowledgment that intellectual property protection had an effect on the price of 
medicines, even as it is important for pharmaceutical research and development. 
V. 
Areus for Amendments und Rntionule for Each 
A. 
The protection periods of patents eventually expire. 
However, it has been 
observed that patent owners have engaged in the practice of filing new patents for each 
demonstrable “new use” of a previously patented product or process. This method of 
“new use” is perceived as a way to prolong the monopoly companies enjoy through the 
patents over their medicines. This means that companies will he able to charge artificially 
high prices for double (or more) the length of time they have already been granted for the 
same patented product or process. On the extreme, allowing such could also open the 
floodgates to new patent registrations for what are already classified at present as 
generics or off-patent medicines. 
Nan-Patentable Inventions: New Use of Existing Substances 
Based on the Intellectual Property Code of the Philippines and the TRIPS 
Agreement, countries have an obligation to grant patents on pharmaceutical products and 
processes. However, these same countries are not obliged to grant patents on new uses of 
existing substances. In fact, no provision in the TRIPS Agreement or in the Intellectual 
Property Code of the Philippines requires the grant of patents for such. 
It is contended by the multinationals in their position paper that proscribing new 
use from patentability runs counter to the general mandate of patentability which 
provides three (3) basic requirements for patents; namely, novelty, inventive step and 
industrial application. Further, in the same position paper it was cited that under 
American law that the broader concept applied is “utility” so that an invention only needs 
to be operable and capable of satisfying some function of benefit to humanity (Le., to be 
useful). Hence, it ultimately reasons out that there is no reason to believe that the new 
use, molecules or compounds of a patented product could not meet the requirement of 
industrial applicability, provided that it can be applied for practical purpo~es.’~ 
On the other hand, all the other participants in the hearing support the policy 
prescription of this particular amendment in line with the support and specific 
recommendations of the World Health Organization (WHO)” and the Intellectual 
Property Office (JPO)I9 of the Philippines. Both the WHO and the IPO noted that this 
proposed amendment would effectively limit the possibility of several patents being 
issued for what is essentially the same invention. Further, the WHO and IPO proposed 
that this amendment be patterned after Section 3(d) of the 2005 Amendments to the India 
Patents Law. 
” Position Paper of the Pharmaceutical and Healthcare Association of the Philippines (PHAP) on Senate 
Bill No. 2139, page 1.5, dated I I January2006, filed before the Senate Committee on Trade and 
Commerce. 
Position Paper of the World Health Organization (WHO) on Senate Bill No. 2139, dated 21 November 
2005, filed before the Senate Committee on Trade and Commerce. To wit: ”It is a good hi//, in brieJ which 
seeks to implement some of the strategies to increase access to medicines that WHO has been advocating. ” 
Cover Letter signed by Dr. Jean-Marc Olive, WHO Representative, WHO Philippine Office. 
’’ Position Paper of the Intellectual Property Office ofthe Philippines on Senate Bill No. 2139, dated 24 
January 200.5, filed before the Senate Committee on Trade and Commerce. 
18 
9 


The IPO recommended, further, that this proposed amendment be introduced as 
among the enumerations in Section 22 of the Intellectual Property Code on Non- 
Patentable Inventions. This is instead of placing this clarification on Section 21 of the 
Intellectual Property Code because it may lead to a misinterpretation of the definition of 
patentability as prescribed in the TRIPS Agreement. 
The Committees on Trade and Commerce, and, Health and Demography agree 
with the WHO and the IPO that this particular amendment will prevent the filing of 
frivolous patents especially for new uses of existing substances. Hence, by introducing 
this amendment, greater access to cheaper medicines will be achieved because generic 
versions of off patent medicines will be introduced into the market sooner for the benefit 
of all Filipinos especially the underprivileged. The Committees also agree with the WHO 
and ID0 proposed restructuring of the proposed amendment by adopting the similar 
amendment to the India Patent Law. 
As it has been agreed upon during the 
interpellations of Senator Edgardo J. Angara in the 13‘” Congress, the substance of this 
amendment has been introduced under Section 26 on Inventive Step of the Intellectual 
Property Code of the Philippines. 
B. 
Parallel Importation and International Exhaustion of Intellectual 
Property Rights for Patents 
Parallel importation refers to importation of exactly the same product, without the 
consent of the patent holder, of a patented product that is marketed in another country by 
the same patent owner. Parallel importation allows one to ‘shop around’ for a good 
price.2o Competition in the supply of drugs or medicines is thus enhanced because of the 
importation of much lower priced identical drugs, which again redounds to ?he benefit of 
all Filipinos. 
Under the present state of the Intellectual Property Code of the Philippines, 
parallel importation, as defined in the prior paragraph, is not allowed because of the 
adoption of the domestic exhaustion principle of intellectual property rights as stated in 
Sec. 72.1 of the same law. The current provision effectively grants exclusive rights in the 
Philippines, including authority to import, on patented products in favor of the patent 
owner only. There is, thus, a need to amend this particular provision to allow for the 
doctrine of international exhaustion of intellectual property rights in drugs and medicines 
instead of the current domestic exhaustion of intellectual property right. 
The right of a country to adopt an international exhaustion regime is one of the 
“flexibilities” recognized under the TRIPS Agreement” and subsequently reiterated in 
the Declaration on TRIPS and Public Health, otherwise known as the Doha Declaration. 
Clause 5(d) of the Doha Declaration provides: 
5 , .  
“The effect of the provisions in the TRIPS Agreement that are 
relevant to the exhaustion of intellectual property rights is to leave each 
Position Paper ofthe World Health Organization (WHO) on Senate Bill No, 2139, dated 21 November 
2005, filed before the Senate Committee on Trade and Commerce, page 3, to wit: “Parallel importation 
refers lo importation, without the consent of the patent holder, of apatentedproduct that is markefed in 
another county. Parallel importation allows one to ‘shop around’for agoodprice. For example, f a  
company sells drug X in county A at aprice of $10, while the same company sells the same drugxin 
country B for $1, then someone may import drug Xfrom country B and sell it in country A, charging for 
example $3. As a result, in this example, country A wouldsave $7 onproductX In other words, parallel 
importation also enables competition, but in a different way. ” 
2 1  Footnote 6 to Article 28 of the TRIPS Agreement subjects the exclusive rights of the patent holder to 
Article 6, which in turn provides that “nothing in the [TRIPS] AgreementshaNBe usedfo address the issue 
of the exhaustion ofintellech~alproperry rights. ” By implication, there is nothing in the TRIPS Agreement 
requiring a State Paily to adopt a particular form of exhaustion principle. 
