Philippine Institute for Development Studies

Review of the Cheaper Medicines Program of the Philippines

Botikang Barangay, Botikang Bayan, P !! "reatment Pack, and the Role of PI"C Pharma, Inc# in $overnment Drug Procurement
%scar &# Pica'o

Abbreviations and Acronyms

AO Administrative Order BFAD Bureau of Food and Drugs BnB Botikang Barangay BNB Botikang Bayan CHD Center for Health Development COBAC Central Office Bids and A ards committee DOH Department of Health !O !"ecutive Order FDA Food and Drug Administration #$A% #overnment $ediated Access %rice &#' &ocal #overnment 'nit &(O &icense to Operate HA) Health Action )nternational )&H* )nterlocal Health *one $e(A $edicines (ransparency Alliance $+% $a"imum +etail %rice NC%A$ National Center for %harmaceutical Access and $anagement N#O Nongovernmental Organi,ation %-.. the %hp -.. Drug +egimen %rogram %H)C %hilippine Health )nsurance Corp/ %hilHealth (he social health insurance program managed 0y the %H)C %)(C %hilippine )nternational (rading Corp/ %D) %arallel Drug )mportation %hp %hilippine %eso %%) %)(C %harma1 )nc/ +A +epu0lic Act 2A( 2alue Added (a" 3HO 3orld Health Organi,ation

Table of Contents

A00reviations and Acronyms /////////////////////////////////////////////////////////////////////////////////////////////////////////////////// 2 (a0le of Contents //////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// 4 &ist of (a0les /////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// 5 &ist of Figures ////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// 6 Chapter )/ )ntroduction /////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// 7 Chapter ))/ %harmaceutical 8ector Conte"t////////////////////////////////////////////////////////////////////////////////////////////// 9 Chapter )))/ +evie of the Botika ng Barangay %rogram ///////////////////////////////////////////////////////////////////////// -9 Chapter )2/ +evie of the Botika ng Bayan %rogram ///////////////////////////////////////////////////////////////////////////// 44 Chapter 2/ +evie of the %-.. (reatment %ack %rogram ////////////////////////////////////////////////////////////////////// 49 Chapter 2)/ +evie of the Drug )nventory $anagement 8ystem 8upporting the #overnment %harmaceutical %rograms //////////////////////////////////////////////////////////////////////////////////////////////////////////// 5: Chapter 2))/ +evie of %)(C $andate and %erformance///////////////////////////////////////////////////////////////////////// ;+eferences //////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// ;6

List of Tables
(a0le -/ %rice Comparison <in %eso !=uivalent> of (hree 8elected Drugs in the %hilippines1 )ndia1 and %akistan1 2..:///////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// 9 (a0le 2/ %rice Comparison <in %eso !=uivalent> of Four 8elected Drugs in the %hilippines and )ndia1 2.-.1 2.-.//////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// 9 (a0le 4/ $edian $edicine %rice +atios for )nnovator Brands and (heir #eneric !=uivalents in the %hilippines1 in %u0lic and %rivate 8ectors1 2..21 2..;1 and 2..:?.9 ////////////////////////////////////////////////////// -. (a0le 5/ %ercent of 838 8urveyed Filipino Households 3ho +eported the %urchase of #eneric and Branded $edicines1 2..4 and 2..://///////////////////////////////////////////////////////////////////////////////////////////////////// -(a0le ;/ Num0er of Days that a &o est@%aid #overnment !mployee Needs to 3ork to %urchase One DayAs 3orth of #eneric $edicine1 0y (ype of Condition1 2..9/////////////////////////////////////////////////////////////// -(a0le 6/ 'r0an and +ural %oor Households 3ith and 3ithout Health )nsurance Based on Data Derived from %ro"y $eans (est////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// -4 (a0le 7/ 2alue of %arallel Drug )mports1 in '8B $illion1 2... to $arch 2.-. ///////////////////////////////////////// -7 (a0le :/ BnBs 0y 8ite1 2..9//////////////////////////////////////////////////////////////////////////////////////////////////////////////////// 2(a0le 9/ +egional Distri0ution of BnBs and %opulation?BnB in !ach +egion1 2..9 ///////////////////////////////// 22 (a0le -./ 8elling %rice of 8elected Drugs Bet een BnB and a &eading %rivate Drugstore Chain1 Cune 2..6 ////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// 2; (a0le --/ %rice Comparison of +etail %rices Bet een the BNB and (he #enerics %harmacy1 as of April 2.-.////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// 2; (a0le -2/ 8elling %rice <%hp> of 8elected Drugs Among BnB1 %rivate #eneric1 Branded #eneric1 and )nnovator Drugs1 2..9 /////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// 27 (a0le -4/ %rice 2ariations of (hree %rescription and (hree Over@the@Counter Drugs in BnBs1 2..9 /////// 27 (a0le -5/ Num0er of BnBs 0y 8ponsoring Organi,ation or )ndividual1 2..9//////////////////////////////////////////// 2: (a0le -;/ Functionality of BnBs using Alternative Definitions1 2..9 /////////////////////////////////////////////////////// 29 (a0le -6/ &evel of #ross 8ales of BnBs1 2..9 ////////////////////////////////////////////////////////////////////////////////////////// 4. (a0le -7/ %roposed Design for an )mpact !valuation of BnB and BNB //////////////////////////////////////////////////// 42 (a0le -:/ Num0er of BNB Outlets 0y +egion and %opulation?BNB1 2.-.//////////////////////////////////////////////// 4; (a0le -9/ (ypes of BNB 0y $aDor )sland #roup and Num0er of BNB 3hich Have Closed1 as of !nd@2.-.47 (a0le 2./ !stimated Annual %roDected $arginal 8tatement of Operations1 in %hp////////////////////////////////// 47 (a0le 2-/ Drugs )ncluded in the %-.. %rogram and %eso 8avings %er (reatment %ack +elative to the Common Brand1 2.-.//////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// 49 (a0le 22/ %rice Comparison of %-.. (reatment %ack ith !=uivalent Common Brand in Oriental $indoro %ilot and Overall DOH1 2..9//////////////////////////////////////////////////////////////////////////////////////////////////// 5(a0le 24/ Funding of (reatment %ack %rogram 0y (ype of +ecipients and Classification of Households/ 55 (a0le 25/ %)(C %rocurement and Distri0ution %rocess for the BnB %rogram ////////////////////////////////////////// 59 (a0le 2;/ %roposed Ne %rocurement 8ystem for the %-.. %rogram //////////////////////////////////////////////////// ;. 5

(a0le 26/ 2ariation of Actual %rocurement %rice <%hp> of #eneric Amo"icillin and +anitidine at !ach %rocurement !ntity in NC+1 +egion )2@A1 and +egion )2@B1 2..: //////////////////////////////////////////////////////////// ;2 (a0le 27/ %rice Comparison of a 8ample of !ssential $edicines Among %)(C #eneric1 Branded #eneric1 %rivate@8ector #eneric1 and )nnovator Drugs1 2..9//////////////////////////////////////////////////////////////////////////////// ;2

List of Figures
Figure -/ +atio of %hilippine %rice to )ndia %rice for 8elected $edicines1 2..5 and 2.-.//////////////////////// -. Figure 2/ %ercentage of Household Cash 8pending on Drugs to (otal Household 8pending for $edical Care1 in )ncome Deciles1 2..6//////////////////////////////////////////////////////////////////////////////////////////////////////////////// -2 Figure 4/ $a"imum1 Average1 and $inimum %rices of 8elected Fast@$oving Drugs in the %hilippines <in %hp>1 $ay 261 2.-. /////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// -; Figure 5/ +etailing of %arallel Drug )mports in the %hilippines//////////////////////////////////////////////////////////////// -6 Figure ;/ Annual and Cumulative Num0er of BnBs !sta0lished1 2..4 2.-.///////////////////////////////////////// 2. Figure 6/ %ercentage of Barangays 3ith a BnB1 0y +egion1 as of $ay 2.-. //////////////////////////////////////////// 24 Figure 7/ Annual and Cumulative Num0er of BNBs !sta0lished1 2..; 2.-. <!nd of Eear> //////////////////// 4; Figure :/ Num0er of BNBs 0y +egion1 in #ross Num0ers1 as of $ay 2.-. /// (rror) Bookmark not defined# Figure 9/ %ercentage of Cities and $unicipalities 3ith BNB1 0y +egion1 as of $ay 2.-. //////////////////////// 46

Chapter I. Introduction

*# %+,ectives of the Study

(his study forms part of a0out a do,en assessments of specific policy and programmatic interventions that the Department of the Budget and $anagement <DB$> commissioned to the %hilippine )nstitute for Development 8tudies <%)D8> in Fe0ruary 2.--/ (he analyses are intended to 0e used as 0ackground papers for the possi0le restructuring and 0udget allocations of these government programs/ (his study aims to assess three discrete government programs designed to lo er the cost of medicines in the %hilippinesF the Botikang Barangay <BnB>1 the Botikang Bayan <BNB>1 and the %-.. treatment pack programs1 and the mandate and role of the %hilippine )nternational (rading Corp/ <%)(C> in these programs/ (hese interventions form part of a much0roader Cheaper $edicines %rogram <C$%> of the government hich consists of a range of policies and regulations designed to lo er the cost of medicines and improve peopleAs access to them/)n chronological order1 the DOH has formulated the follo ing relevant C$% policies and regulationsF (he #enerics Act of -9:: <+/A/ 667;> aimed to promote1 re=uire1 and ensure ade=uate supply1 distri0ution1 use and acceptance of drugs and medicines identified 0y their generic names/8u0se=uently1 DOH issued the implementing guidelines for the e"clusive use of generic terminology in all prescriptions and orders in all DOH hospitals <A/O/ -691 s/ 2..5>/ !/O/ 591 s/ -994 directed the mandatory use of the %hilippine National Drug Formulary <%NDF> as the 0asis for the procurement of drug products 0y the government/ A/O/ -:1 s/ 2..61 contained the implementing guidelines for the %NDF system/ +/A/ 7;:-1 the %rice Act1 mandated the DOH as the lead agency in identifying essential drugs as 0asic necessities and in monitoring their corresponding prices/ Follo ing this la 1 DOH issued the guidelines for DOH retained hospitals to engage in holesale procurement and distri0ution of essential drugs <A/O/ -.1 s/ 2..;>Gthe guidelines for drug consignment in government hospitals <A/O/ -5;1 s/ 2..5>G and the revised policies and guidelines for the institutionali,ation and decentrali,ation of the DOH drug consignment system/ A/O/ 91 s/ 2..6 provided the guidelines for institutionali,ing and strengthening the !ssential Drug %rice $onitoring 8ystem <!D%$8>Gthe use of the Drug %rice +eference )nde" as a guide to rational drug selection and drug pricesG and the use of the +eference )nde" as the 0asis for reim0ursing drugs and medicines in hospital claims/

D/$/ 9:1 s/ 2..5 provided the guidelines for enhancing the informational transparency on the transactional visits of sales and medical representatives in all DOH facilities/ +/A/ 9;.2 of 2..:1 the Cheaper $edicines Act1 is intended to achieve universally accessi0le and cheaper and =uality medicines 0y pursuing an effective competition policy in the pharmaceutical sector/ (he %resident su0se=uently issued an e"ecutive order re=uiring ma"imum retail prices for a num0er of drugs/ +/A/ 97-- of 2..:created the Food and Drug Administration from the former Bureau of Food and Drugs1 and conferred upon it much 0roader regulatory po ers/

B# Scope and %rgani'ation of the Report

(his study focuses only on the operations of the BnB1 BNB1 and %-.. treatment pack programs/ )t does not assess the much larger policies on parallel drug importation <%D)> and the generics drugs la on hich these programs depend/ )t also does not assess the impact of the #overnment $ediated +etail %rice <ma"imum retail price> of drugs and the su0se=uent voluntary price reduction of pharmaceutical companies1 done in the ake of the enactment of the Cheaper $edicines Act/ (hese issues re=uire more intensive scrutiny 0eyond the scope of this study/ (he study involved a revie of pu0lished and unpu0lished literature/ Fortunately1 there already e"ists a ealth of data from studies produced in recent years1 especially from the $edicines (ransparency <$e(A> coalition/ No primary survey for this study as involved/ (he study should not 0e vie ed as an impact evaluation1 0ut only a policy and program revie / (he study also involved selected intervie s ith key informants in $etro $anila/ Due to time limitations1 only a limited num0er of them ere intervie ed/ No visits to actual BnB1 BNB1 and %-.. sites ere made/ (he report is organi,ed as follo s/ (his chapter provides the introduction/Chapter )) situates the assessment in the %hilippine pharmaceutical conte"t/ Chapter )))revie sthe Botikang Barangay program/Chapter )2revie the Botikang Bayan program/Chapter 2revie s the %-.. treatment pack program/Chapter 2) revie s the %)(C %harma system supporting government drug procurement/ Finally1 Chapter 2))revie sthe mandate and performance of %)(C in drug procurement/ (he conclusions and operational recommendations are contained in the separate chapters1 rather than pulled together in a separate chapter/ (he report incorporates the comments of the DOH@NC%A$ staff on an earlier version of the study/ (he research assistance provided 0y $s/&eilaniBolong is appreciated/

Chapter II. Pharmaceutical Sector Context

*# %verwhelming Role of the Private Sector
8ales of pharmaceuticals in the %hilippines are conservatively estimated at %hp-.. 0illion annually1 ith 7. percent 0eing accounted for 0y multinational firms <%a0lico1 2..6>/ According to %HA% data <Ball1 2.-.>1 a0out :. percent of the sales are in drug stores1 -. percent in hospitals1 and -. percent in other retail outlets/ Out of total sales1 64 percent comes from a maDor pharmaceutical chain1 -7 percentcomes from the com0ined sales of all other small independent pharmacies1 7 percent comes from private hospitals1 2/; comes from pu0lic hospitals1 -. percentcomes from other private outlets1 and ./; percent comes from other pu0lic outlets/ (hus1 the private sector as a hole holds an inordinate share of the market <more than 9. percent>1 hile the pu0lic sector is a very minor financier and purchaser/ Drugs are a re=uirement for almost all modern health care/ Drugs account for a0out half of household health spending among Filipinos/ Although pharmaceutical reim0ursements of the social health insurance program <%hilHealth> remain small relative to its mem0ersA needs1 they already account for 4. percent of its total payouts/(here remains a large unmet need for drugs hich has not 0een =uantified <NC%A$1 n/d/>/

B# Country of (-pensive Drugs

Drugs in the %hilippines are more e"pensive than in other countries in Asia1 and in countries of similar economic status/ (his has 0een repeatedly sho n in studies1 e/g/1 Business $eridian )nternational1 as cited in B)*C&)+ <2..9> in (a0le - and &avado <2.--> in (a0le 2/ Drug prices of 0rand names in the %hilippines are any here from ; to 4. times more e"pensive than similar 0rand names of similar manufacturers in )ndia and %akistan/ (his is the strongest factor that impelled the government to institute a parallel drug importation policy under the Cheaper $edicines %rogram/ "a+le # Price Comparison .in Peso (/uivalent0 of "hree Selected Drugs in the Philippines, India, and Pakistan, 1!!2 %rice in the %rice in )ndia %rice in %hilippines <0> %akistan <a> <c> Norvasc %fi,er 5;/.. ; n?a 2entolin #8H 4-;/.. -24/.. 62/.. )mmodium Cansen -./.. 4/.. -/:. 8ourceF Business $eridian )nternational1 as cited in B)*C&)+ <2..9>/ Brand Name $anufacturer +atio <a?0> 9/. 2/6 4/4 +atio <a?c> @ ;/;/6

"a+le 1#Price Comparison .in Peso (/uivalent0 of &our Selected Drugs in the Philippines and India, 1! !, 1! ! Brand Name $anufacturer 9 %rice in the %rice in +atio

%hilippines <a> Buscopan1 -. mg?ta0 Boehringer -;/:4 %onstan1 ;.. mg?ta0 %fi,er 2;/77 Adalat +etard1 2. mg?ta0 Bayer 54/5; Bactrim1 5.. mg?:. mg ta0 +oche -:/-6 8ourceF &avado <2.-->1 0ased on Online $)$8 %hilippines 2.-.1 httpF?? /mims/com?inde"/asp" C)$8 )ndia 2.-.1 httpF??