10 


Member fiee to establish its own regime for such exhaustion without 
challenne. subject to the MFN and national treatment provisions of 
Articles 3 and 4.” (emphasis suppliedj 
In support of this amendment, the IPO also noted in its position paper that nothing 
in the TRIPS Agreement prohibits the adoption of the doctrine of international exhaustion 
of intellectual property rights. It also reasoned that this proposed amendment is very 
important because it allows the supply of the product to be increased and prices to be 
moderated through competition, or, in other words, by improving accessibility through 
importation of drugs priced cheaply abroad than their counterparts in the Philippines. 
The implication of adopting an international exhaustion of rights regime is that once a 
drug or medicine is sold or marketed anywhere in the world, the Philippines can 
immediately benefit from the price differences for the same drug or medicine in a 
different market.22 The IPO unequivocally supported this proposed amendment without 
any modifications. 
Parallel importation is permitted in several countries. The European Union 
permits parallel importation between European countries. In Japan, the courts have held 
that the parallel importing of patented roducts sold in one country into Japan does not 
violate the patents granted in Japan?’ 
Argentina, Cambodia, Thailand and Vietnam 
permit parallel importation, with clearly worded legi~lation.~~ 
It should be noted that the Philippines, at present, imports off-patent lower priced 
drugs or medicines from India through the Philippine International Trading Corporation 
(PITC). Though this involves the importation of drugs or medicines, this is not parallel 
importation as legally defined which, as stated earlier, involves the importation of 
patented drugs even without the consent of the patent owner. Nevertheless, the 
multinational corporations, represented by PHAP, have filed cases against the relevant 
government officials led by the Secretary of Health, Director of the Bureau of Food and 
Drugs and the PITC contending that these actions of importing cheaper off-patent 
branded medicines by the government on the ground that such constitutes infringement of 
its patent, trademark and tradename rights in violation of the basic right that no person 
shall be deprived of property without due process of law.25 The case is for prohibition of 
the importation with an application for a temporary restraining order and preliminary 
injunction. 
.,, 
C. 
Early Working 
Early working refers to the process by which generic companies are allowed to 
experiment and test for regulatory approval of generic versions of a drug or medicine 
before its patent expires. This will allow generic producers to get ready, so that they can 
start the production and sale of a generic drug as soon as its patent expires. 
As explained by the WHO, in the absence of such provision, generic 
manufacturers can only start the time-consuming process of testing and registration after 
the expiry of the patent. This easily delays the marketing of generic drugs for two to 
three years after patent expiry?6 Again, this will facilitate generic competition through 
Position Paper of the Intellectital Property Office of the Philippines on Senate Bill No. 2139, dated 24 
January 2006, tiled before the Senate Committee on Trade and Commerce. 
23 Japan Supreme Court, DECISION on Case No. Heisei ~ ( w o )  1988 delivered on July 1, 1297. 
January 2006, filed before the Senate Committee on Trade and Commerce. 
’’ PHAP vs. Secretary of Health, et.al., Civil Case No. 00-1374, Makati Regional Trial Court 
26 Position Paper of the World Health Organization (WHO) on Senate Bill No. 2139, dated 21 November 
2005, filed before the Senate Committee on Trade and Commerce. 
Position Paper ofthe Intellectual Property Office of the Philippines on Senate Bill No. 2139, dated 24 
24 
11 


the immediate entry in the Philippine pharmaceutical market of more affordable or lower 
priced drugs or medicines. 
The IPO supports*' the proposed amendments which allows the early working 
doctrine because such is consistent with the TRIPS Agreement. 
As an exception to rights conferred on patent owners and in compliance with the 
TRIPS Agreement2*, the first proposed amendment broadens the purposes of 
experimental use of inventions to include scientific or educational purposes and such 
other activities directly related to such scientific or educational experimental use. 
The second proposed amendment introduces into the Intellectual Property Code of 
the Philippines the doctrine of early working by creating an exception to the exclusive 
right o€ the patent holder to the use of the invention by allowing a third party to use and 
test the patented invention including any data related thereto. 
The same proposal, 
however, clearly limits this exception solely for purposes reasonably related to the 
development and submission of information required under any law of the Philippines or 
of another country. In short, this will allow generic companies to engage in any activity 
that will facilitate the registration of a generic version of a drug before the Bureau of 
Food and Drugs or any other drug regulatory authority before the patent expires. For the 
protection of the patent holder, it may be inferred from the amendment in relation to the 
existing 20-year patent period that the actual act of manufacturing in commercial 
quantities, stockpiling, marketing, distribution and selling to the public may only be done 
after expiration of the patent. 
It is worth noting that this amendment is similarly provided in many other 
jurisdictions, Le., Canada, Argentina, Thailand, Malaysia and Indonesia. In the United 
States, a similar provision is stated in the US Code?' 
As stated earlier, these proposed amendments will make the Philippine 
pharmaceutical industry more competitive because it will increase the supply of 
medicines by allowing the early entry of generic versions within a short period of a few 
months after patent expiration. For the Filipino consumer, this will effectively result to 
an increase in the supply of cheaper generic medicines as alternatives to the'branded off- 
patent drugs. 
It is also worth noting that the current proposed amendment in the substitute bill 
on early working also integrates the recommendation of Senator Miriam Defensor- 
Santiago which recognizes the protection of data under Article 39.3 of the TRIPS 
Agreement and which further specifically requires the Intellectual Property Office to 
issue the appropriate rules and regulations regarding the execution of the doctrine of early 
working. 
~ 
~~ 
~ 
~~ 
~~ 
27 Position Paper of the Intellectual Property Office of the Philippines on Senate Bill No. 2139, dated 24 
January 2006, tiled before the Senate Committee on Trade and Commerce. 
Article 30 of the TRIPS Agreement, to wit: "Exceptions to Rights Conferred: Members may provide 
limited exceptions to the exclusive rights conferred by apatent, provided that such exceptions do not 
unreasonably conflict with a normal exploitation of the patent and do not unreasonably prejudice the 
legitimate interests of the patent owner, taking account of the legitimate interests of thirdparties. " 
'' 35 U.S.C. 271 (e)(l); to wit: "It shall not be an act of infringement to make, use, offer to sell, or sell 
within the United States or import into the United States apatented invention (other than a new animal 
drug or veterinary biologicalproduct [as those terms are used in the Federal Food, Drug, and Cosmetic 
Act and the Act of March 4, 19/31 which is primarily manufactured using recombinant DNA, recombinant 
RNA, hybridoma technology, or other processes involving site specific genetic manipulation techniques) 
solelyfor uses reasonably related to the development andsubmission of information under Federal law 
which regulates the manufacture, use or sale of drugs or veterinary biologicalproducts. " 


D. 
Provisions for the governmental use of patented medicines or processes for their 
manufacture constitutes an important tool to protect public health. Unlike the case of 
compulsory licenses, there is no need for an application by a private or public party, but 
the government can, in exercising its authority, decide ex officio to use a patented 
invention. 