)ndia <a?0> <0> -/92 :/2 2/96 :/7 -/55 4./2 ./;6 42/5 /mims/com?inde"/asp"G

$ore distur0ingly1 the trend is not improvingG in fact1 it is orsening1 at least until after the imposition of the #overnment $ediated Access %rice <#$A%> in 2.-./ As (a0le 4 sho s1 the ratio of local median prices to international reference prices especially for innovator <or originator> 0rands1 in 0oth pu0lic and private sectors1 rose in most of the past decade/ )ndeed1 the ratios of %hilippine price to )ndia price for all the four 0randed drugs considered in Figure - rose from 2..5 to 2.-./ "a+le 3# Median Medicine Price Ratios for Innovator Brands and "heir $eneric (/uivalents in the Philippines, in Pu+lic and Private Sectors, 1!!1, 1!!4, and 1!!25!6 (ype 8ector 2..2 2..; 2..; 2..:?.9 2..:?.9 )nnovator %u0lic -:/25 -;/4-5/-9 4./24 26/44 Brand %rivate -;/9; -7/2: @ 47/-. @ #eneric %u0lic @ 6/5. ;/-5 9/7: 7/97 !=uivalent %rivate :/46 -7/76 ;/65 @ -./76 @ 8ourceF 2..2 data are from Health Action )nformation Net ork <2..2> and 2..; data are from the )nstitute of %hilippine Culture <2..;>1 as cited 0y Batangan and Cu0an <2..9>/ &igure # Ratio of Philippine Price to India Price for Selected Medicines, 1!!7 and 1! !

8ourceF &avado <2.--> -.

#ains have 0een achieved in the production and consumption of generic drugs1 follo ing the enactment of the #enerics Act in -9::/ )n the first@ever #enerics 8ummit held in 8eptem0er 2..:1 as many as 2: generic@drug companies ere given =uality seals for good manufacturing practicesG the num0er of #ood $anufacturing %ractice <#$%> compliant firms has since increased to ;41 though a larger num0er of firms continues to operate ithout having yet complied ith #$% standards/ Nonetheless1 the larger firms manufacturing prescription drugs no meet #$% standards/ (oday1 it is claimed that ;@6 out of -. Filipinos no purchase generic drugs/ As (a0le 5 sho s1 an increasing proportion of Filipinos are no 0uying cheaper generic drugs1 and the proportion of households ho did not 0uy medicines <for any reason> has declined significantly/DOH has mandated all government health orkers to use only generic terminologies in drug purchasing1 prescri0ing1 dispensing1 and reim0ursement/ +eports indicate that generic manufacturers no sell at prices ;;@:. percentlo er than their 0randed counterparts/ "a+le 7#Percent of S8S Surveyed &ilipino 9ouseholds 8ho Reported the Purchase of $eneric and Branded Medicines, 1!!3 and 1!!2 (ype of $edicines #eneric medicines Branded medicines Did not 0uy medicines 8ourceF 8ocial 3eather 8tations/ 2..4 57 46 -7 2..: ;; 4: 7

Ho ever1 even the cheapest generics in the %hilippines still sell at a high multiple of international reference prices/ (he case is even orse for originator drugs/ (hus1 afforda0ility of drugs remains a serious pro0lem/ (he 3HO survey of patients in health facilities in 2..9 defined afforda0ility as the num0er of daysA ages that the lo est@paid government employee needs to purchase standard treatments for selected conditions/ (he results1 sho n in (a0le ;1 indicate that drugs remain prohi0itive for the lo est@earning householdsG this means that drugs are even more prohi0itive for the unemployed and indigent/ "a+le 4# :um+er of Days that a ;owest<Paid $overnment (mployee :eeds to 8ork to Purchase %ne Day=s 8orth of $eneric Medicine, +y "ype of Condition, 1!!6 Condition Adult respiratory infection High cholesterol Hypertension Hypertension 'lcer %ediatric respiratory infection 8ourceF Batangan and Cu0an <2..9> #eneric $edicine Amo"icillin 8imvastatin Atenolol Captopril Ompepra,ole Ceftria"one No/ of DaysA 3ork ./4 days -/5 days ./: days -/- days I - day I- day

)n a separate 3HO household survey in 2..91 it as found that the average cost of a prescription for acute illness as %hp 5:;1 and the monthly cost of medicines for chronic diseases as %hp 956/ Health insurance penetration among the surveyed households as very lo 1 and even among those ith health insurance1 pharmacy for outpatient care is not usually covered <Batangan and Cu0an1 2..9>/

--

(o economi,e on going to the doctor or other health orker1 Filipinos commonly resort to self@ treatment or self@prescription/ )n the 3HO household survey1 over half of the medications taken in acute illness ere self@prescri0ed or prescri0ed 0y a non@health professional/ Of course1 this practice of self@treatment creates its o n pro0lems1 including possi0le improper medication1 and drug resistance in the case of use of anti0iotics/ (he household afforda0ility of medicines is particularly acute for sufferers of chronic and de0ilitating illnesses re=uiring maintenance drugs/ A study on dia0etes care in the country <Higuchi1 2..:> sho ed that there are very fe sustaina0le measures for the maintenance of regular medications of dia0etics 0ecause of personal cost constraints1 hich leads to irregular treatment leading to more e"pensive complications and hospital admissions later/

C# "he%nus of Payment for Drugs is on 9ouseholds

Households spend a significant percentage of medical care on drugs1 and poorer households tend to spend a larger share of their medical care costs on drugs than richer households do <Figure 2>/ During the year1 the poorest households spend on average more than half <;9 percent> of their medical care costs on drugs/ For the richest households1 this proportion is only 5- percent/ (hus1 relative to their income and medical care costs1 the poor 0ear a heavier load on drug costs than do richer households/ &igure 1# Percentage of 9ousehold Cash Spending on Drugs to "otal 9ousehold Spending for Medical Care, in Income Deciles, 1!!>

8ourceF Family )ncome and !"penditures 8urvey 2..61 as cited 0y Ban,on <2.-.>/ 3hy do drugs take up a large proportion of household medical care costs1 especially among the poorJ A primary reason is the a0sence or eakness of risk pooling/ $any of the poor1 especially those in the informal sector1 are not in any health insurance risk pool1 such as %hilHealth1 private health insurance1 or community1 &#'1 or other micro@insurance programs <see (a0le 6/>$oreover1 even if they ere in a risk -2

pool1 outpatient drug purchases are typically not a covered 0enefit in such risk pools1 including %hilHealth/ "a+le ># ?r+an and Rural Poor 9ouseholds 8ith and 8ithout 9ealth Insurance Based on Data Derived from Pro-y Means "est (ype of Health )nsurance %hilhealth or other social health insurance H$O insurance Cooperative health insurance Other health insurance No health insurance 8ourceF Cited 0y Ban,on1 2.-. National Capital +egion 'r0an %oor 2;/. ./2 ./2 5/. 7./. +ural %oor 2./; ./2 ./6 5/. 7;/.

As for inpatient %hilHealthdrug 0enefits1 poor purchasing practices <especially in government hospitals> often lead to 0loated costs/ (he a0sence of drugs in many government hospitals also forces households to 0uy in private pharmacies as out@of@pocket spending/ (hus1 the t o long@standing pro0lems related to this issue areF No capitation for primary care/ (he lack of a capitation system to pay for primary care providers is a severe shortcoming as :9 percent of pharmacy sales are made on outpatient settings/ No case@0ased payment for hospital care/ 'nder fee@for@service <itemi,ed 0illing> system of paying providers1 private hospitals and physicians have little incentive to use cheaper drug alternatives <such as generics> 0ecause the higher their value of claims1 the more reim0ursements they o0tain1 and the 0etter off they ould 0e/

D# &actors *ffecting Drug Prices

$ost drug ingredients in the %hilippines are imported/ $ost local drug manufacturing is through a toll system1 a version of contract manufacturing here production is outsourced 0y an originating company to third parties/ A0out :. percent of toll manufacturing 0y multinational companies is done 0y )nterphil &a0oratories1 a sister company of *uellig%harma1 hich itself accounts for a0out :. percent of holesale distri0ution <%a0lico1 2..6>/ Another key factor in the local pharmaceutical market is the over helming share of 0randed medicines/ Before the end of the previous decade1 the over helming demand for drugs is for originator 0rands and K0randed genericsLG true generics accounted for a very small percentage <a0out 4 percent> of sales1 hereas it accounted for as much as ;. percent of the '/8/ market <%a0lico1 2..6>/ (his is counter@ intuitive in light of the already off@patent status of many of the essential drugs in the %hilippines/ &ack of household kno ledge of drugs1 pervasive marketing and advertising1 the strong role of medical representation in the sale of drugs1 and the incentives given to prescri0ing doctors have 0een fre=uently cited as contri0uting to the persistence high drug prices and the high consumption of 0randed drugs in the country/ But perhaps the most important factor is the sheer lack of supply of generic alternatives to households anting them1 a situation that persisted until past the middle part of 2...s hen generics -4

finally emerged on their o n1 thanks in part to the initiatives that ill 0e revie ed in this report <parallel drug importation1 village pharmacies1 drug franchises1 drug treatment packs1 and the like>/ Ball and (isocki <2..9> undertook a study in three regions of the country to e"amine the price components for originator 0rands and a generic version of si" medicines1 namelyF cotrimo"a,ole1 coamo"iclav1 atenolol1 gli0enclamide1 amlodipine1 and atorvastatin/ (he study covered pu0lic hospital pharmacies1 chain and independent retail pharmacies1 and village pharmacies <Botikang Barangay> in three regions/ (he selling price to patients as determined at each outlet and then the price as traced 0ack through the supply chain through distri0utors to manufacturers or importers1 using invoices and?or other documents from hich validated data could 0e o0tained/ (he results of the study indicate the follo ingF <->Highly concentrated market structure and product segmentation +icher Filipinos tend to use originator 0rands and K0randed genericsL sourced from private drugstores and hospitals1 hile poorer Filipinos rely to a greater e"tent on lo er@priced generics sourced from pu0lic facilities and community outlets/ $iddle@class Filipinos tend to follo richer FilipinosA use of originator 0rands and K0randed genericsL 0ut ith greater use of pu0lic facilities/ (he dominance of e"pensive originator 0rands and K0randed genericsL among upper@class Filipinos is due to a num0er of factors including strong marketing 0y dominant manufacturers and support of their products 0y prescri0ing physicians incentivi,ed 0y medical representativesG lack of competition from pu0lic and N#O outlets hich concentrate on provision of lo er@priced generics to the poorG information im0alance among patients relying on physician advice and lacking kno ledge of competing productsG and inade=uate assurance of =uality of generics 0y the Food and Drug Administration <FDA1 formerly BFAD> leading to popular dou0ts a0out the 0ioe=uivalence of generics to more e"pensive originator 0rands or K0randed generics/L <2> High retailer markups For generic products1 markups ranged from ; 4;; percent at the retailer level1 and -: --7 percent at the distri0utor level/ For originator 0rand products1 markups ere relatively lo er <;@: percent> at private retail pharmacies/ Ho ever1 a large chain pharmacy had markups that ranged from 2 6. percent/ <4>Cost@increasing value@added ta" <2A(> 2A( is charged at a rate of -2 percent hich the patient has to pay/ (he original 2A( is incurred at the first stage of the supply chain1 and distri0utors and retailers often charge their markup 0ased on the 2A( inclusive price rather than on the cost e"cluding 2A(/ (his practice ratchets up the price paid for 0y the patient/ <5>Adverse effect of senior citi,ensA discounts 8enior citi,ens are eligi0le for a 2. percent discount on the retail price of medicines/ 3hile retailers could offset some of this cost <7 percent> through their 2A( returns1 there is no specific 0udgetary provision for this1 so the remaining -4 percent has to 0e recouped 0y retailers through increased prices to all patients/ <;> Discount schemes (o promote their corporate image1 pharmaceutical companies and retailers have resorted to loyalty cards that provide discounts and there0y incentivi,e customers to purchase a particular 0rand or to 0uy from a particular store/ (hese programs are often accompanied 0y patient assistance schemes that in turn channel consumers to the promoted products/ (he discount programs of %fi,er and $ercury Drug have 0een the most visi0le in this regard/ 3hile there are certain positive -5

features in such programs1 they also tend to irrational medicine selection 0y patients or their physicians1 and could discourage them from looking at other <cheaper> alternative drugs/

(hrough a com0ination of the a0ove factors1 there is a noticea0le large variation in the prices of fast@ moving drugs in the %hilippines1 as sho n in Figure 4 <&avado1 2.-->/ 8ome outlets charge as much as 2 or 4 times the price of similar drugs in other outlets/ &igure 3# Ma-imum, *verage, and Minimum Prices of Selected &ast<Moving Drugs in the Philippines .in Php0, May 1>, 1! !

NoteF Only average prices ere la0elled/ 8ourceF &avado1 2.--1 0ased $)$8 %hilippines data retrieved on $ay 261 2.-./

(# Recent Policies to ;ower the Prices of Medicines

-/ Parallel Drug Importation @ (he Botikang Barangay <BnB>1 the Botikang Bayan <BNB> as ell as the %-.. program rely crucially on the parallel drug importation <%D)>/ )n 2...1 the DOH initiated %D) as an innovative strategy to cut costs of medicines/ %D) involves the importation into the country of a patented drug from a third country ithout the authori,ation of the patent holder <in a second country1 usually the '/8/ and !uropean countries here many of these drugs ere researched1 developed1 and patented>/ )t is mainly used hen the price in the third country is considera0ly lo er than the price the patent holder charges in the country concerned/ Figure 5 sho s ho the drugs imported through the %D) policy are retailed/ %)(C imported the %D) medicines1 mostly from )ndia and %akistan1 and DOH distri0uted them under the #amotna$a0isa at A0ot Haya <#$A ;.> %rogram in its 72 DOH@retained hospitals and three &#' hospitals in the Autonomous +egion of $uslim $indanao <A+$$>/ (he DOHAs %harmaceutical -;

$anagement 'nit claimed that %D) imports achieved an estimated average of 6./9 percent price reduction of drugs in 2..51 much higher than the targeted ;. percent reduction 0y 2.-./ (he prices of essential medicines further decreased 0y an average of 5- percent in 2..; and again in 2..6 <David and #eronimo1 2..:>/ &igure 7#Retailing of Parallel Drug Imports in the Philippines

BnB %rogram %D) )mports %)(C %harma %)(C M DOH &ogistics

Outlets

BNB %rogram

Outlets

%-.. %rogram

DOH Hosp/

&#' Hosp/ DOH %rocurement

&#' %rocurement

&#'s can also directly purchase %D)s/ )ndeed1 in the early 2...s1 the provinces of Capi, and Negros Oriental placed orders for %D)s/ )n the case of Capi,1 the %rovincial #overnment even 0ecame the market leader1 forcing private drugstores to reduce their prices <$8H1 n/d/>/ 3hen the BnB and BNB emerged in the mid@2...s1 they 0ecame the primary retailers of %D) drugs/ (he Cheaper $edicines Act also allo s the retailing of %D) drugs to the private sector1 0ut in an assessment of the 0usiness climate in the health sector1 B)*C&)+ <2..9> pointed out that %D) drugs are retailed only in BnB1 BNB <and su0se=uently the %-.. programs>1 not in private outlets/ At that time1 most BNBs ere still N#O <non@profit> operations/ &ately1 ho ever1 there has 0een interest among for@profit 0usiness enterprises to 0ecome BNBs1 and most BNBs are no for@profit private enterprises/ Ho ever1 in hindsight1 the overall si,e of %D) procurement has 0een very small relative to the total pharmaceutical sales in the %hilippines/ )n the decade 0et een 2... and $arch 2.-.1 the %hilippine government imported only '8B :/7:9 million of %D) drugs <or %hp 477/9 million in todayAs current e"change rate of '8B -/..F %hp 54/..> <(a0le 7>/ (his translates to a measly average yearly importation of '8B 7991... <or %hp 45/5 million>

-6

"a+le @/ 2alue of %arallel Drug )mports1 in '8B $illion1 2... to $arch 2.-. Eear 2... 2..2..2 2..4 2..5 2..; 2..6 2..7 2..: 2..9 2.-. $arch (otal 8ourceF %)(C %harma1 $ay 2.-./ Annual )mports <'8B $illion> ./52. ./2;6 -/599 ./;-9 ./;7: -/.2. -/;5. -/44: -/574 ./--. ./.46 :/7:9

2/ Cheaper Medicines Law @ (he enactment in 2..: of the K'niversally Accessi0le Cheaper and Nuality $edicines ActL <+/A/ 9;.2> and in 2..9 of the KFood and Drug Administration ActL <+/A/ 97-->1 ere important milestones in laying the foundation for improving the =uality and reducing the prices of medicines/ (he KCheaper $edicines ActL confers on the %resident the authority to regulate the price of medicines and drugs and empo ers the DOH 8ecretary to esta0lish a drug price monitoring and regulation system/ %ursuant to this Act1 the %resident issued !"ecutive Order <!/O/> :2- <made effective August -;1 2..9> prescri0ing the ma"imum retail prices <$+%> also kno n as government mediated access prices <#$A%> for selected medicines that address some diseases hich are common causes of mor0idity and mortality in the country/ (he !/O/ covered only five active pharmaceutical ingredients including some antihypertensive1 anti0iotics1 and anti@neoplastics?anti@cancer/ At the same time1 some manufacturers negotiated ith the government to reduce prices of selected products voluntarily1 rather than fall under mandatory price regulation/ (he DOH approved voluntary price reductions of up to ;. percent for -6 molecules <or 5- drug preparations> in August 2..91 and a further 97 products in 2.-./ Ho ever1 voluntary price reductions apply only to the products of participating manufacturers1 not to alternative suppliers of generic su0stitutes/ (he DOH has esta0lished a process for monitoring and evaluation of the impact of these measures/ )nitial feed0ack has identified a num0er of concernsF <i> the selection of products for price restraint does not follo rational selection principles <for e"ample1 not all first line treatments for hypertension or asthma are covered>G <ii> the level of price reductions is ar0itrary <surveys have found %hilippines prices for originator 0rands to 0e over -; times higher than international reference prices1 and even lo est cost generics ;@6 times international reference prices>G <iii> the scheme may reduce generic competition and pu0lici,e 0rand@name medicines <for many of the products there is a much cheaper1 =uality generic su0stitute availa0le>G <iv> %hilHealth cannot use voluntary price reductions in its reim0ursement of

-7

medicines 0ecause they apply to specific manufacturers onlyG and in aggregate1 the medicines falling under the scheme account for a relatively limited share of the market/

-:

Chapter III. evie! of the "oti#ang "arangay Program

*# Program Description
(he village drug outlethas had a checkered history in the %hilippines/ )t as kno n as KBotikasa BarangayL in the -97.sG faded out of the scene in the -9:.s and -99.s <Flores1 'menai1 and 3akal1 2..->G and as revivedduring the -2th Congress hen former %res/ #loria $acapagal Arroyo pledged in her state of the nation address <8ONA> in Culy 2... to lo er the prices of drugs and medicines fre=uently 0ought 0y the poor 0y ;. percentduring her administration<DOH1 2..4>/ (his as part of her -.@%oint &egacy %rogram/ Follo ing this presidential pledge1 the DOH entered into a $emorandum of Agreement ith the %hilippine Charity 8 eepstakes Office <%C8O> and the %hilippine )nternational (rading Corp/ <%)(C> to purchase and distri0ute the drugs and medicines through the DOH net orks of the renamed Botikang Barangay <BnB>and1 later1 the larger Botikang Bayan <BNB>/ %C8O earmarked %hp 2. million to 0e transferred to %)(C for the procurement of BnB drugs/ (he initial target as :.. BnB hich ill each 0e seeded ith %hp 2;1... orth of drugs/ (o operationali,e this program1 DOH issued A/O/ 651 s/ 2..4 hich contained the policy guidelines for the operationali,ation of BnBs 0y the regional Centers for Health Development <CHD>/ (he A/O/ defined a BnB as a drug outlet of a proponent local government unit <&#'>-G selected 0y the CHD concernedG approved 0y the %harma ;. %roDect hich as purposely set up to manage the 8ONA pledgeG and licensed 0y the Bureau of Food and Drugs <BFAD>1 no kno n as the FDA/All BnB drugs pass through the =uality control and product registration standards of the FDA/ (he BnBs ere mandated to sell lo @priced generic over@the@counter <O(C> drugs and1 originally1 2 prescription drugs <amo"icillin and cotrimo"a,ole>/&ater1 the num0er of drugs as increased1 ith each BnB0eing a0le to sell a selection from a list of around 4; O(C generic medicines and household remedies1 and 7 prescription drugs/ (oday1 BnBs can sell up to 5. essential O(C drugs and : prescription drugs <NC%A$1 n/d/>/ (he rest of the DOH A/O/ defines the general and specific guidelines ith respect toF <a> handling procedure for the initial deliveries of drugs procured through the %)(CG <0> BnB responsi0ilities of proponent &#'sG <c> stocks replenishment orders from the BnBsG <c> BnB supplier eligi0ility and accreditationG <d> BnB drug price determination for stock replenishmentsG <e> fund management conditions for the BnBsG <f> rational drug useG and <g> proDect monitoring/

B# Program Performance
1. Extent of BnB and the poors access to them Figure ; sho s the impressive gro th of BnBs since the program as launched/ )t has 0een estimated that a typical BnB serves around ;.. people per month <NC%A$1 n/d/>/ (his means that the -614;.BnBs in e"istence 0y the end of 2.-. serve a0out :/2 million people a month1 or a0out :/7 percent of the countryAs population/ )t is difficult to estimate the

(his as the original intention1 0ut as ill 0e sho n 0elo 1 the BnBs have evolved such that most of the sponsoring organi,ations no are actually private entities/

-9

num0er of Filipinos they serve each year1 0ecause some of the clients certainly ill have repeat purchases throughout the year/ &igure 4#*nnual and Cumulative :um+er of BnBs (sta+lished, 1!!3A 1! !

NoteF 2..7 data ere not availa0le/

By the end of 2.-.1 a total of -614;. BnBshad 0een esta0lished nation ide1 including those of t o N#Os <-.6 of the Ha0alikatngBotikaBinhi and 574 of the National %harmaceutical Foundation or Health %lus>/Official reports sho that the original target of - BnB per 4 0arangays as achieved one year early <in 2..9> <NC%A$1 n/d/>/ (he ne target has 0een set at -F2 for all 0arangays/ Based on this ne target1 a survey done under the auspices of the !uropean 'nionAs<!'> Health 8ector %olicy 8upport %rogram <2reeke1 et al/1 2..9> sho ed that 62 percent of 4:9 BnBs seen do serve 2 0arangays1 hile 4: percent serve - 0arangay/ )n other ords1 the program target has 0een e"ceeded 0y more than 4. percent/ For the poorest of the poor 0arangays1 the target is -F-/ )n the Autonomous +egion of $uslim $indanao <A+$$> as ell as geographically isolated and depressed areas1 the target is also -F-/ +esults of the !' BnB survey sho ed that a third of the BnBs are found in residences in the 0arangay <(a0le :>/ An additional half <59 percent> are found in 0arangay health stations1 0arangay halls1 or sari@ sari <variety> stores/ $ore than half <;; percent> of them are ithin ; minutes of alking distance to the nearest health facility <typically a rural health unit> hile another 2; percent are ithin 4. minutesA alking distance/ Only around -9 percent of the BnBs are an hour or more of alking distance from an +H'/ On the 0asis of these findings1 it can 0e concluded that the e"isting BnBs are accessi0le to their rural clients/

2.

"a+le 2#BnBs +y Site, 1!!6 8ite No/ of BnBs +esidence -2. Barangay health station 6: Barangay hall ;7 8ari@sari store ;+ural health unit 9 $unicipal hall Others ;6 (otal 462 NoteF (he 462 total represents only the functional BnBs/ 8ourceF 2reeke1 et al/1 2..9 %ercent 44 -9 -6 -5 2 Negl/ -; -..

Although there has 0een nota0le achievement in the gro th of BnBs1 their geographic distri0ution across the country has not 0een as e=ually impressive/ 'sing population?BnB ratio1 (a0le 9and Figure ; sho that the regions orst served ith BnB also tend to 0e the poorer ones1 e/g/1 A+$$ <- per -519..>1 Bicol <- per -51...>1 8occsksargen <- per -.17..>1 and $imaropa <- per 91...>/ %rovincial distri0ution is even more striking1 ith the poorest provinces such as Basilan1 8ulu1 &anao del 8ur1 (a i@ta i1 Compostela 2alley1 8u=uiDor1 Batanes1 and $arindu=ue ithout BnB as late as 2..9/ (he other poorly served provinces are Nueva 2i,caya < ithonly -2 percent of its 0arangays having a BnB>1 Al0ay <-. percent>1 8orsogon <; percent>1 8i=uiDor <5 percent>1 and Catanduanes <4 percent> <&avado1 et al/1 2.-->/ 8even years after the program as initiated in 2..-1 -; of the 5. poorest to ns still do not have BnBs <+aga,a and $orales1 2..9>/ BnBsA ina0ility to penetrate =uickly into the poorest areas1 hich as the original intention of the program1 is due to the fact that DOH is not directly involved in determining and setting up BnB outlets/ BnBs are largely a local initiative of the &#'s and community organi,ations ith support from the DOHAs regional Centers for Health Development/ (he a0sence of BnB in a poor locality may also 0e due to the scarcity of supervising pharmacist ho ants to ork in the area/ According to DOH rules1 only a supervising pharmacist is authori,ed to dispense prescription drugs/ (he %harmacy &a also re=uires the presence of a pharmacist in a drugstore or retail outlet/ (he continued supply of drugs after the initial stock has run out has 0een a maDor pro0lem/ CHD intervie s indicate that hile the BnBs ere originally conceived to operate as drug revolving funds1 ith the funds managed at their respective CHDs1 this 0usiness format has not 0een follo ed/ (hus1 there has 0een a eak reflo of funds/ $oreover1 each BnB has 0een left to itself to locate its o n source of supply/ )n some instances1 the BnBs have sourced their drugs from private distri0utors and retailers <even for@profit sources>1 thus increasing their costs1 and the prices faced 0y consumers/ (he pro0lem seems to 0e of economies of scale1 i/e/1 individually1 each BnB is too small to arrant a regular visit from a supplier1 especially if the BnB is in a far@flung area/

2-

"a+le 6#Regional Distri+ution of BnBs and Population5BnBin (ach Region, 1!!6 +egion Num0er of BnBs <2..9> Num0er of BnBs <2.-.> %opulation in $n <2..7> 5/6 -/; 4/9/7 --/6 --/7 2/6 ;/6/: 6/5 4/9 4/2 5/. 5/2 4/: 2/4 5/::/6 @ @ %opulation?BnB

) )locos -1.-9 -17-4 5156CA+ Cordillera A+ 546 7.2 415:: )) Cagayan 2alley 52;-4 7125: ))) Central &u,on -162; -1:24 ;19:2 NC+ $etro $anila ;45 757 2-164; )2A Cala0ar,on -14.5 -16-5 9/. )2B $imaropa 7;. :6. 415-4 2 Bicol 464 ;42 -51.77 2) 3estern 2isayas -1;5: -1642 51522)) Central 2isayas ;-9 ;9; -21429 2)) !astern 2isayas 674 99; ;1:-5 )O *am0oanga %eninsula ;4; 745 61.4: O Northern $indanao :22 -1.74 51:.: O) Davao 6.7 :69 61:5: O)) 8occsksargen 4;7 456 -.1726 Caraga 4;5 7-2 61579 A+$$ 277 4--51:77 8u0total -21-55 -;17771295 Ha0alikatngBotikaBinhi :92 -.6 @ National %harmaceutical 562 574 @ Foundation #rand total -4159: -614;. ::/6 61;62 8ource of 0asic dataF DOH <2..9>G Depano <2.-->G last column as calculated 0ased on the ra data of DOH/ A system of pooling drug re=uirements to achieve economies of scale remains to 0e orked out/ Ho ever1 DOH@NC%A$ staff opine that central pooled procurement ill 0e difficult for the reorders 0ecause of <a> the large num0ers of BnB and communication challengesG <0> the different procurement cycles of BnBs 0ecause of their variations in demand and sale patternsG and <c> the so@far non@e"istent )( technology needed that is a0le to respond =uickly to the re=uirements of BnBs1 securing orders1 and delivering the products to them/

22

&igure ># Percentage of Barangays 8ith a BnB, +y Region, as of May 1! !