In addition, the government can allow a subcontractor or authorized 
representative to use the invention on its behalf.30 
Government Use and Legal Cover for Government Use 
The US Government has made an extensive application of government use 
provisions: “the US has always relied heavily on the non-voluntary licensing of patented 
inventions to facilitate public, non-commercial uses by the government and its agents ... 
The bulk of the non-voluntary licenses issued for government use pertain to national 
defense. Nevertheless, the US has also used this same legal tool to reduce=,the costs of 
certain medicines and to advance both environmental and economic development goals, 
including major projects to dam river and generate ele~tricity”~’. 
The TRIPS Agreement does not limit the right of member states to make the 
determination of the reasons, including public health, which may justify the government 
use of a patented invention. Under the Intellectual Property Code of the Philippines, the 
government has broad room to decide the use of patented inventions. IHowever, the same 
law subjects the government, rnututis mutandis, to the same conditions applicable to 
compulsory licenses. It is this present requirement of following compulsory licensing 
rules, which has unduly impeded the exercise of the government use option by the 
appropriate agency. 
Present Philippine jurisprudential experience in compulsory licensing shows that 
it takes a long period of time to get approval because of procedural delays caused by 
appeals filed by the patent owners. The only compulsoly license petition granted, after 
the new Philippine Intellectual Property Code took effect on January 1,~,1998, was a 
compulsory license petition filed on December 8, 1991 when the old Patent law was still 
in effect. This petition was finally granted on December 19, 2001 - that is after a period 
of ten years.32 
In relation to the proposed amendments to the government use provisions, all 
parties in the hearing agreed that the proposal of the IPO, which supports the policy 
approach of the amendments but restructures this particular proposed amendment, is 
acceptable to all the parties. The IPO proposal clarifies the whole government use option 
and effectively removed the process for the exercise of such from the mutatis mutandis 
application of compulsory licensing rules. This is expected to make the process more 
efficient and timely particularly in handling emergency situations. 
As proposed by Senator Edgardo J. Angara in the 13’h Congress, it is worth noting 
that the proposed amendment in the substitute bill grants to the President of the Republic 
of the Philippines the power to make a determination on the immediately executory use 
or other exploitation by the government or its authorized representatives”of drugs or 
medicines to protect public health. It also retained the proposals to provide legal cover 
Carlos M. Correa, Use of TRIPS Flexibilities under the Patent Law of the Republic of the Philippines, 
November 2005. Note: Carlos M. Correa is a world renowned expert in intellectual property rights and 
public health and was guest speaker in the first Philippine Intellectual Property Rights and Public Health 
Forum held last October 20 and 21,2005 at the Intercontinental Hotel of Manila, Makati City. 
3 ’  Reichman, .I. 
and Hasenzahl, C. (2002), Nan-Voluntary Licensing of Patented Inventions: Historical 
perspective, Legal framework under TRIPS, and an Overview of the Practice in Canada and the United 
States of America, UNCTADIICTSD, Geneva, as cited in Carlos M. Correa, Use of TNPS Flexibilities 
under the Patent Law of the Republic of the Philippines, November 2005. 
’* Carlos M. Correa, Use of TRIPS Flexibilities under the Patent Law of the Republic of the Philippines, 
November 2005. 
30 
13 


for the implementing agencies and its officers, which shall implement the said action. 
This legal cover is the grant of an exemption from temporary restraining orders and 
preliminary injunctions of such government actions, except if issued by the Supreme 
Court. 
The restructuring of the government use provision is expected to create an 
environment whereby the government will now be able to act promptly and decisively on 
matters that involve public interest. On the matter of protecting public health, this 
proposed amendment to government use would also give the government the ability to 
act immediately on issues like the avian influenza and SARS without fear of possible 
lawsuits from patent owners. 
E. 
Under the Intellectual Property Code of the Philippines and the TRIPS 
Agreement, which establishes the basic rights of trademark owners, it should be noted 
that the protection in favor of trademark holders is against the use of their marks where 
there is a likelihood of confusion. 
Exception to Trademarks and Tradenames Rights 
Under this legal framework, it is also possible for multinational pharmaceutical 
companies who own the tradenames or trademarks to restrict access to drugs and 
medicines by asserting that parallel importers may not use local trademarks for drugs 
imported pursuant to Section 72.1 of the Intellectual Property Code of the Philippines 
even if these drugs or medicines have been put on the market by the trademark holders in 
other markets. Imposing restrictions on trademarks in addition to conditions involved in 
the importation, sale or distribution of drugs or medicines imported pursuant to Section 
72.1 create an additional barrier to the entry of said drugs or medicines in the market.33 
As proposed by Senator Edgardo J. Angara in the 13'h Congress, this proposed 
amendment is introduced once again as an amendment to Section 159 of the Intellectual 
Proeprty Code of the Philippines. 
This proposed amendment will complement the adoption of the international 
exhaustion of intellectual property rights as explained earlier. Further, this will also 
support the contention that in cases of parallel importation, the drugs or medicines bear 
the trademark of the same patent owner, hence, there is no likelihood of confusion. In 
short, this amendment is meant to create a competitive business environment for parallel 
importation. 
F. 
Support for the Proposed Amendments to the Intellectual Property 
Code of the Philippines 
The parties in favor and supportive of these proposed amendments are the 
following: (1) Department of Health (DOH), (2) Department of Trade and Industry 
(DTI), (3) Intellectual Property Office (IPO), (4) Bureau of Food and Drugs (BFAD), (5) 
Philippine International Trading Corporation (PITC), (6) National Institutes of Health 
(NIH), (7) World Health Organization (WHO), (8) Philippine Medical Association 
(PMA), (9) Philippine Nurses Association (PNA), (1 0) Integrated Midwives Association 
of the Philippines (IMAP), (1 2) Philippine Chamber of the Pharmaceutical Industry 
(PCPI), (13) Third World Network (TWN), (14) Cut the Cost, Cut the Pain Network 
(3CPNet), (15) OXFAM Philippines, (16) Ayos na Gamot sa Abot Kayang Presyo 
Posilion Paper of the Intellectual Property Ofice of the Philippines on Senate Bill No. 21 39, dated 24 
33 
January 2006, filed before the Senate Committee on Trade and Commerce. 
14 


(AGAP), (1 7) Philippine Healthwatch Initiatives, Inc., (1 8) Health Alliance for 
Democracy (HEAD), and, various NGOs for the poor, sick and elderly. 
VI. 
Other Causes for the Hiplt Prices ofDrups nnd Medicines 
Notwithstanding the aforementioned, the Committees noted that there are other 
issues that contribute to the continued high cost of drugs and medicines, including off- 
patent drugs. These are, among others:34 
1. 
2. 
3. 
4. 
5. 
6. 
7. 
8. 
9. 