NoteF (his figure does not contain data for 7 regions as they are not availa0le in the level of disaggregation <per 0arangay> needed/ 8ourceF &avado1 2.-. !ational drug use One BnB analyst has raised issue ith the choice of drugs included in the BnB in relation to the 0urden of disease in the country/ DOH uses the top causes of mortality and mor0idity as 0asis for the choice of drugs/ 3hile this may seem accepta0le at first 0lush1 it does not have sound technical mooring as disease 0urden should 0e calculated 0ased on disa0ility adDusted life years <DA&E>1 hich is the glo0ally accepted methodology/ DA&Es take account of the num0er of people ho died or got sick of the disease <the usual mortality and mor0idity data>1 as ell as the period of time that people got sick <standardi,ed in a year> and the severity of the disease/ 2ery fe DA&E studies have 0een done in the %hilippines1 mostly as graduate theses/ (he DOH is Dust 0eginning to get into this type of analysis/ )n any case1 hile the 0urden of disease averted 0y BnB drugs looks large from a simple mortality and mor0idity reckoning1 it may not 0e so if reckoned in terms of DA&Es/ Drugs sold 0y BnBs are all approved 0y FDA1 0ut they stock only a small num0er of the list of products needed for pu0lic health/ (hese include over the counter medications for minor illnesses such as diarrhea1 dehydration1 stomach acidity1 coughs and di,,iness/ ( o anti0iotics ere included hen the program started <cotrimo"a,ole and amo"icillin>/ Five prescription drugs for chronic diseases ere added in 2..;F metformin and gli0enclamide for dia0etesG metropolol and captropil for cardiovascular diseasesG and sal0utamol for respiratory illnesses/ Ho ever1 BnBs do not carry drugs for common diseases such as malaria and (B/ (hese conditions are deemed more complicated and re=uire professional consultationG the non@inclusion in the BnB drug list implies that self@treatment is not encouraged/ 24

BnBs ought to 0e monitored regularly 0y a licensed pharmacist1 0ut the lack of availa0le pharmacy staff has turned this into a maDor pro0lem <$e(A1 2.-.>/(he !' BnB survey noted that regulatory supervision 0y a supervising pharmacist is hardly taking place <2reeke1 2..9>/ 8ome deem the lack of regular pharmacist supervision and lack of linkage to primary care facilities as limiting most BnBsA potential to provide access to prescription medicines for chronic conditions/ (he linkage to an +H'1 ho ever1 is not a physical@distance pro0lem as they are close to most BnBs1 0ut rather a coordination pro0lem/ )n any case1 a significant proportion of BnBs <4; percent1 according to the !' survey>had e"pired medicines at the day of the visit1 indicating the gravity of the supervision and related pro0lems/ $oreover1 the lack of control and information on prescri0ing 0ehavior arising from the lack of supervising pharmacists <and the lack of up@to@date prescription registers> poses serious pu0lic health risk 0ecause of potential overuse of anti0iotics/ A fe BnBs have gone 0eyond their mandate 0y procuring their o n stocks of prescription drugs hich DOH prohi0its them to sell/ +aga,a and $orales <2..6> reported that a 2..6 Commission on Audit team discovered several BnB outlets inCaraga and $etro $anila selling unauthori,ed medicines Ale"an and Am0ro"ol1 among others1 0ecause they ere 0eing demanded 0y patients suffering from 0ronchitis/ As this is a COA report on a specific location1 ho ever1 it cannot 0e ascertained hether the practice is idespread nation ide or not/ (he 0iggest challenge that the BnB program has to face is ho to situate the BnBs ithin the overall frame ork of the health care system/ (he BnB program appears to have started as a coping mechanism to the shortage of drugs in the late -99.s and early 2...s/ )t has succeeded in getting supplies to many areas that did not have access to drugs 0efore1 0ut certain poor areas remain ithout them/ $oreover1 supervision has loomed as a maDor pro0lem/ 3ith the sudden upsurge of private generic pharmacy outlets every here1 the BnB program certainly needs to 0e re@e"amined/ ".Costefficienc# $is%a%$isthe pri$ate sector Comparing the efficiency of BnBvis@a@visalternative sources of retail drugs is fraught ith difficulty/ Firstly1 the institutional structures and o nership of retail suppliers differ/ 8econdly1 the importation modes varyF hile BnBs rely on parallel drug importation ith its inherent su0sidy1 others do not/ (hirdly1 BnBs also rely on the distri0ution system of DOH and CHDs1 hich is another form of su0sidyG alternative suppliers do not/ BnBs are also further out in rural areas1 ith their attendant higher transport costs/ For these reasons1 suppliers are not directly compara0le1 even if they may 0e selling similar pharmaceutical product lines/<(here are also issues a0out 0ioe=uivalence 0et een BnB drugs and private sector alternatives1 hich is a separate issue/> Despite these difficulties1 it is important to compare BnB prices ith alternative suppliers/ )n mid@2...s prior to the rapid emergence of private retail pharmacies selling generic drugs1 and prior to the implementation of the ma"imum +etail %rice &a 1 +amos <2..6> compared the selling price of selected drugs 0et een BnB and a leading private drugstore chain/ (he results1 sho n in (a0le -.1 indicate that BnB prices ere consistently lo er than the comparator@supplier across all the drugs considered/ (he price reduction varies from 4: percent to 9. percentG on average1 drugs are 62 percent cheaper than the alternative/ Note1 ho ever1 that hile the ta0le sho s price comparison1 it is not really a true comparison of alternative pharmaceutical retail sources1 since the BnBs enDoy implicit government su0sidies that the

25

leading drugstore chain does not2/ (hus1 this ta0le should only 0e used to compare the prices that the household faces in either BnB or the drugstore chain1 not to compare economic efficiency of the t o sources/ (his issue is discussed in the ne"t section/ "a+le !#Selling Price of Selected Drugs BetweenBnB and a ;eading Private Drugstore Chain, Bune 1!!> #eneric Name and Dosage BnB &eading Drugstore Chain :./;. 7/2; -7/;. 5/-. 4/.. 5/9; ;:/6; -/4; 49/2; 4/2; ;/9. 2/6; :/-; -/9. 52/2; %eso 8avings %ercent %rice +eduction 772 9. 75 765 ;5 66 4: ;. :9 49 5: :;4

Amo"icillin1 2;. mg Amo"icillen1 ;.. mg Cotrmo"a,ole1 :.. mg &operamide1 2 mg $efenamic acid1 2;. mg $ultivitamins for adults1 -..?0o" $ultivitamins for children1 6. m& %aracetamol1 ;.. mg %ovidone iodine -.P sol/1 -; m& $etformin1 ;.. mg #li0enclamide1 ; mg1 -..?0o" $etoprolol1 ;. mg Captopril1 2; mg 8al0utamol1 2 mg 8al0utamol1 ; m& 8ourceF +amos <2..6>

24/-5 2/.2 -/69 -/.; ./:: -/7: 27/-./56 25/4; -/6./62 -/64 5/2: ./46 -9/:4

;7/46 ;/25 -;/:4/.; 2/-2 4/-7 4-/;; ./9. -5/9. -/65 ;/2: -/.4 4/:7 -/;5 22/54

%)(C %harmaAs o n price comparison 0et een BnB outlets < ith an assumed 4. percentmarkup price> and (he #enerics %harmacy or (#% <a private franchise retailer> in April 2.-. also sho s significant cost advantage of the BnB over (#% in almost all the drugs sold <(a0le -->/ Note1 ho ever1 that this comparison is 0ased on listed prices1 ith the assumed 4. percentmarkup for BnB outlets an assumption that often does not hold in reality1 as ill 0e sho n in the ne"t section/ "a+le 1! ! # Price Comparison of Retail Prices Between the B:B and "he $enerics Pharmacy, as of *pril

#eneric Name

Dosage

Aluminum Hydro"ide Q $agnesium Hydro"ide

2

22; mg?2.. mg per ; ml suspension

%%) 8elling %rice to DOH 2./;;

BnB +etail %rice4 26/72

(he #enerics %harmacy %rice 5;/..

%rice Difference %hp %ercent

-:/29

5-

)n the comments provided 0y DOH to the draft report1 DOH staff themselves noted that these comparisons are not appropriate since the drug outlets already apply a significant margin at retail/ 4 At 4. percent markup/

2;

Amo"icillin trihydrate Amo"icillin trihydrate Ascor0ic Acid Captopril Cotrimo"a,ole

2;. mg?; ml po der?granules suspension ;.. mg ta0let ;.. mg ta0let 2; mg ta0let :.. mg sulfametho"a,ole? -6. mg methoprim ta0let? capsule (a0let e=uiv/ to 6. mg elemental iron ; mg ta0let 2 mg capsule 2;. mg capsule?ta0let ;.. mg ta0let ;. mg ta0let %er ; ml syrup Capsule

24/..

29/9.

5:/..

-:/-.

4:

24./:. 9;/.. 265/4. -2;/..

4/.. -/25 4/55 -/64

4/.. -/6. 5/.. 2/;.

./.. ./47 ./;6 ./::

. 24 -5 4;

Ferrous sulfate #li0enclamide &operamide Hydrochloride $efenamic Acid $etformin $etoprolol $ultivitamins for children $ultivitamins for adults %aracetamol

52/.. 7./5; 7-/5; 66/7. 9./.. -2./.. 2./7; -2:/6. -9/6; 4;/4; -7/;. 44/;. -5/4.

./;; ./92 ./94 ./:7 -/-7 -/;6 26/9: -/67 2;/6; ./56 22/7; ./55 -:/;9

-/.. -/-. -/4. -/2. -/7. 2/2. 42/.. 2/-. 27/.. ./6. n/a/ ./;. 2;/..

./5; ./-: ./47 ./44 ./;4 ./65 ;/.4 ./54 -/56 ./-5 n/a/ ./.6 6/5-

5; -7 29 2: 29 -6 2. ; 24 n/a/ -4 26

2;. mg?; ml syrup?suspension %aracetamol ;.. mg ta0let %ovidone iodine -.P solution 8al0utamol 2 mg ta0let 8al0utamol 2 mg?; ml syrup 8ourceF %)(C %harma1 2.-.

Another analysis compares the selling prices of selected drugs among BnBs and a range of private suppliers1 namelyF generic1 0randed generic1 innovator drug e=uivalent1 and discounted innovator drug e=uivalent <cited 0y #loor1 2..9>/ (he results of this relatively more accurate comparison are sho n in (a0le -2/ Of the drugs considered1 only four ere reported for BnBs/ Of these four drugs1 BnBs can claim to have the lo est selling price only for one drug <metformin ;.. mg1 selling at %hp -/62 per ta0let>1 and even their price advantage over the lo est generic <%hp -/7.> is very small/ )n the other three drugs for hich compara0le data are availa0le1 the BnBs ere outpriced 0y the lo est generic supplier/ )ndeed1 the innovator drug discount price is even lo er than the BnB price for felodipine and amlodipine/ (hese data suggest that BnBs do not offer the lo est price in the market1 even ith the implicit su0sidies they receive1 e/g/1 parallel drug importation1 logistics support from %)(C and DOH1 and supervision of CHD/

26

"a+le 1# Selling Price .Php0 of Selected Drugs *mongBnB, Private $eneric, Branded $eneric, and Innovator Drugs, 1!!6 8elected Drugs BnB &o est #eneric 4;/.. -;/.. :/.. @ 5./.. ;/:. -/7. @ Branded #eneric 5./.. -7/;. 5-/.. ;6/;. 4:/7; 5/2; 5/;. 4./7; )nnovator Drug 77/2; 77/.. 7-/;. 47./.. ;-/;. :/2; --/.. 6-/.. )nnovator Drug Discount5 4:/62 4./:. 52/:9 @ 56/4. @ @ @

Felodipine -. mg Amlodipine -. mg Clindamycin 4.. mg Budenoside $ontelukast -. mg #licla,ide :. mg $etformin ;.. mg (amo"ifen 8ourceF DOH <2..9>

49/.. 47/.. @ @ @ --/6. -/62 @

3hy are BnB prices not the lo est in the market for compara0le drugsJ A $e(A study conducted 0y HA) #lo0al in 2..: sho ed that BnBs had some of the highest mark@ups <2;@4;; percent> even though they are supposed to have a regulated 4. percentmarkup/ (he authors of this study contend that some of the high mark@ups ere a result of the BnB having a minimum selling price of %hp - per ta0let?capsule thus the high markups on medicines costing much less than this and one BnB increased its price of fast@moving items to recover losses due to e"piry of slo @movers/ )t must 0e noted that BnBs have no control over the range of products initially supplied and cannot return e"piring products for a refund<HA) #lo0al1 2..:a>/ (he !' survey <2..9> of BnBs re@affirmed the HA) study findings1 citing operatorsA complaints that the 4. percentmarkup calculation do not seem to have taken into account the actual transport costs 0et een the supplier and the BnB/ (he %HOs and CHDs intervie ed as key informants also confirmed these findings/ !ven as some BnB outlets outprice their private competitors1 the ide variation in BnB prices means that some of them are really pricing ay a0ove the competition/ (he !' survey gathered the prices of three prescription drugs and the results are sho n in (a0le -4/ For amo"icillin1 although the median price is %hp 4/..1 7. percent of the BnBs surveyed sold it at a price higher than %hp 4/..G indeed1 -. percent of them sold it as high as %hp 7/.. or more/ 8imilar patterns of pricing occurred for cotrimo"a,ole and metropolol/ "a+le 3# Price Cariations of "hree Prescription and "hree %ver<the<Counter Drugs in BnBs, 1!!6 %rice +anges Amo"icillin ;.. mg capsules <NR44.> 4/.. 5 26 Cotrimo"a,ole :.. mg?-6. mg ta0lets <NR292> 2/;. -9 44 $etoprolol ;. mg ta0lets <NR2.-> 2/;. -6 2.

$edian price <%hp> %ercent of BnBs ith price 0elo %hp 2 %ercent of BnBs ith price 0et een %hp 2 and 4
5

%rice reduction program

27

%ercent of BnBs ith price 0et %ercent of BnBs ith price 0et %ercent of BnBs ith price 0et %ercent of BnBs ith price 0et %ercent of BnBs ith price 0et 8ourceF 2reeke1 et al/1 2..9

een %hp 4 and 5 een %hp 5 and ; een %hp ; and 6 een %hp 6 and 7 een %hp 7 and :

2: 2: 4 -.

29 5 -4

-2 6 6 . -5

(o 0e fair1 #loor <2..9> notes that the competition that BnBs?BNBs has 0rought to the domestic pharmaceutical market aside from the $+%?#$A%@mandated price reduction has 0rought do n the local prices of drugs/ (hus1 the prices of innovator medicines have gone do n through their generic counterparts in BnB?BNB1 or sold 0y the private drugstores throughout the country/ )t is as if the BnBs?BNBs and private pharmacies selling generics have 0rought do n the once@dominant sellers of innovator drugs1 causing them to lo er their prices dramatically/ No 1 the ta0le is 0eing turned1 ith discounted innovator drugs outpricing the BnB?BNBs/ )t must 0e noted at this point that the period 2..9?2.-. as marked 0y high insta0ility in drug prices 0ecause of the com0ined effect of %D)1 the sudden emergence of generic pharmaceutical franchising;1 and the implementation of the $+%?#$A%/ (hus1 the data in (a0le -4 must 0e treated ith caution/ (he BnBsA and BNBsA role in increasing the contesta0ility of the local drug market is an important role that the government plays1 even if BnBs?BNBs no have prices that may 0e a 0it higher than alternative private suppliers/ 8ome =uarters fear that if BnBs?BNBs ithdra completely from supplying the local market1 private suppliers may raise their prices again to Kpre@contestedL levels/ (his is a strategic consideration that should 0e taken into account a0out the future of BnBs?BNBs/

C# Program Sustaina+ility
1. &ponsoring organi'ations and functionalit# Although the BnB as originally conceived as an &#' initiative1 the !' survey <2reeke1 2..9> <nR4.2> has sho n that most <57 percent> of BnBs seen are actually sponsored 0y private entities or individuals <(a0le -5>G an additional -- percent are sponsored 0y the 0arangay health orker/ (he minority <52 percent> are sponsored 0y government entities/ )t appears that BnBs continue to receive support from the &#' after a change in administration1 mainly 0ecause they are politically popular/ "a+le 7# :um+er of BnBs +y Sponsoring %rgani'ation or Individual, 1!!6 8ponsor %rivate Barangay council Other &#'s Barangay health orker Other government related interests (otal 8ourceF 2reeke1 2..9/ Num0er -52 ;7 4; 45 45 4.2 %ercent 57 -9 -2 ---..

Ho many BnBs are functionalJ (he !' survey <2..9> defined functionality in terms of alternative indicators1 and these are sho n in (a0le -;F

8uch as (he #enerics %harmacy/

2:

<a> (he BnB as open and the operator as present at the time of the survey/ A high :7 percent of the 4.2 BnBs actually visited ere still functional/Of the 45 BnBs that ere no longer functional as of the date of the survey1 the reasons for closure included no demand for productsG resupply pro0lemsG and financial difficulties in keeping the 0usiness up/ %olitical interference as cited 0y Dust one BnB operator/ Data from NC%A$@DOH sho that since 2..4 hen the BnB program started1 a total of -192. have closed <Depano1 n/d/>1 representing --/7 percent of all BnBs that have 0een esta0lished/ (he regions ith the highest rates of BnB closure ere A+$$ <;7/2 percent>1 !astern 2isayas <22/6 percent>1 Cala0ar,on <22/- percent>1 and Central 2isayas <-6/4 percent>/ <0-> 8ales are over %hp -:1... per year1 hich is related to the use of the seed capital of %hp 2;1... over -: months/ &ess than a third <27 percent> meet this functionality definition/ <02>8ales are over %hp -2?person?year/Only a =uarter <2; percent> meet this functionality definition/ <c> (he main management tools of sales 0ook1 inventory register1 and prescription register are availa0le/Only 7 percent of the BnBs meet this functionality definition1 and only 2 percent are up to date in their 0usiness data/ "a+le 4# &unctionality of BnBs using *lternative Definitions, 1!!6 )ndicator Open BnB and present operator @ Functional BnBs @ NonfunctionalBnBs @ (otal BnBs actually visited #ross sales level @ BnBs ith annual sales I%hp -:1... @ BNBs ith annual sales S%hp -:1... @ Not reported @ (otal BnBs in the original Q su0stituted sample %er capita sales level @ BnBs ith annual per person sales I%hp -2 @ BnBs ith annual per person sales S%hp -2 @ Not reported @ (otal BnBs in the original and su0stituted sample Operational management system @ BnBs ith annual sales I%hp -:1... Q 4 registers present @ BnBs ith annual sales I%hp -:1... Q 4 registers present Q up@ to@date data @ (otal BnBsin the original and su0stituted sample 8ourceF 2reeke1 2..9 Num0er 297 45 4.2 -.5 -46 -59 4:9 97 -4. -62 4:9 26 : 4:9 %ercent :7 -4 -.. 27 4; 4: -.. 2; 44 52 -.. 7 2 @

. (inancial condition(he NC%A$ <n/d/> reports that the BNBs are earning1 and some of the 0est@ practice BnBs have %hp -..1... in their 0ank accounts/ (he typical BnB1 ho ever1 is Dust struggling along <median sales of %hp -51... per year>1 and a0out half of them reported undesira0le sales figures/ Out of the 25. BnBs ith financial data analysed in the 2..9 !' study1 ;5 percent are deemed accepta0le or desira0le1 i/e/1 ith sales of at least %hp 251... per annum <(a0le -6>/ Ho ever1 almost half <56 percent> of the BnBs have annual sales figures of %hp 251... hich is deemed undesira0le/ 29

(hus1 economic via0ility remains precarious for many of the BnBs/ Because of the large variance in sales1 it has 0een suggested that the package of seed capital given to BnBs 0e customi,ed to the market and catchment area of the BnB/ "a+le ># ;evel of $ross Sales of BnBs, 1!!6 8ales &evel Desira0le @ 8ales %hp 5:1... and a0ove Accepta0le 8ales 0et een %hp 251... and 5:1... 'ndesira0le 8ales less than %hp251... (otal 8ourceF 2reeke1 et al/1 2..9 Num0er 44 97 --. 25. %ercent -5 5. 56 -..

)t is not clear hether the BnB sponsors had any training in financial management and related skills/ 8ome o0servers note that the program should not e"pect Barangay Health 3orkers <BH3>1 ho manage most BnBs1 to 0e conversant ith financial management1 since admittedly their training has 0een on other skills/ For this reason1 it has 0een suggested that BnBs increasingly 0e focused on those ith entrepreneurial skills and adept at financial management1 such as sari@sari <variety store> o ners/ 'nlike BnBs hich are supplied solely 0y %)(C and must pay for every delivery they receive1 (he #enerics %harmacy does consignment for its franchisees1 hich can also get medicines from other sources/ 'nder consignment1 the supplier <consignor> provides an inventory of drugs to a retailer hich pays only the items that it is a0le to sell/ (his is an important distinction 0et een BnBs and for@profit franchisees hich confers on the latter a distinct advantage/ (he #enerics %harmacy also tends to advertise more1 thus attracting more customers/ (he discount given to senior citi,ens <as called for under the la > is a key factor in the financial condition of BnBs/ 8enior customers are entitled to a 2. percent discount1 0ut the markup enDoyed 0y BnB outlets is only 7@: percent of the catalogue price of %)(C/ (hus1 for each senior customer purchase1 the BnB suffers an outright loss of -2@-4 percent/ (he total loss can 0e considera0le1 especially at the startup period of the BnB1 and more so if it is Dust a small or medium@si,ed outlet/ O0servers claim that it is not profita0le to run a BnB on a stand@alone 0asis/ )ts smallness orks against efforts to make it sustaina0le/ )ndeed1 sales are too lo for many of them/ (o address this issue1 it has 0een suggested that non@economical BnBs should 0e allo ed to fold up1 and an alternative approach utili,ing already@e"isting structures <such as variety stores> as drug outlets should 0e pursued/ ". Mar)et competition @ (he BnBs have had important demonstration effects/ +eali,ing that lo @cost retail of drugs can 0e profita0le <as sho n 0y the 0est BnBs>1 for@profit drug franchise operations have mushroomed =uickly1 most nota0ly (he #enerics %harmacy1 the first generics retail pharmacy to franchise in the %hilippines/ )t is no reputed to have -1-.. franchisees nation ide <as of Cune 2.--> and is the fastest gro ing drugstore in the country/ For@profit franchise upstarts that follo ed in its ake include H2 Drugs1 %harma=uick 251 !mmaflor1 and Cohnston Drugs/ (he 3atsons Drugstore chain has also 0ranched out rapidly1 ith 257 pharmacies nation ide/ (he BnB idea itself 0ranched out to larger Botikang Bayan <BNB> hich operates on the same franchise format as its private sector counterparts/ Despite the still@precarious situation of BnBs1 the Drugstore Association of the %hilippines no vie s them as undue competition/

4.

D# %verall *ssessment and %perational Recommendations (he BnB program has rapidly gro n in terms of num0er1 0ut the systems re=uirements to make them effective1 efficient and sustaina0le operations have lagged 0ehind/ )n Canuary 2.--1 the DOH has placed a moratorium on additional BnBs 0eing esta0lished1 until the systems pro0lems are fi"ed/ (he follo ing pro0lem areas need particular attentionF <a> (o sta0ili,e the supply and prices of drugs in BnBs1 the DOH is considering alternative options to pool procurements1 impose order1 and monitor drug =uality/ NC%A$1 orking in tandem ith the CHDs1 plans to identify and formulate a list of legitimate drug suppliers that ill 0e allo ed to supply =uality drugs to BnBs at the prices set 0y DOH/ BnB operators ill not 0e allo ed to o0tain supplies outside of those in the list/ <0> Ne location strategies need to 0e formulated on account of emerging competition from the private sector/ (he BnBs should focus on really poor 0ut via0le areas1 and the 0udget re=uest for additional BnBs should reflect these concerns/ $oreover1 a ne set of criteria should 0e set to determine the location of ne BnBs1 including the distance of the closest BnB1 the location of other <private> retail outlets1 population si,e in the catchment area of the BnB1 and economic and poverty conditions in the area/ <c> Capacity 0uilding of BnB operators need to 0e given more prominence/ 8kills in 0asic drug retail management1 pharmaceutical operations1 stock and inventory management1 and accounting and record@keeping should 0e given priority/ DOH is partnering ith the %hilippine %harmacists Association to provide training on Kpharma@preneurshipL and good pharmaceutical practices/ NC%A$ plans to come up ith a standard training manual for BnB operators/ <d> CHD supervision is key in ensuring the via0ility of BnBs/ (o ards this end1 the supervising pharmacists shall 0e re=uired to monitor the income of the BnBs to help the regional CHDs target their assistance/ <e> (he Administrative Order esta0lishing the BnB program has to 0e revamped/ NC%A$ is no finali,ing the revised guidelines for the BnB program1 addressing such issues as drug re@supply1 the need for pharmacist services1 and other operational issues/ NC%A$ also needs to re@think the overall strategy for the BnBs given the changed market for pharmaceuticals ith the recent entry of private local suppliers1 the via0ility and long@term sustaina0ility of BnBs1 the cost@effectiveness of the traditional village pharmacy model1 and alternative models that could 0e considered/ <f> For BnBs that have matured 0eyond their original mandate1 and have good financial and operational management practices1 NC%A$ intends to assist them 0ecome licensed as regular pharmacies/ (he 0enchmark is that they should reach an income level close to the average income of a small private retail outlet/ Despite the current pro0lems1 the BnB program provides a strong signal from government of its commitment to pursue afforda0le and =uality drugs/ (he role of BnBs and BNBs in reducing prices through competition is an important consideration/ (hese outlets have helped ease the contesta0ility of the local drug market1 hich used to 0e dominated 0y one large dominant chain store/ (here are ell@ founded fears that the drastic reduction1 if not complete stoppage1 of the BnB program could signal to the private sector to resume their high@price regimes since there is no longer competition/

4-

(he smallness of the BnB as an economic enterprise can 0e addressed if it is allo ed to operate also as a sari@sari <variety> store/ $ore to the point1 the rural drug distri0ution should 0e re@strategi,ed to tap already@e"isting rural stores1 hich can then sell over@the@counter drugs on the side/ Along this thrust1 a pooling or aggregator mechanism can 0e more easily employed to Doin together the resupply mechanisms of a group of sari@sari stores1 follo ing the logistics mechanism of the other products that they sell/

(# Proposal for Program Impact (valuation

3ith e"isting data1 it is impossi0le to isolate the impact of the parallel drug importation and the involvement of %)(C in logistics on BnB operations1 costs1 and effectiveness/ Current comparisons 0et een BnBand alternative <private> retail sources of drugs are erroneous 0ecause they are comparing different drug importation modes1 institutional structures1 and su0sidi,ed and unsu0sidi,ed logistics and distri0ution systems/ )t is necessary to isolate the individual effects of these factors1 and (a0le -7 proposes a method to do this/ "a+le @# Proposed Design for an Impact (valuation of BnB and B:B )mportation $ode #enerics sourced via %D) <su0sidi,ed> )nstitutional 8tructure BnB BnB BNB BNB %rivate retail pharmacy +ural pharmacy (o n pharmacy %rivate retail pharmacy O ner #overnment %rivate Non@profit For@profit For@profit #overnment N#O For@profit6 Dependent on DOH?CHD Distri0ution &ogistics Ees <su0sidi,ed> Ees <su0sidi,ed> Ees <su0sidi,ed> Ees <su0sidi,ed> Ees <su0sidi,ed> Ees <su0sidi,ed> No <unsu0sidi,ed No <unsu0sidi,ed>