The need to increase the national budget for health to help ease the out-of- 
pocket expenses of patients; 
The need to improve the negative investor outlook at the local 
pharmaceutical marltet and the purchasing power of the Philippine peso; 
The need to strengthen the local pharmaceutical industry to enable it to 
compete with multinational companies. This can be through increased 
government support in the form of tax exemptions for active substance 
drugs, technical assistance, loans, parallel importation, discounts or 
exemptions from regulatory fees; 
The need to strengthen public confidence in the local generic industry; 
The need to strengthen, enact and enforce regulatory and supervisory laws 
and regulations to ensure the safety and efficacy of drugs, particularly the 
charter of the Bureau of Food and Drugs; 
The need to promote research and development in public health. 
The need to develop the local generics industry’s capability to 
manufacture more complex drugs (is. higher generation antibiotics, 
cardiovascular drugs, cancer chemotherapy drugs, or hyperalimentation); 
The need to develop the local pharmaceutical industry’s capability to 
develop drugs from endogeneous or local sources; and 
The need to identify and develop sources of raw materials to lessen 
dependence on importation. 
VII. 
Other Options to Improve Access to Quality, Affordable Medicines 
Aside from discussions on the proposed amendments to the Intellectual Property 
Code, the various senate bills filed as well as the discussions in the committee hearings 
also introduced several other legislative proposals that seek to ensure better access to 
quality, affordable medicines. 
A. Strengthening the Bureau of Food and Drugs (BFAD) 
It has been stated during the hearings that another avenue to ensure broader access 
to quality, affordable medicines is to strengthen the capability of BFAD. The DOH 
proposed that these should involve the following35: 
1. Expansion of the research and regulatory capability of BFAD in the 
regions. 
Specifically, this will mean more laboratory facilities with 
appropriate equipment and personnel. 
Based on the Lerter of the Philippine Medical Association submitted to the Senate Committee on Trade 
Based on the Department of Health (DOH) Presentation to the Senate Committees on Trade and 
34 
and Commerce on 24 November 2005. 
Commerce, Health and Demography, and, Finance Hearing held on September 10, 2007 and on the Bureau 
of Food and Drugs Presentation to the Senate Committees on Trade and Commerce, Health and 
Demography, and, Finance Hearing on September 17,2007. 
15 


2. Creation of a more flexible structure for BFAD that will consider the 
corporitization of BFAD, exempt BFAD from the Salary Standardization 
Law, allow its use and retention of its income, give it authority to hire 
additional personnel, among others. 
3. Imposition of a mandatory electronic submission of essential regulatory 
information on the pharmaceutical industry inputs and outputs. 
4. Imposition of the mandatory disclosure of drug prices and inventory of 
drugs sold in other foreign markets by importer-applicants and linlting of 
entry price as a regulatoly requirement. 
Further, in the committee hearings, it was presented by BFAD that there is a 
nationwide ratio of one food and drug regulatory officer for every two hundred and two 
establishments. At present, there are only 220 officers monitoring 44,333 BFAD 
registered establishments. It was also further noted that out-migration of highly trained 
BFAD personnel is going on in favor of better pay and facilities particularly in food and 
drug regulatory agencies of other countries. Lastly, inspection processes take a significant 
amount of time due to limited facilities and equipment. Hence, there is cle&rly a need to 
augment the operations budget of BFAD from internally generated income sources. 
The abovestated recommendations and facts have been taken into consideration 
by the committees and it was agreed that there is a need to strengthen the Bureau of Food 
and Drugs by allowing it at the minimum to retain its income for use in 
improvinghpgrading its facilities, expanding its organizational capability and training its 
personnel, among others. 
B. Re-examination of the Generics Act of 1988 and the Pharmacy Law 
It has also been noted during the hearings that there is also a need to amend 
Section 6 of the Generics Law (R.A. No. 6675) by strictly requiring that only generic 
names of drugs be written in medical prescriptions by doctors. In the same light, it has 
been proposed that drug outlets should also be required to inform all buyers of medicines 
of all other drug products having the same generic name so that buyers may’decide which 
product to buy. Corollary to this, it has also been discussed in the committee hearings that 
there is a need to revisit the mandatory requirement in the Pharmacy Law (P.D. No. 
1363) which mandates that registered pharmacists should supervise all pharmaceutical 
drug sales. For both proposed amendments to the Generics Act and the Pharmacy Law, 
higher penalties have also been proposed. Considering that these proposals have a major 
impact in the professional practice of doctors and pharmacists, these comments have been 
noted by the committees and will be subject to further discussions through technical 
working group meetings under the primary control of the Committee on Health and 
Demography. 
C. Creation of a Congressional Oversight Committee 
The committees also took note of the need to establish a congressional oversight 
committee that will monitor the whole pharmaceutical policy of the ,government. 
Considering that the proposed amendments in the attached substitute bill will have 
significant impacts in national drug policy, the committees agree that there must indeed 
be a congressional oversight committee to monitor the implementation of the proposed 
law once enacted. 
16 


D. Imposition of a Non-Discriminatory Clause 
The committees also took note of the need to impose a non-discriminatory clause 
or “mandatory carry” system. 
Some participants in the hearing have expressed 
reservations to the imposition to the same. Foremost among these is the position of the 
Drug Stores Association of the Philippines (DSAP). Specifically, DSAP contends that 
such a provision creates safety risks and in another aspect, lead to a weakening of the 
economic viability of small drugstores. For DSAP, requiring all drugstores to carry 
parallel imports without a clear set up of accrediting such by the proper authorities could 
be “used as a shield for those selling unregistered imported  medicine^."^^ Further, it was 
highlighted that most drugstores in the country with limited capital would prefer to carry 
on their shelves only saleable items. For DSAP, forcing them to shell out capital for none 
movable items means waste of valuable capital in non-moving stock inventory. Another 
is the position of Mercury Drug C~rporation~~, 
which hinges its opposition on the right to 
property of individuals and on the guarantees for the quality of medicines sold. On the 
latter, Mercury cites Section 29 of the Pharmacy Law which provides that, “In cases of 
drugs, pharmaceuticals or poisons sold in their original packaging, the seal of which has 
not been broken or tampered with, the liability rests upon the manufacturer or in his 
absence upon the importer, the distributor, representative or dealer who was responsible 
for their distribution for sale.” Another health organization, Philippine Nealthwatch 
Initiatives, Inc., raised questions on the practicality of a “must carry” provision since the 
medication needs, on the basis of morbidity rates, vary across the nation. 
Hence, 
implementing it will entail a complex system that differs per regions health needs. Tge 
same organization contends that this may even result in unnecessary costs and could even 
increase the prices of medicines. 
Considering that the impact of a non-discriminatory clause relative to lowering of 
medicine prices cannot be assured at present, the committees have opted to have this 
matter studied further through technical working group meetings under the supervision of 
the committees. 
E. Creation of a Drug Prices Regulation Board 
Unlike the previous issues, this matter has been subject to a lot of reservations by 
most of the participants during the committee hearings. The DTI notes that the creation 
of a drug price regulation board is redundant since the similar powers have’already been 
granted to the National Price Coordinating Council and the President of the Philippines as 
provided in Sections 7 and 10 of the Price Act (R.A. No. 7581). The DOH, through 
Undersecretary Alexander Padilla,38 also categorically stated that they are against the 
inclusion of drug price control provisions in the same law which introduces the TRIPS 
flexibilities. The DOH representative further advised that the same should be studied 
further considering that the implementation of such is too complex and far-reaching. In 
the hearings, it was also noted that the large composition of a price regulation board 
could lead to delays in agreeing on decisions tom impose price controls considering that 
the parties include representatives from the industries to be regulated on the one hand and 
the consuming public 
Aside from that, the WHO39 presented its comparative studies of 
the impact of drug price regulation noting that the creation of such has no bearing on 
” Position paper submitted by the Drug Stores Association of the Philippines to the Senate Committees on 
Trade and Commerce, Health and Demography, and, Finance Hearing on September 17,2007. 
” Position paper submitted by Mercury Drug Corporation to the Senate Committees on Trade and 
Commerce, Health and Demography, and, Finance Hearing on September 12,2007. 
... 
.j_ 
Based 011 the testimony of DOH Undersecretary Alexander Padilla during the Senate Committees on 
Based on the WHO Presentation during the Senate Committees on Trade and Commerce, Health and 
38 
Trade and Commerce, Health and Demography, and, Finance Hearing on September 10,2007. 
Demography, and, Finance Hearing on September 17,2007. 
19 
17 


prices. In fact, it highlighted that in Japan, which has a very complicated drug price 
regulation scheme, the prices remain to be very high. 
The dangers of price control or regulation have also been noted in the position 
papers submitted by several noted economists and business professors4' which includes 
the following: Dr. Felipe M. Medalla of the U.P. Diliman, School of Economics; Dr. 
Cielito F. Habito of the Ateneo de Manila University, Department of Economics; Dr. 
Fernando T. Aldaba, Chairperson of the Ateneo de Manila University, Department of 
Economics, and, Dr. Cid L. Terosa, University of Asia and the Pacific, School of 
Economics, Dr. Rene B. Azurin4' of the U.P. Diliman Graduate School of Business also 
testified to the same concerns by the economists. Basically, the concerns .,are that price 
controls are at risk of regulatory capture especially in countries where the governance 
structure is weak and prone to corruption. It was also noted that there is no clear study 
that says such have been effective. Others highlighted that price controls may also result 
to unavailability or delay in the availability of drugs. Medalla and Habito emphasized 
also that more competition is the best approach to ensuring access to quality affordable 
medicines, Corollary to this, they also noted that imposing a price control mechanism 
might actually be incompatible with competition enhancing policies. 
Conversely, the Philippine Nursing Association (PNA)42 and the Health Alliance 
for Democracy (HEAD)43 submitted position papers in support of the imposition of drug 
price controls, It is worth noting that the position of HEAD with regard to the creation 
of a drug price regulatory board is subject to a three to five year life span, and, it further 
required that the board should have more patient and consumer groups represented 
therein. On another front, the Drug Stores Association of the Philippines (DSAP) agrees 
that price regulation has its role in reducing the prices of medicines. DSAP specifically 
recommends that the same be imposed on the manufacturers and distributors end. It also 
contends that price referencing is a better alternative compared to imposing price ceiling. 
Lastly, DSAP suggests that locally manufactured generic products be exempted from 
price regulation since the same are already low priced. 
Based on the foregoing reservations, oppositions, or limited support on the 
creation of a drug price regulatory board, the committees have decided to propose a 
system of medicine price regulation patterned after the provisions of Republic Act No. 
7581, otherwise known as the Price Act. Basically, the proposed provision gives the 
power lo impose price ceilings on any drug to the President of the Republic of the 
Philippines upon joint recommendation of the Secretaries of Health and Trade and 
Industry provided that certain conditions with public health impacts exist. These 
conditions, patterned after the Price Act, are as follows: 
1. The impendency, existence, or effects of a calamity that affects public 
health; 
2. The threat, existence, or effect of a public health emergency officially 
recognized by the Department of Health or by official Department of 
Health recognized non-governmental organizations; 
3. The prevalence of widespread acts of illegal price manipulation of any 
drug or medicine; 
Position papers and letters have been submitted by Dr. Felipe M. Medalla, Dr. Cielito F. Habito, 
Fernando T. Aldaba, and, Dr. Cid L. Terosa to the Senate Committee on Trade and Commerce. 
Dr. Rene B. Azuriii testified on the merits of drug price regulation during the Senate Committees on 
Trade and Commerce, HeaIth and Demogiaphy, and, Finance Hearing on September 17,2007 
42 Position paper submitted on September 7,2007 by the Philippine Nursing Association (PNA) to the 
Senate Committees on Trade and Commerce, Health and Demography, and, Finance Hearings. 
" Position paper submitted on September 17,2007 by the Health Alliance for Democracy (HEAD) to the 
Senate Committees on Trade and Commerce, Health and Demography, and, Finance Hearings. 
40 
41 


4. The impendency, existence, or effect of any event that causes artificial 
and unreasonable increase in the prices of any drug or medicine. 
5. Whenever the prevailing price of any drug or medicine has risen to 
unreasonable levels. 
This process of imposing price regulation is deemed most effective and efficient 
because the decision making process is limited to a few people who Kave the best 
knowledge of the public health situation of the Philippines at any point in time. Further;jit 
is consistent with existing laws. As an additional feature, the proposed provision likewise 
allows the Secretary of the Department of Health to impose administrative fines for those 
who violate the order of the President. As a safeguard on the exercise of this power, only 
the Supreme Court of the Philippines shall be allowed to restrain through any appropriate 
order the actions of the President invoked under any of the abovestated conditions. 
Considering that most, if not all, are agreed that the imposition of price controls are 
extreme measures that should be use as a last resort, the proposed set-up which gives the 
power to the President of the Republic of the Philippines is deemed best and will be most 
efficient in the conditions contemplated. 
19 


VIII. 
Recornmendotion 
After a care€ul review of all the proposals, including submitted documents and 
the Senate with 
i%Sk.. 
, prepared by 
pertinent records, the Committees have the honor to report them 
the recommendation that the attached substitute bill, S.B. No. 
the Committees, entitled: 
‘\,a 
:.p ...~, 
., Tt 
, , ,. 
AN ACT 
TO PROVIDE FOR QUALITY AFFORDABLE MEDICINES 
~~ 
~~ 
~ 
~~~. 
. 
~ 
~~ 
~ 
~~ 
~~ 
~ 
~~~ 
be approved in substitution of the pertinent proposals as embodied in Senate Bill Nos. 90, 
101, 755, 1404, 1420 and 1530, taking into consideration P.S. Res.,No. 49 with Senators 
Villar, Roxas, Trillanes IV, Cayetano, P., Zubiri, Legarda, Lapid and Enrile as authors 
thereof. 