#enerics sourced outside of %D) <unsu0sidi,ed> 8ourceF (his study

)ncluding franchise drugstores1 such as #enerics %harmacy/

42

Chapter I$. evie! of the "oti#ang "ayan%Program

*# Program Description
(he Botikang Bayan <BNB> program aims to esta0lish - BNB outlet per municipality1 using the franchising 0usiness format/ BNBs are flagship outlets of the Cheaper $edicines %rogram of the government/ (he eligi0le applicants are N#Os and cooperativesG trade and la0or unions or employeesA associationsG corporate foundations and religious groupsG senior citi,ens and omenAs groupsG and sole proprietorships1 partnerships and corporations/ &ike the BnBs1 BNBs rely on parallel drug importation1 mainly from )ndia and %akistan1 though they also carry local 0randed generic drugs/ $ost of the medicines 0eing imported under this program are for asthma1 hypertension1 and dia0etes/ 8ome special outlets under the BNB net ork are <BNB 8ecretariat1 n/d/>F Botikasa%arokya1 hich are operated 0y the 8ocial Action Centers of parishes/ Funding for the initial stocks is provided 0y the Office of +eligious Affairs of the Catholic Church through the %hilippine Charity 8 eepstakes Office/ : as of end@2..9/ Coops for Christ/ -5 as of end@2..9/ $ilitary and %olice outlets1 hich are operated respectively 0y the Armed Forces of the %hilippines Commissary and the %hilippine National %olice 8ervice 8tores/ 6 as of end@2..9/ %hilippine #overnment !mployees Association outlets/ 9 as of end@2..9/ 8tate Colleges and 'niversities outlet/ - in Cavite as of end@2..9/ &#' outlets/ 6 as of end@2..91 in the provinces of Cavite1 $indoro Oriental1 *am0oanga8i0ugay1 and 8uluG and in the cities of $alolos <Bulacan>1 O,amis <$isamis Occidental>/

(he re=uirements for pre=ualification areF valid and current registration as an institution <8ecurities and !"change Commission1 Cooperative Development Authority1 Department of &a0or1 or other relevant agency>G minimum revolving capital of %hp ;..1...: for the proDect as evidenced 0y a certification issued 0y an authori,ed 0ankG proposed location plan <floor area of at least -; s=/ m/> and vicinity mapG and capa0ility to comply ith the documentation1 technical and other re=uirements of FDA in the filing of application for a license to operate as a drugstore1 including the availa0ility of the services of a licensed pharmacist/
7

(his program is not e"plicitly included in the scope of ork/ (his report includes it in order to provide a complete picture of the pharmaceutical retail initiatives under the Cheaper $edicines %rogram of the government/ : st th st $inimum initial capital as originally set at %hp 4..1... for - @; class city or - class municipalityG %hp 2..1... th nd th th th for 6 class city or 2 @5 class municipalityG and %hp -..1.. for ; @6 class municipality/

44

(he BNB proponent signs a memorandum of agreement ith the %)(C stipulating the follo ing key terms and conditionsF %)(C ill supply all drugs and medicines and other consumer products hich ill 0e sold in the BNB outlet/ No other products ill 0e sold 0y the BNB/ (he BNB outlet must maintain the follo ing monthly purchase of drugs from %)(CF o o o %hp -.1... for BNBs in -st@;th class city or -st class municipalityG %hp 71;.. for BNBs in 6th class city or 2nd@5th class municipalityG and %hp ;1... for BNBs in ;th@6th class municipality/

(he BNB ill sell the drugs at no more than the prescri0ed $a"imum +etail %rices <or government mediated access prices>/ 2iolation of this condition ill entitle %)(C to revoke its accreditation of the BNB as participant in the program/ BNB outlets ill 0e re=uired to provide =ualified senior citi,ens ith the standard price discount in accordance ith e"isting la s/ %)(C ill arrange to provide training support to the supervising pharmacist and other BNB personnel/ %)(C ill arrange to make standard signages1 collaterals1 and product lists availa0le for use in the retail outlets/ %)(C ill provide BNB outlets ith certificates of product registration as ell as BFAD?FDA reports of analysis for all 0atches of drug supplies delivered/ For all deliveries from %)(C or its designated distri0utor1 the BNB ill pay in full through a thirty@ day post@dated check/ &ate payments are su0Dect to an interest rate of 2 percent per month/ Failure to remit payments for previous deliveries entitles %)(C to ithhold processing of follo @ up orders/ +eturns or e"changes of products delivered 0y %)(C are allo ed only ithin 7 orking days from the date of the delivery/ +eturns are accepted only for defective or tampered packagingG ina0ility of %)(C to provide the re=uired certificate or product registration or report of analysis of the 0atches or lots deliveredG and the remaining shelf or usa0le life of the product is less than 6 months/

)n turn1 the BNB operator agrees to <a> provide the initial capitali,ation of the outlet and the inventory of medicines to 0e soldG <0> shoulder the overhead1 manpo er1 legal and other e"penses re=uired to operate the outletG <c> purchase the standard program signage and other collaterals from %)(C for use in the outletG <d> display1 in a prominent location and ithin sight of consumers1 the product list and $+%s1 the license to operate1 and the certificate of accreditationG <e> hen re=uested1 and su0Dect to further negotiation1 share in the e"penses for marketing and advertising support for the programG and <f> comply ith the reporting and monitoring re=uirements hich may 0e instituted 0y %)(C and DOH?FDA in connection ith the program/ Follo ing the issuance of BFAD?FDA of the license to operate1 the operator posts a surety 0ond of %hp ;..1... in favor of %)(C to guarantee faithful compliance ith the terms and conditions of the program/

45

(he BNB idea itself has evolved into a derivative format called BNB !"press1 hich re=uires a smaller investment <%hp 4.1...> for the initial set of medical stocks/ BNB !"presses are also privately run outlets/ (hey are supervised 0y an institutional pharmacist or a territorial one ho goes around simila BNBs/

B# Program Performance
1. Extent of B*Bs 8ince the program started in 2..;1 the cumulative num0er of BNBs has continued to rise1 peaking at 212;6 in 2.-. <Figure 7>/ Ho ever1 the annual addition to BNBs has declined from a peak of 457 in 2..7 to only 6- in 2.-./ &igure @#*nnual and Cumulative :um+er of B:Bs (sta+lished, 1!!4 A 1! ! .(nd of Dear0

8ourceF Botikang Bayan 8ecretariat1 %)(C/

/0otikang0ayan/com/ph

Do BNBs improve accessJ (a0le -: sho s the regional distri0ution of BNBs and the population?BNB 0y region/ As e"pected1 the regions ith the densest concentration of BNBs are the National Capital +egion <NC+> and the surrounding areas of +egion ))) <Central &u,on> and )2@A <Cala0ar,on>1 hich are also the most affluent regions/ (he regions ith the ne"t level of concentration are ) <)locos>1 CA+1 )) <Cagayan 2alley>1 )2@B <$imaropa>1and 2 <Bicol>/ (he poorest regions <all of $indanao and the +egion 2))) or !astern 2isayas> have e"pectedly the least concentration of BNBs/ "a+le 2# :um+er of B:B %utlets +y Region and Population5B:B, 1! ! +egion ) )locos CA+ Cordillera A+ )) Cagayan 2alley No/ of BNB <2.-.> -52 52 77 +egional %opulation in $n <2..7> 5/6 -/; 4/4; %opulation?BNB 421495 4;17-5 5.126.

))) Central &u,on 2;9/7 NC+ $etro $anila 212;6 --/6 )2@A Cala0ar,on 4.9 --/7 )2@B $imaropa 77 2/6 2 Bicol :: ;/2) 3estern 2isayas -59 6/: 2)) Central 2isayas -.6/5 2))) !astern 2isayas 52 4/9 )O *am0oanga 54/2 %eninsula O Northern $indanao 4; 5/. O) Davao ;4 5/2 O)) 8occsksargen 55 4/: Caraga 22 2/4 A+$$ -. 5/(otal 212;6 ::/6 8ource of 0asic dataF BNB 8ecretariatG %hilippine 8tatistical Eear0ook1 2.-.

4:165; ;1-52 471:65 441766 ;719;; 5;164: 641466 921:;7 7:1.59 --512:6 79125; :61465 -.51;5; 5-.1... 491274

(he BNB target is to have - BNB for each city or municipality/ #iven this program target1 Figure : sho s the percentage of cities and municipalities in each region that has a BNB/ As of end 2.-.1 it is estimated that around -1... municipalities are not yet served 0y a BNB/ &igure 2# Percentage of Cities and Municipalities 8ith B:B, +y Region, as of May 1! !

8ourceF &avado <2.--> +. !ational drug use (he BNB drugs ere also selected 0ased on the most prevalent causes of mortality and mor0idity1 not on DA&Es1 hich are the more accurate and appropriate 0asis for drug 46

selection/ Nevertheless1 0ecause BNBs offer a ider selection of drugs <including curative and asymptomatic conditions>1 they seem more a0le to address the health conditions of their catchment populations far more than BnBs are capa0le of doing/ (here are no data on the prescri0ing and dispensing 0ehaviour of BNBs1 0ut one can surmise the lack of supervising pharmacists is also a pro0lem1 especially for municipalities further out/ ,. Cost efficienc# $is%a%$is the pri$ate sector No study has 0een done on the pricing of BNBs relative to other pharmaceutical suppliers/

C# Program Sustaina+ility
1. Mortalit# rate (a0le -9 sho s the types of BNB and the num0er that have 0een closed/ Out of the 212;6 BNBs that have 0een esta0lished1 -47 have closed as of end@2.-.1 for a total mortality or closure rate of 6 percent/ Note1 ho ever1 that BNBs are private 0usinesses hich can 0e sold/ )ndeed1 cursory search in the )nternet sho s BNBs for sale in Bulacan and Davao/ One is reported 0eing sold for %hp -4.1... <Davao>/ "a+le 6# "ypes of B:B +y Ma,or Island $roup and :um+er of B:B 8hich 9ave Closed, as of (nd<1! ! (ype Full D8A% ND8A% #overnment Agency %rivate %harma %rogram $ilitary Camp (otal 8ourceF %)(C %harma &u,on 2;9 566 777 7 2 6 -1;-; 2isayas 24 94 -76 @ @ @ 292 $indanao 2. 62 -2. 4 @ @ 2.; Closed 57 27 64 @ @ @ -47 %ending Application @ 45 74 @ @ @ -.7 (otal 459 6:2 -12.7 -. 2 6 212;6

. (inancial condition of B*Bs Based on %)(CAs financial proDections <(a0le 2.>1 a typical BNB should demonstrate profit of %hp 4.515.. per year1 out of total sales of %hp 6 million/ (his is an ideali,ed model1 and little is kno n of the actual financial condition of BNBs/ "a+le 1!# (stimated *nnual Pro,ected Marginal Statement of %perations, in Php 8ales 2aria0le Costs Cost of 8ales 8upplies e"pense 'tilities +epairs Communications (a"es and licenses Advertising e"pense $iscellaneous Contri0ution $argin Fi"ed Costs 47 61...1... 51:..1... 461... 721... -;.1... 2;1... 271;.. 4.1... -.1...

;1-;.1;.. :591;..

8alaries and ages 8881 %H)C1 H$DF )nsurance e"pense -4th month pay 8ecurity e"pense &ease e"pense )nterest e"pense %rofit 8ourceF %)(C %harma1 )nc/ D# %verall *ssessment

2-61... 2-16.. -41;.. -:1... 961... -2.1... 6.1...

;5;1... 4.515..

(he BNB format <franchise> is far more structured than the BnB/ )ts for@profit nature has 0uilt@in incentives for the o ner to perform 0etterG the o ner can also sell the 0usiness1 and there is a domestic market for such 0usiness sale/ (he BNB ur0an market is also more sta0le than the BnB rural market/ (he supply replenishment of the BNB has 0een less of a pro0lem than the BnBF there is an agreed@ upon resupply of drugs under the franchise agreement ith %)(C %harma1 hich the BnB agreement ith CHD does not have/ Competition from the private sector is getting more keenG the future of the BNB ill depend on ho ell %)(C %harma manages its franchise net ork/ BNBs are less of a 0udget concern since they are the responsi0ility of %)(C %harma as a government o ned and controlled corporation/

4:

Chapter $. evie! of the P&'' Treatment Pac# Program

*# Program Description
(he %-.. treatment pack program solves t o constraints in pharmacy prescription at the same time/ On the one hand1 compliance packaging helps address the need for patients to adhere to their medication schedule/ (his is a practice that has 0een in place in long@term care pharmacies in developed countries for years/ On the other hand1 KtipidL <thrift> packs have increasingly 0een used in the %hilippines for the marketing of products such as shampoo1 detergents1 cooking oil1 cell phone load1 cigarettes1 and alcoholic drinks/ (hus1 the %-.. treatment pack com0ines these t o concepts in an innovative marketing approach that takes into cogni,ance 0oth the medical necessity of drug compliance as ell as householdsA a0ility to pay for drugs/ (he %-.. treatment pack as patterned after the 3almart '8B5 %rescription %rogram for Americans ithout health insurance/ (his program no has 4.. drugs/ (he DOH initiated the %hp -.. (reatment %ack9<%-.. for short1 and also kno n as the K(ipidL or (hrift %ack> %rogram in Decem0er 2..: to iden peopleAs access to prepackaged generic drugs ith an afforda0ility limit of -.. pesos or lo er/ (he intention is to encourage patients to take the full course of their drug treatment regimen <i/e/1 improve compliance>1 instead of patients 0uying them in individual ta0lets or capsules hich end up 0eing more e"pensive and often leads to discontinuance once the patient feels ell enough/ (he drugs are packaged in a full set/ (hus1 the program meets t o key pharmaceutical o0Dectives at onceF <a> improving the availa0ility of =uality@assured drugs at afforda0le prices1 and <0> promoting the rational use of medicines/ (he program as piloted in 72 DOH retained hospitals and 2: &#' hospitals/ (he program includes 25drugs most commonly used1 including anti0iotics1 antihypercholesterolemia1 antiarthritis1 antiasthma1 antidia0etes1 and 2itamin C/ (a0le 2- sho s these medicines1 their dosages and treatment course1 and the common 0rand/ Of the -7 0rands in the %-.. list1 five are in the !ssential Drug &ist1 the prices of hich have gone do n dramatically follo ing the implementation of the $+%?#$A%/ )n addition1 7 other drugs have since 0een included in the %-.. list after the $+%?#$A% as implemented/ "a+le 1 # Drugs Included in the P !! Programand Peso Savings Per "reatment Pack Relative to the Common Brand, 1! ! #roup Anti@infectives <7> Drugs Amo"icillin ;.. mg cap Common Brand Amo"il (reatment Course 4" a day for 7 days Nuantity %er %ack 2-

)t is no re0randed as the DOH Complete (reatment %ack %rogram1 to take account of some drug packages that are priced higher or lo er than %hp -.. per pack/

49

Co@amo"iclav-. 62; mg ta0let Cefale"in ;.. mg cap Ciproflo"acin ;.. mg ta0 Clindamycin -;. mg cap Cotrimo"a,ole -6. mg ta0 $etronida,ole ;.. mg ta0 8al0utamol 2 mg?2/; m& ne0ules Amlodipine -. mg ta0 Felodopine !+ -. mg ta0 Felodipine !+ 2/; mg ta0 Felodipine !+ ; mg ta0 8imvastatin -. mg ta0 8imvastatin 2. mg ta0 8imvastatin Allopurinol -.. mg ta0 $elformin ;.. mg ta0 #li0enclamide ; mg ta0 Omepra,ole 2. mg capsule +anitidine -;. mg ta0 Amlodopine ; mg ta0 Atenolol ;. mg ta0 $etropolol -.. mg ta0 $etropolol ;. mg ta0 Ascor0ic Acid ;.. mg ta0

Augmentin Hefle" @ Dalacin C Bactrim Flagyl 2entolin Norvasc %lendil !+ %lendil !+ %lendil !+ *ocor *ocor *ocor *yloprim #lucophage Daonil &osec *antac Norvasc (enormin Betaloc Betaloc Cecon

Anti@asthma <-> Anti@hypertensive <2>

2" a day for 7 days 4" a day for 7 days 2" a day for 7 days 5" a day for 7 days 2" a day for 7 days 4" a day for 7 days 4@5" a day or as needed - ta0 once a day - ta0 once a day - ta0 once a day - ta0 once a day - ta0 once a day - ta0 once a day - ta0 once a day - ta0 once a day 4" a day - ta0 once a day - ta0 once a day - ta0 once a day - ta0 once a day - ta0 once a day - ta0 once a day 2" a day - ta0 once a day

-5 2-5 2: -5 4. 9 6 4 7 ; -; -: 5 4. 9. 4. -; 2: -2 -5 4. 9. 4.