Respectfully submitted: 
Ckairmhn, Committee on T ade & Commerce 
Member, Committee on Healt 1 
and Demography 
Member, Committee on Finance 
TOMPA 
RA” y 
PIA 
CAYETANO 
Chairperson, committee on wealth and Demography 
Member, Committee on Trade and 
Member, Committee on 
20 


VICE-CHAIRPERSON: 
EDGARDO‘J. ANGARA 
Vice-Chairman, Committee on Finance 
Member, Committee on Health and Demography 
JOKER P. ARROYO 
Vice-Chairman, Committee on Finance 
MIRIAM DEFENSOR SANTIAGO 
Vice-Chairperson, Committee on Finance 
MEMBERS: 
” REVILLA, JR. 
ade and Commerce 
alth and Demography 
Committee on Trade and Commerce 
Committee on Health and Demography 
Committee on Finance 
Committee on Finance 
ittee on Trade and Commerce 
Committee on Trade and Commerce 
Committee on Health and Demography 
Committee on Finance 
Committee on Health and Demography 
Committee on Finance &e- 
FRANC’I+CHIZ~~ ESCUDERO 
RICHARD J. GORDON 
Committee on Trade and Commerce 
Committee on Trade and Commerce 
Committee on Finance 
Committee on Health and Demography 
Committee on Finance 
21 


ALLAN 
Committee 
PETER 
on Health 
CAYETANO 
and Demography &&:: 
ANTONIO F. TRILLANES IV 
Committee on Finance 
EX-OFFICIO MEMBERS: 
e, 
President 
GG Y ro-Tempore 
EJERCITO ESTRADA 
-%F%AN 
Majori Leader 
n 
@//(/&2/LI- 
A 0  ILINO 0. PIM 
TEL, JR. 
- 
Minority Leader 
MANNY VILLAR 
Senate President 
Senate of the Philippines 
Pasay City 
22 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
.~ . .v 
,. ., 
, ., 
,> ' ' 
.- 
7 
, 
" !  
-. 
t 
FOURTEENTH CONGRESS OF THE 
1 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
1 
S. No. E "f6b 
(In substitution of S.B. Nos. 90, 101,755, 1404, 1420, 1530 and P.S. Resolution No. 49) 
Prepared by the Committees with Senators Villar, Roxas, Trillanes IV, Cayetano, P., Zubiri, 
Legarda, Lapid and Enrile as authors thereof 
AN ACT 
TO PROVIDE FOR QUALITY AFFORDABLE MEDICINES 
Be it enacted by the Senate and House of Representatives of the Philippines in Congress 
assem bled: 
SECTION 1. Short Title. - This Act shall be known as the "Quality Affordable 
Medicines Act of 2007. I' 
SECTION 2. 
Declaration ofPolicy. -The State recognizes as a priority national policy 
the protection and promotion of the right to health of the people. In protecting public 
health, it shall always endeavor to ensure broad access to quality affordable medicines for the 
benefit of the people. 
SECTION 3. Construction in Favor ofProtection ofpublic Health. - All doubts in the 
implementation and interpretation of the provisions of this Act, including its implementing 
rules and regulations, shall be resolved in favor of protecting public health. 
SECTION 4. Section 26 of Republic Act No. 8293, otherwise known as the Intellectual 
Property Code of the Philippines, is hereby amended to read as follows: 
"SEC. 26. Inventive Step. - 26.1. An invention involves an inventive 
step if, having regard to prior art, it is not obvious to a person skilled in the 
art at the time of the filing date or priority date of the application claiming 
the invention. 
1 


1 
“26.2. IN THE CASE OF DRUGS OR MEDICINES, THERE IS NO 
2 
INVENTIVE STEP IF THE INVENTION RESULTS FROM THE MERE 
3 
DISCOVERY OF A NEW FORM OR NEW PROPERTY OF A KNOWN 
4 
SUBSTANCE WHICH DOES NOT RESULT IN THE ENHANCEMENT OF 
5 
THE KNOWN EFFICACY OF THAT SUBSTANCE, OR, THE MERE 
6 
DISCOVERY OF ANY NEW USE FOR A KNOWN SUBSTANCE OR A 
I 
KNOWN PROCESS UNLESS SUCH KNOWN PROCESS RESULTS IN A 
8 
NEW PRODUCT THAT EMPLOYS AT LEAST ONE NEW REACTANT.” 
9 
10 
11 
12 
13 
14 
“72.1. Using a patented product which has been put on the market in 
15 
the Philippines by the owner of the product, or with his express consent, 
16 
insofar as such use is performed after that product has been so put on the 
17 
said market: PROVIDED> THAT, WITH REGARD TO DRUGS OR 
18 
MEDICINES, THE LIMITATION ON PATENT RIGHTS TO THE USE, 
19 
SALE, OFFERING FOR SALE OR IMPORTATION OF THE PRODUCT 
20 
SHALL APPLY AFTER A DRUG OR MEDICINE HAS BEEN 
21 
INTRODUCED ANYWHERE IN THE WORLD BY THE PATENT 
22 
OWNER, OR BY ANY PARTY AUTHORIZED TO USE THE 
23 
INVENTION. 
SECTION 5. Section 72 of Republic Act No. 8293, otherwise known as the Intellectual 
Property Code of the Philippines, is hereby amended to read as follows: 
~ 
“SEC. 72. Limitations of Patent Rights. - The owner of a patent has no 
right to prevent third parties from performing, without his authorization, 
the acts referred to in Section 71 hereof in the following circumstances: 
2 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
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“72.2. Where the act is done privately and on a non-commercial scale 
or for a non-commercial purpose: Provided, That it does not significantly 
prejudice the economic interests of the owner of the patent; 
“72.3. Where the act consists of making or using exclusively for [the 
purpose of experiments that relate to the subject matter of the patented 
invention;] EXPERIMENTAL 
USE 
OF 
THE 
INVENTION 
FOR 
SCIENTIFIC PURPOSES OR EDUCATIONAL PURPOSES AND SUCH 
OTHER ACTIVITIES DIRECTLY RELATED TO SUCH SCIENTIFIC OR 
EDUCATIONAL EXPERIMENTAL USE. 