Anti@ hyperlipidemic <-> #out preparation <-> Oral hypoglycemic <2> Antacids and anti@ ulcerants <2> Anti@hypertensive <4>

2itamins <-> 8ourceF DOH <2..9>

B# Program Performance
1. Potential program -enefits )n health care settings in developed countries here compliance packaging has 0een the norm for some time1 the 0enefits of treatment packs includeF effective treatment of a conditionG esta0lishing optimal dosingG incorporation of all medications <prescriptions and non@prescriptions>G more effective communications 0et een health professionals and patientsG providing clarity and transparency of treatment e"pectations and o0Dectives of the programG ma"imi,ing
-.

8pecial 0onus package

5.

drug utili,ation hile minimi,ing asteG simplifying compliance ith la0elling and record keeping re=uirementsG minimi,ing need to consult a physician for routine administrative mattersG and appropriate handling and disposal of confidential material <OC%1 2.-->/No impact evaluation of the %-.. program has 0een undertaken1 and it ould 0e useful to assess ho far these potential 0enefits have 0een reali,ed so far/ . Cost comparison and sa$ings to the patient (a0le 22 sho s the selling price of the common 0rand vis@a@vis the %-.. for a complete treatment1 and the associated savings for the purchase of the latter/ ( o data sets are availa0le for analysis1 and they sho the follo ingF "a+le 11# Price Comparison of P !! "reatment Pack with (/uivalent Common Brand in %riental Mindoro Pilot and %verall D%9, 1!!6 Drugs DOH1 2..9 8elling %rice %-.. of Common 8elling Brand %rice %hp <A> %hp <B> 2.5/9. ;./.. 55:/;. ;.7/.. 2-5/2. -69/;. 5.4/9. ;6-/7; @ -1-2./.. 4:2/2. -96/--9:/:. 2.-/:; 4.6/.. 744/;. 7:6/.. -../.. -../.. 7./.. ;./.. 7./.. -../.. @ -../.. 2;/.. -../.. -../.. -../.. 2;/.. -../.. -../.. 5Oriental $indoro1 2..9 8elling %rice %-.. 8avings of Common 8elling %hp %rice Brand %hp %hp 2.5/9. 27/.. -77/9. @ 644/7; @ @ @ @ -1.22/.. @ @ @ -9:/:. @ 4.6/.. 744/;. @ @ 95/:. @ @ @ @ 2;/2. @ @ @ :./;. @ -6/;. :-/.. @ @ ;4:/9; @ @ @ @ 996/:. @ @ @ --:/4. @ 2:9/;. 6;2/;. @

Allopurinol -.. mg ta0 Amlodipine -. mg ta0 Amlodopine ; mg ta0 Amo"icillin ;.. mg cap Ascor0ic Acid ;.. mg ta0 Atenolol ;. mg ta0 Cefale"in ;.. mg cap Ciprofla"acin ;.. mg ta0 Clindamycin -;. mg cap Cotrimo"a,ole -6. mg ta0 Felodopine !+ -. mg ta0 Felodipine !+ 2/; mg ta0 Felodipine !+ ; mg ta0 #li0enclamide ; mg ta0 $elformin ;.. mg ta0 $etropolol -.. mg

DOH %hp 8avings <A@B> -;5/9. 45:/;. 5.7/.. -55/2. --9/;. 444/9. 56-/7; @ -1.2./.. 4;7/2. 96/-9:/:. -.-/:; 2:-/.. 644/;. 6:6/..

ta0 $etropolol ;. mg ta0 $etronida,ole ;.. mg ta0 Omepra,ole 2. mg capsule +anitidine -;. mg ta0 8al0utamol 2 mg?2/; m& ne0ules 8imvastatin -. mg ta0 8imvastatin 2. mg ta0 8imvastatin Co@amo"iclav-- 62; mg ta0let 8ourceF DOH <2..9>

-1477/.. ;9-/.. -19.5/2; :96/.. 24./:; 6-;/.. 74:/.. -65/.. -1-9.

-../.. ;./.. 7;/.. 7;/.. -../.. 7;/.. -../.. -../.. ;../..

-1277/.. ;5-/.. -1:29/2; :2-/.. -4./:; ;5./.. 64:/.. 65/.. 69./..

@ ;9-/.. 2;4/9. :96/.. 2;5/7. 6-;/.. @ @ @

@ 2:/;. 9./.. 65/5. 9;/:; 75/2; @ @ @

@ ;62/;. -64/9. 99;/;. -;:/:; ;5./7; @ @ @

(he ider DOH 2..9 price comparison sho s that the savings range from %hp 65/.. to %hp -1:29/ For instance1 ranitidine <0rand name *antac> costs %hp 42 each/ )f needed for 2: days1 the cost ould 0e %hp :96/ But ith the %-.. pack1 the regimen ould only cost %hp -..1 saving for the patient %hp :2-/ (he 2..9 price comparison for Oriental $indoro1 here the program as pilot@tested under the %rovincial Health Office1 sho s that that the savings range from %hp -;:/:; to %hp 99;/;./

8ince the %-.. program as initiated1 the market for generics drugs in the %hilippines has 0oomed1 ith the rapid gro th of the private@for@profit (he #enerics %harmacy as ell as similar generic compliance@ pack initiatives of the private pharmacy chain 3atson <using %hare" products> and +ite@$ed 0randed generics <using 'nila0 products>/ (hus1 price comparison of the %-.. treatment pack should also 0e made ith these ne er initiatives/ ". Beneficiaries (he %-.. packs are currently dispensed at DOH retained and selected &#' hospitals1 hich are mostly patroni,ed 0y the poor and lo er middle class/ Ho ever1 there has 0een poor record@ keeping of those ho actually o0tained these treatment packs/ )f the program is to 0e targeted 0etter1 a tracking system needs to 0e put in place/ (here have 0een allegations of leakage1 ith sporadic anecdotal accounts of K0alik0ayansL <returning Filipino e"patriates> purchasing large volumes of %-.. packs to 0e 0rought home/ (here are no availa0le data on the volume of this leakage/ (his program is 0eing re0randed as the DOH Complete (reatment %ack %rogram1 and 0eginning 2.--1 ill 0ranch out into three su0@programs ith different sets of 0eneficiaries as e"plained 0elo /

--

8pecial 0onus package

52

+. !ational drug use (he %-.. treatment pack program as intended to improve adherence to medication/ 3ith its re0randing and re@launch as the DOH Complete (reatment %ack program1 it is envisioned to 0e offered more idely to indigent Filipinos/ (hus1 medications for common acute infections and maintenance drugs for hypertension1 dia0etes1 and high cholesterol ill 0e provided for free to the poor CC( recipients1 on the follo ing conditionsF <a> the patient consults ith the +H' physicianG <0> the patient has a D83D )D num0er and?or %hilHealth num0er as 0eing covered under the %H)C 8ponsored %rogramG and <c> the patient adheres to the regimen prescri0ed 0y the +H' doctor and constantly does follo @up/ ,. Deli$er# challenges A maDor criticism of this program is its limited num0er of access points/ 8o far1 only DOH hospitals and a limited num0er of &#' hospitals are dispensing ith %-.. packs/ +egion 2)) is considering e"pansion of this program 0eyond the current access pointsG other regions may follo suit/ Ho ever1 ith the e"pansion of the delivery net ork1 stock availa0ility needs to 0e improved/ DOH and regional %-.. coordinators ill also 0e necessary/ 8tock inventory and delivery remain as maDor pro0lems for this program/ #ood %-.. practices have 0een culled from the e"perience of Oriental $indoro1 and these may 0e orth disseminating/ )n this province1 the %-.. stocks are delivered through the +egional 8tore1 using the %rovincial Hospital Depot/ (he distri0ution outlets include all the government hospitalsG the +H's and BnBs are 0eing eyed as potential outlets/ %romotion is done through trimedia <press1 (2 and radio>/ 8upport is o0tained from all government health personnel in hospitals1 +H's1 and the interlocal health ,ones/ Finally1 the drug list in the %-..1 so far1 has 0een very limited/ (here is certainly scope to adding more drugs to this list/ DOH is re0randing and relaunching the program in late 2.-- to deal ith these delivery challenges/ As has 0een mentioned1 the intention is to scale up the program in three aysF %roviding the treatment packs for free to poor1 CC(@receiving families and?or families deemed indigent and enrolled under the %hilHealth 8ponsored %rogram/ DOH ill provide these as a grant to the D83D@identified -1.2- poor municipalities as part of the 5%?CC( <%anta idng%amilyang %ilipino Conditional Cash (ransfer> %rogram/ (he municipalitiesA rural health units ill 0e the programAs access points/ 8elling the treatment packs in participating DOH and &#' hospitals1 at allo ed margins inclusive of all applica0le discounts/ (his ill ensure the availa0ility of these drugs for non@poor patients/ #overnment hospitals may stock these treatment packs in their pharmacies on a consignment 0asis/ (he program could 0e run as drug revolving funds at the respective government hospitals/ 8elling the treatment packs in private retail outlets/ (he NC%A$ shall secure approval from the Department of Finance to allo these sales1 e"empting the treatment packs from special discounts and value added ta" <2A(>/ %rivate hospitals may also stock these treatment packs in their pharmacies on a consignment 0asis/

.. Procurement of treatment pac)s (he initial supply system as limited to %)(C %harma/ +estocking the hospitals as difficult 0ecause of variationsin demand?consumption patterns/ %)(C %harma as also 0eset ith operational issues and financial lia0ilities hich affected its performance as a procuring 54

agency/3ith the relaunched treatment pack program1 procurement ill 0e done centrally at DOH@ COBAC through one@time 0idding/

C# Program Sustaina+ility
1. (unding DOH initially funded the program ith %hp ;. million/ Additional technical and other support as initially provided 0y 3HO1 !' and #(*/)n Oriental $indoro1 the %-.. 0udget is included in the annual procurement 0udget for medicines in the different satellite hospitals <&egaspi1 n/d/>/ (he payment is done through fund transfers/(he %-.. proDect of Oriental $indoro indicates that the treatment pack program can 0e sustaina0le/ Data for the month of Decem0er 2..: alone sho that sales at cost as %hp 5;91-7. hile sales at selling price as %hp ;4.16-.1 yielding a net income of %hp 7-155. <or an annuali,ed net income of %hp :;712:.>/ NC%A$ is no accounting for the initial %hp ;. million that seeded the program in 2..:/ DOH and &#' hospitals that fail to remit 0y 8eptem0er 2.-- ill not 0e allo ed to participate in the re0randed and relaunched treatment pack program/ (he re0randed and relaunched program certainly re=uires significant funding from DB$ in the initial year/ (a0le 24 lays out the potential funding sources of this program1 as culled from the ay it is descri0ed in the comments to this report provided 0y DOH?NC%A$/ (hese ideas are elucidated in the last section of this chapter/ "a+le 13#&unding of "reatment Pack Program +y "ype of Recipients and Classification of 9ouseholds Classification of Households %oor (ype of +ecipients )nitial Funding for (reatment %acks DB$?DOH DB$?DOH 8u0se=uent Funding for (reatment %acks DB$ %H)C capitation and?or Outpatient Benefit %ackage Drug revolving fund

5%?CC( recipients %hilHealth indigents and 8ponsored %rogram mem0ers Nonpoor %u0lic hospitals <DOH1 DB$?DOH @ &#'s> Consignment %rivate hospitals and DB$?DOH Drug revolving fund clinics Consignment NoteF (his ta0le is for illustrative purposes only/ No DOH administrative order or %hilhealth circular has 0een issued ith respect to the proposals contained in this ta0le/ (he ideas in this ta0le reflect those culled from the DOH?NC%A$ staff comments on the earlier draft of this report/ 8ourceF (his study/

. &#stems support 8ystems support as eak for the original %-.. program1 0ut pu0lic health potential is large/ Current $M! system does not provide a unified and up@to@date information on the use of the initial %hp ;. million that seeded the program/ Only a0out %hp -9 million have 0een remitted 0y participating hospitals after three years/ (he Commission on Audit is no going after these hospitals/