“72.4. WHERE THE ACT INCLUDES TESTING, USING, MAKING OR 
SELLING THE INVENTION INCLUDING ANY DATA RELATED 
THERETO, SOLELY FOR PURPOSES REASONABLY RELATED TO THE 
DEVELOPMENT 
AND 
SUBMISSION OF INFORMATION AND 
ISSUANCE OF APPROVALS BY 
GOVERNMENT REGULATORY 
AGENCIES REQUIRED UNDER ANY LAW OF THE PHILIPPINES 
THAT REGULATES THE MANUFACTURE, CONSTRUCTION, USE OR 
SALE OF ANY PRODUCT: PROVIDED, THAT IN ORDER TO PROTECT 
THE DATA SUBMITTED BY THE ORIGINAL PATENT HOLDER FROM 
UNFAIR COMMERCIAL USE PROVIDED IN ARTICLE 39.3 OF THE 
TRIPS AGREEMENT, THE INTELLECTUAL PROPERTY OFFICE (IPO), 
IN CONSULTATION WITH THE APPROPRIATE GOVERNMENT 
AGENCIES, 
SHALL ISSUE 
THE APPROPRIATE 
RULES 
AND 
REGULATIONS NECESSARY THEREIN NOT LATER THAN ONE 
HUNDRED TWENTY (120) DAYS AFTER ENACTMENT OF THIS LAW. 
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“[72.4] 72.5. Where the act consists of the preparation for individual 
cases, in a pharmacy or by a medical professional, of a medicine in 
accordance with a medical prescription or acts concerning the medicine so 
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prepared; 
“[72.5] 72.6. Where the invention is used in any ship, vessel, aircraft, 
or land vehicle of any other country entering the territory of the 
Philippines temporarily or accidentally: Provided, That such invention is 
used exclusively for the needs of the ship, vessel, aircraft, or land vehicle 
and not used for the manufacturing of anything to be sold within the 
Philippines. (Secs. 38 and 39, R.A. No. 165a)” 
SECTION 6. Section 74 of Republic Act No. 8293, otherwise known as the Intellectual 
Property Code of the Philippines, is hereby amended to read as follows: 
“SEC. 74. Use of Invention by Government. - 74.1. A Government 
agency or third person authorized by the Government may exploit the 
invention even without agreement of the patent owner where: 
(a) The public interest, in particular, national security, nutrition, 
health or the development of other sectors, as determined by 
the appropriate agency of the government, so requires; or 
(b) A judicial or administrative body has determined that the 
manner of exploitation, by the owner of the patint or his 
license, is anti-competitive; OR 
(C) THERE IS PUBLIC NON-COMMERCIAL USE OF THE 
PATENT BY THE PATENTEE, WITHOUT SATISFACTORY 
REASON. 
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“74.2. UNLESS OTHERWISE PROVIDED HEREIN, [Tlthe use by the 
Government, or third person authorized by the Government shall be 
subject, [mutatis mutandis, to the conditions set forth in Sections 95 to 97 
and 100 to 102. (Sec. 41, R.A. No. 165a)l TO THE FOLLOWING 
PROVISIONS: 
(A) IN SITUATIONS OF 
NATIONAL 
EMERGENCY 
OR 
OTHER CIRCUMSTANCES OF EXTREME URGENCY, THE 
RIGHT HOLDER SHALL BE NOTIFIED AS SOON AS 
REASONABLY PRACTICABLE; 
(B) 
IN THE CASE OF PUBLIC NON-COMMERCIAL USE, 
WHERE 
THE 
GOVERNMENT 
OR 
CONT&ACTOR, 
WITHOUT MAKING A PATENT SEARCH, KNOWS OR 
HAS DEMONSTRABLE GROUNDS TO KNOW THAT A 
VALID PATENT IS OR WILL BE USED BY OR FOR THE 
GOVERNMENT, 
THE 
RIGHT 
HOLDER 
SHALL 
BE 
INFORMED PROMPTLY; 
(C) 
THE SCOPE AND DURATION OF SUCH USE SHALL BE 
LIMITED TO THE PURPOSE FOR WHICH ”IT WAS 
AUTHORIZED, AND IN THE CASE OF SEMI-CONDUCTOR 
TECHNOLOGY, SHALL ONLY BE FOR PUBLIC NON- 
COMMERCIAL USE OR TO REMEDY A PRACTICE 
DETERMINED AFTER JUDICIAL OR ADMINISTRATIVE 
PROCESS TO BE ANTI-COMPETITIVE; 
(D) SUCH USE SHALL BE NON-EXCLUSIVE; 
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(E) THE RIGHT HOLDER SHALL BE PAID ADEQUATE 
REMUNERATION IN THE CIRCUMSTANCES OF EACH 
CASE, TAKING INTO ACCOUNT THE ECONOMIC VALUE 
OF THE AUTHORIZATION; 
(F) 
THE LEGAL VALIDITY OF ANY DECISION RELATING 
TO THE AUTHORIZATION OF SUCH USE SHALL BE 
SUBJECT TO JUDICIAL REVIEW; AND 
(G) THE 
USE 
OR 
OTHER EXPLOITATION BY THE 
GOVERNMENT OR THIRD PERSON AUTHORIZED BY 
THE GOVERNMENT OF DRUGS OR MEDICINES UNDER 
THIS SECTION SHALL BE SUBJECT TO THE EXCLUSIVE 
DETERMINATION 
OF 
THE 
PRESIDENT 
OF 
THE 
REPUBLIC OF THE PHILIPPINES AND SHALL BE 
IMMEDIATELY EXECUTORY PROVIDED, THAT NO 
COURT. EXCEPT THE SUPREME COURT OF THE 
PHILIPPINES, 
SHALL 
ISSUE 
ANY 
TEMPORARY 
RESTRAINING ORDER OR PRELIMINARY INJUNCTION 
OR PRELIMINARY MANDATORY INJUNCTION THAT 
WILL PREVENT ITS IMMEDIATE EXECUTION. THE 
OFFICE OF THE PRESIDENT, IN CONSULTATION WITH 
THE APPROPRIATE GOVERNMENT AGENCIES, SHALL 
ISSUE THE APPROPRIATE IMPLEMENTING RULES AND 
REGULATIONS FOR THE EXERCISE OF THIS AUTHORITY 
WITHIN ONE HUNDRED TWENTY (120) DAYS AFTER 
ENACTMENT OF THIS LAW. ALL CASES ARISING FROM 
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THE IMPLEMENTATION OF THIS PROVISION SHALL BE 
COGNIZABLE 
BY 
COURTS 
WITH 
APPROPRIATE 
JURISDICTION PROVIDED BY LAW.” 
SECTION 7. Section 159 of Republic Act No. 8293, otherwise known as the Intellectual 
Property Code of the Philippines, is hereby amended to read as follows: 
“Section 159. x x x 
lLx x x 
‘(x x x 
‘(x x x 
“159.4 THERE SHALL BE NO INFRINGEMENT OF TRADEMARKS 
OR TRADENAMES OF IMPORTED OR SOLD DRUGS OR MEDICINES 
ALLOWED UNDER SECTION 72.1 OF THIS ACT, AS WELL AS, 
.. .. 
IMPORTED OR SOLD OFF-PATENT DRUGS 
OR MEDICINES: 
PROVIDED, THAT SAID DRUGS OR MEDICINES BEAR THE 
REGISTERED 
MARKS 
THAT 
HAVE 
NOT 
BEEN 
TAMPERED, 
UNLAWFULLY MODIFIED, OR INFRINGED UPON AS DEFINED 
UNDER SECTION 155 OF THIS CODE.” 
SECTION 8. Implementing Rules and Regulations on Amendments to Republic Act 
No. 8.293 othemise known as the Intellertual Propefly Code of the Philippines. - Unless 
otherwise provided herein, the Intellectual Property Office, in coordination with the 
Department of Health and the Bureau of Food and Drugs, shall issue’ the necessary 
implementing rules and regulations for all amendments to Republic Act No. 8293, otherwise 
known as the Intellectual Property Code of the Philippines, within one hundred twenty 
(120) days after enactment of this law. 
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SECTION 
9. Strengthening of the Bureau of Food and Drugs (BFAD). - (a) For a more 
effective and expeditious implementation of this Act, the Director or head of the Bureau of Food 
and Drugs shall be authorized to retain, without need of a separate approval from any 
government agency, and subject only to the existing accounting and auditing rules and 
regulations, all the fees, fines, royalties and other charges, collected by the Bureau of Food a1d 
Drugs under this Act and other laws that it is mandated to administer based on the immediately 
prior year of operations, for use in its operations, like upgrading of its facilities, equipment 
outlay, human resource development and expansion, and the acquisition of the appropriate office 
space, among others, to improve the delivery of its services to the public. This amount, which 
shall be in addition to the Bureau of Food and Drugs’ annual budget, shall be deposited and 
maintained in a separate account or fund, which may be used or disbursed directly by the 
Director or head. 
(b) After five (5) years from the coming into force of this Act, the Director or head of the 
Bureau of Food and Drugs shall, subject to the approval of the Secretary of the Department of 
Health, determine if the fees and charges mentioned in subsection (a) hereof that the Bureau of 
Food and Drugs shall collect are sufficient to meet its budgetary requirements. If so, it shall 
retain all the fees and charges it shall collect under the same conditions indicated in said 
subsection (a) but shall forthwith, cease to receive any funds from the annual budget of the 
National Government; if not, the provisions of subsection (a) shall continue to apply until such 
time when the Director or head of the Bureau of Food and Drugs, subject to the approval of the 
Secretary of Health, certifies that the abovestated fees and charges the Bureau of Food and Drugs 
shall collect are enough to fund its operations. 
(c) The Bureau of Food and Drugs shall submit a yearly performance report to the 
Quality Affordable Medicines Oversight Committee, as provided in Section 11 of this Act. 
The report shall itemize the use of such retained funds in the past year up to the present and 
the budgeted use of the same in the succeeding periods. 
SECTlON 10. Drug or Medicine Price Regulation by the President of the Philippims. - 
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(a) Without prejudice to the provisions in Republic Act No. 7581, otherwise known as the 
Price Act, the President of the Philippines shall have the power to impose price ceilings over any 
or all drugs or medicines, upon joint recommendation of the Secretaries of the Department of 
Health and Trade and Industry, if any of the following conditions so warrant: _'' 
(1) The impendency, existence, or effects of a calamity that affects public health; 
(2) The threat, existence, or effect of a public health emergency officially recognized 
by the Department of Health or by official Department of Health recognized non- 
governmental organizations: 
(3) The prevalence of widespread acts of illegal price manipulation of any drug or 
medicine; 
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(4) The impendency, existence, or effect of any event that causes artificial and 
unreasonable increase in the prices of any drug or medicine. 
(5) Whenever the prevailing price of any drug or medicine has risen to unreasonable 
levels. 
(b) The power of the President of the Philippines to impose price ceilings shall be 
exercised within such period of time that the President shall deem necessary. The effectivity 
of this power of the President of the Philippines to impose price ceilings on drugs or 
medicines maybe revolted by the President of the Philippines by Executive Order. No court, 
except the Supreme Court of the Philippines, shall issue any temporary restraining order or 
preliminary injunction or preliminary mandatory injunction that will prevent the immediate 
execution of the exercise of this power of the President of the Republic of the Philippines. 
'r 
(c) Any person who refuses to comply with the order of the President of the 
Philippines as provided herein shall be punished with an administrative fine of not less than 
One Hundred Thousand Pesos (Php100,OOO.OO) but not more than Five Hundred Thousand 
pesos (Php500,OOO.OO) at the discretion of the Secretary of the Department of Health for the 
first offense. For each of the succeeding offenses, the administrative fine shall not be less 
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than Five Hundred Thousand Pesos (Php500,000.00) but not more than One Million Pesos 
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(Php1,000,000.00) at the discretion of the Secretary of the Department of Health plus the 
cancellation of the license to operate by the Bureau of Food and Drugs andor such other 
appropriate government authorities. 
(d) The Secretary of the Department of Health (DOH) shall issue the necessary 
implementing rules and regulations for the enforcement of the exercise of this power by the 
President of the Philippines. The implementing rules and regulations shall be issued by the 
Department of Health (DOH) within sixty (60) days from the promulgation of the order of 
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the President of the Philippines. 
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SECTION 11. 
Congressional Oversight Committee. - (a) For the effective 
implementation of this Act, there shall be created a Congressional Oversight Committee, here% 
after to be referred to as the Quality Affordable Medicines Oversight Committee to be composed 
of five ( 5 )  members from the Senate, which shall include the Chairpersons of the Senate 
Committees on Trade and Commerce and Health and Demography, and, five (5) members from 
the House of Representatives, which shall include the Chairpersons of the House of 
Representatives Committees on Trade and Commerce and Health and Demography. The Chair 
of the Quality Affordable Medicines Oversight Committee shall be the Chairperson of the Senate 
Committee on Trade and Commerce, and, the Vice-Chair of the oversight committee shall be the 
Chairperson of the House of Representatives Committee on Health and Demography. 
(b) The Quality Affordable Medicines Oversight Committee shall oversee the full 
implementation of the provisions of this Act. 
SECTION 12. Appropriarions, - For the initial implementation of this Act, the amount 
of Twenty Five Million Pesos (Php25,000,000.00) shall be provided for purposes of this Act 
in the current General Appropriations Act as addition to the annual budget of th? 
Department of Health, 
Thereafter, such sum as may be necessary for its continued 
implementation shall be included in the annual general Appropriations Act. 
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SECTION 13. Separability Clause. - Any portion or provisions of this Act that may be 
declared unconstitutional or invalid shall not have the effect of nullifying other portions and 
provisions hereof as long as such remaining portion or provision can still subsist and be given 
effect in their entirety. 
SECTION 14. Repealing Clause. - All laws, decrees, executive orders, proclamations 
and administrative regulations, or parts thereof inconsistent herewith are hereby repealed or 
modified accordingly. 
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SECTION 15. Effectiviry Clause. - This Act shall take effect fifteen (15) days after its 
publication in at least two national papers of general circulation. 
Approved, 
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