55

8upply replenishment 0y %)(C %harma also remainsa maDor pro0lem/ %art of this pro0lem is the challenge of pooling the demand re=uirements among DOH and &#' hospitals for procurement purposes/ 'nder the ne 1 re0randed treatment pack program1 NC%A$ plans to computeri,e the reporting and monitoring system from the +H's 0y 2.-2/ (he program ill 0e designed ith clear reporting1 monitoring and accounting procedures/ (he +H' physicians ill 0e re=uired to su0mit =uarterly reports to the CHDs on their distri0ution and utili,ation of treatment pack medicines1 as ell as their current inventory levels/ A patient registry ill 0e re=uired to provide information on patient name1 D83D and?or %hilHealth num0ers1 diagnosis1 and medications given/ ". *eed drug re$ol$ing funds 3hile the %-.. program can 0e sustaina0le1 it re=uires drug revolving funds <D+F> in health facilities for the program <and related fee@generating schemes such as %hilHealth reim0ursements1 private health insurance reim0ursements1 and user fees> to 0e truly institutionali,ed/ 3ithout such D+Fs and an accompanying fee@retention policy at the local level1 health staff ould not 0e as encouraged to offer %-.. treatment packs for sale/ (he pro0lem is that not all &#' health facilities have esta0lished D+Fs1 and revenues for the %-.. program are usually plo ed 0ack to the local treasury1 reducing the incentive of health staff to collect payments/ (his is an area that NC%A$ and the CHDs need to focus on/ (echnical assistance1 capacity 0uilding1 and )( hard are and soft are support1 and training are needed to see this through/ As the relaunched treatment pack program is going to 0e nation ide1 the scale of this effort is going to 0e large/ +. /se of treatment pac) in Phil0ealthcapitation )n 2..91 %hilHealth in its Circular No/ 2.1 e"tended the coverage of the %-.. program for its 8ponsored $em0ers <indigents> to include their drug consumption outside the hospital <take@home drugs> so that the patient can complete the full course of treatment/ For chronic illness1 this often e"tends to a ma"imum of t o eeksA supply of the appropriate %-.. pack/ %hilHealth is also considering including the treatment pack as an outpatient 0enefit package hich can 0e used 0y patients of Outpatient Departments1 not only patients ho ere admitted/ )ndeed1 %hilHealth should seriously plan for the roll@out of its capitation program1 hich should involve 0oth government and private physicians as primary care providers <%C%s>/ (his capitated %C% program could start ith the planned roll@out of the re0randed treatment pack as its outpatient pharmacy 0enefit1 0oth for once@off treatment and for chronic@care patients/ (he initial funding is e"pected to 0e provided 0y DB$1 0ut %hilHealth capitation and O%B reim0ursements should kick in in su0se=uent years/ A maDor issue that %hilHealth needs to resolve is the very limited amount that it currently pays government +H's for patients under the 8ponsored %rogram/ 3hile the program is deemed operating on a capitation 0asis1 the current level of %hp 4.. is pitifully lo that policy analysts have deemed it a Kre0ateL or KdiscountL as it is no here near the full amount of a capitated system1 estimated to 0e around %hp -12../ %hilhealth needs to accurately calculate this amount1 taking into account the need to cover for the cost of the treatment packs that ill 0e provided as a 0enefit under its 8ponsored %rogram <for indigents> and for regular mem0ers <if and hen it decides to e"tend the O%B to all its mem0ers under a capitation system>/ ,. Demonstration effects Despite pro0lems in the %-.. program1 the model has caused ripple effects in the private sector/ Compliance pack marketing programs have 0een esta0lished 0y 'nila0As +ite@$ed and 3atsonAs %hare"/ Both of these private@sector programs1 ho ever1 are still focused on the rich and middle@class/ 5;

D# %verall *ssessment and %perational Recommendations

(he %-.. program is highly innovative in the %hilippine conte"t1 ith a large potential for reducing out@ of@pocket spending1 especially on those drugs dealing ith chronic care/ Ho ever1 the program needs to 0e redesigned and funded ade=uately from the government 0udget <pump@priming> Q %hilHealthcapitation program <sustaining>/ $oreover1 procurement of drugs should 0e open to the private sector <under COBAC> and not limited to %)(C %harma/ DOHAs $aterials $anagement Division can 0e the lead unit as it is currently doing outsourcing/ Follo ing the a0ove parameters1 the ne 1 re0randed DOH complete treatment pack program is e"pected to 0e the main pharmaceutical procurement activity in government1 even as the BnB program is e"pected to slo do n/ (he treatment pack program ill have the follo ing main featuresF <-> (hree separate su0@programs can 0e considered1 as e"plained a0oveF (reatment packs to 0e provided for free to poor1 CC(@receiving families and families deemed indigent and enrolled under the %hilHealth 8ponsored %rogram <8u0@program ->/ <0> (reatment packs to 0e provided to nonpoor families in participating DOH and &#' hospitals1 at allo ed margins inclusive of all applica0le discounts <8u0@program 2>/ <c> (reatment packs to 0e provided to patients in private retail outlets <8u0@program 4>/

<2> (he supply of treatment pack drugs ill 0e open to 0idders <private suppliers Q %)(C %harma>1 since a healthy market for generic drugs has made this possi0le/ %rocurement of these treatment packs ill 0e done centrally through open 0idding/ (he annual needs of municipalities have 0een forecasted 0ased on population and epidemiology/ (his should 0e reconciled ith hat ould 0e made availa0le 0y DB$ as 0udget in 2.-2 and su0se=uent years/ (he availa0ility of 0udget ill also determine hether the program can e"pand to include other chronic diseases <asthma1 chronic o0structive pulmonary diseases1 and insulin for dia0etes>/ <4> DOH and &#' facilities ill 0e provided ith the treatment packs as grants1 under 8u0@program descri0ed a0ove/ Only facilities that have remitted the sales revenues from the original %-.. treatment pack program ill 0e eligi0le/ DB$ ill 0e asked to fund the Kpump@primingL program1 0ut %hilhealth should 0e asked to roll out its capitation scheme under the 8ponsored %rogram for indigents1 ith the treatment pack as centrepiece 0enefit for a0out : million primary mem0ers/ %hilhealth and D83D targeting systems are 0eing harmoni,ed for this purpose/ <5> DOH and &#' hospitals ill also 0e provided ith treatment packs under consignment 0asis to 0e used for non@poor patients1 under 8u0@program 2 descri0ed a0ove/ (he supply for this su0@program could similarly 0e contracted out to the private sector under a 0idding arrangement <for non@%D) drugs>/ )f local generics prices rise1 the government has the option to resort 0ack to %D) as an emergency measure/ (he initial yearAs re=uirements should 0e funded 0y DB$1 ith the e"pectation that the su0se=uent yearsA funding should come increasingly from %hilHealthAs Outpatient Benefit %ackage1 for %hilHealth mem0ers/

56

<;> Finally1 private hospitals and clinics could also 0e provided ith treatment packs under a consignment 0asis1 under 8u0@program 4 descri0ed a0ove/

57

Chapter $I. evie! of the (rug Inventory )anagement System Supporting the *overnment Pharmaceutical Programs
*# *dvantages of PI"C PharmaProcurement
Are %D) medicines procured 0y %)(C %harmaof good =ualityJ According to an assessment done 0y $8H <n/d/>1 three factors guarantee the =uality of %D) medicines <$8H1 n/d/>F <a> (he drugs are purchased only from the largest and most reputa0le distri0utors in the country here they are imported fromG <0> Among 0randed imports1 only 0randed products manufactured 0y reputa0le multinational companies are procuredG and <c> BFAD?FDA and DOH perform la0oratory testing on each 0atch of %D) drugs using standards stricter than those used for locally made drugs <$8H1 n/d/>/ Despite these assurances1 a fe key informants for this study raised the issue of 0ioe=uivalence in %D) drugs/ (his is a technical issue that is 0eyond the scope of this revie / Aside from lo price and assured =uality1 the other advantages of &#' and DOH health facilities 0uying %D)s from %)(C %harma are as follo <$8H1 n/d/>F <-> No need of 0idding/ 8ince %)(C %harmais a government agency1 &#'s and DOH can simply enter into a negotiated contract ith %)(C/ <2> 2alue for moneyF Because of lo er prices offered 0y %)(C %harma1 &#'s can ma"imi,e their drug 0udgets/ <4> +easona0le payment terms/ (he %)(C is prepared to e"tend credit ithin a reasona0le time from the date of delivery/ )n addition1 payment is in pesos1 not in dollars/ (he process through hich the medicines procured 0y %)(C %harmaare distri0uted to the e"isting government programs is a0ove 0oard/ According to an assessment of &#' procurements done 0y 3ong and de la &una <2..->1 the process involves not only %)(C %harma 0ut hospital retailers as ell/ Although this assessment is dated1 there is little reason to suppose the process has changed dramatically since 2..-F @ Drug selection/ &#' and participating hospitals selects drugs it needs from among the products availa0le through %)(C/ Nuantification/ &#' and participating hospitals then estimate the =uantities of the drugs needed1 taking into account their availa0le funds <allocation>/ !ach &#' and participating hospital su0mit its re=uirements to the %rovincial Health Officer ho ill consolidate all the purchase re=uests <%+> and then for ard the consolidated %+ to the %rovincial #eneral 8ervices Office <%#8O>/ (he %#8O processes the %+ and1 ith the approval of the #overnor1 issues a %urchase Order <%O> to the %)(C/ 5:

B# BnB Program Procurement and Inventory Management

(a0le 25 sho s the process of distri0uting %D) drugs under the BnBprogram/ "a+le 17# PI"C Procurement and Distri+ution Process for the BnB Program 8teps FOD- gets advance copy of %+ ith CAF FOD- checks %+ as to dosage form1 =uantity and price Convenes meeting among 8A$ <CAC and C!+>1 &8C1 Distri0ution1 BAC 8ecretariat1 )%$' 8tart of BAC process %re@Bid conference Deadline for su0mission and opening of 0ids Bid evaluation?%ost =ualification Approval 0y the HO%! of the post =ualification evaluation sheet )ssuance of NOA <Notice of A ard> Acceptance of the NOA 0y the inning 0idder <; days> )ssuance of the Notice to file %erformance 8ecurity %osting of %erformance 8ecurity )ssuance of %urchase order <%O> and Notice to %roceed <N(%> Acceptance of %O and N(% Delivery of $edicines to %%) 3arehouse Completion of )nspection 0y %%) Nuality Assurance <NA> <2 days> )nspection 0y NC%A$?Collection of samples 0y FDA %reparation of sales invoice and property receipts %acking 0y C(8)?ACC&) <7 days> Delivery to CHDs <7 to -5 days> +etrieval of %ODs 0y C(8) and ACC&) +eceipt of %ODs from C(8)?ACC&) 0y %%) +elease of +A from FDA %reparation of documents for DOH 0illing (ransmittal of documents to DOH %rocessing of payment at DOH (ransmittal of documents to DB$ %rocessing of payment at DB$ +elease of check to DOH %rocessing of payment to %%) +eceipt of payment from DOH 0y %%) %rocessing of payment to suppliers 0y %%) %%) releases checks to suppliers 8ourceF %)(C %harma Days 8e=uence Day 2 4 -. 2; 26@2: 29 4. 4-@4; 46 4:@56 49@57 49@;5 54@:5 :;@:6 :7@:: :7@:: :7@9; :9@9; 96@-.9 --.@--6 --7@--: --: --9 -2. -2-@-4; -46 -47@-;7 -;: -;9@-6-62 Day -64

&#'s initially hesitated to participate in retailing the %D) drugs due to the perceived long lead time for ordering/ )n the first year hen %)(C had not yet stocked up1 the ordering process took as long as 5 months <3ong and de la &una1 2..->/ Ho ever1 ith %)(C stockpiling1 rapid distri0ution has 0een done as soon as the orders came/ 59

8till1 some BnBshave lo turn@over1 and face pro0lems ith re@supply1 as has 0een mentioned earlier <De 2reeke1 2..7>/ )n %akil1 &aguna1 a '%@%u0lic Health study found that BnBs usually e"perienced stockouts 0ecause of larger@than@e"pected demand for drugs/ (he anti0iotics cotrimo"a,ole and amo"icillin ere usually unavaila0le in the -- BnBs studied/ COA auditors also found that 0et een 2..; and 2..71 more than %hp -/; million orth of BnB drugs nation ide had e"pired1 mainly 0ecause of the procurement of least re=uested drug/ BnBs have to a0sor0 this cost of unsold drugs 0ecause current rules do not permit their return to %)(C for a refund/ (he unintended astage is a conse=uence of com0ined factors including lack of BnB managerAs kno ledge of local disease conditions1 poor =uantification1 eak logistics at CHD offices1 and poor inventory and management of BnB operators/ )n +egion O)) in 2..71 the large num0er of the five anti0iotic drugs that e"pired as due to the a0sence of a supervising pharmacist needed to dispense them1 not so much to lack of demand/ Ho ever1 there seem to have 0een improvementG DOH officials are confident that there has not 0een any reported e"piry of drugs recently/

C# P !! Program Procurement and Inventory Management

(he %)(C procures the %-.. medicines on 0ehalf of DOH/ (he %-.. system enDoys the 0enefits of economical 0ulk procurement as it allo s the DOH to consolidate all the drug re=uirements of various <small> &#'s and its o n retained hospitals/ (his aspect of the program is very important 0ut is often not highlighted/ 3ith devolution1 &#'s 0ecame small procurers1 many of them purchasing at highly uneconomical prices1 leading to e"tremely high prices as documented else here in this report/ 'nder the current system of procurement1 difficulties in reordering have 0een e"perienced under the %-.. program1 as in the BnB program/ (o deal ith this pro0lem1 NC%A$ <n/d/> has proposed a ne procurement system outlined in (a0le 2;/ "a+le 14# Proposed :ew Procurement System for the P !! Program (asks )dentify one DOH retained hospital as central processing and distri0ution agency in each region (hrough the provincial health offices1 identify &#' hospitals in the region ho are interested in participating in the %-.. program Nuantify and consolidate the demand volumes for %-.. ithin the region 8u0mit the consolidated summary of demand volumes and su0mit to DOH central office DOH Central 8u0allot the 0udget to the DOH retained hospital identified in each region as the central Office processing and distri0ution agency )dentify the approved 0udget ceiling?allocation for each recipient &#' hospital DOH Decide on the appropriate option hether <a> to procure from %)(C %harma1 or <0> 0id Hospital out the d?mcompetitively to private suppliers <as per +/A/ 9-:5>1 inclusive of packaging and la0elling %rovide the allocation for each recipient hospital Apply for &icense to Operate as distri0utor?repacker/ +epack and distri0ute %-.. d?m to recipient hospitals/ +ecipient +eceive %-.. supplies and sell them/ Hospital 3hat to do ith the proceeds of sales and fund management are still to 0e determined/ Discussions ith DOF1 DB$1 DOH1 and each &#' to 0e held/ 8ouceF NC%A$1 n/d/ ;. 'nit CHD

Chapter $II. evie! of PITC )andate and Performance

*# PI"C Mandate
%)(C is a government o ned and controlled corporation <#OCC> created 0y virtue of %residential Decree -.7- as amended1 under the Department of (rade and )ndustry <D()>/ )t has over 4. yearsA e"perience in the e"port1 import1 and marketing of a ide range of commodities1 industrial products1 and consumer goods/ )t as esta0lished in -974 to take the lead in the %hilippine trade ith socialist and other centrally planned economies then in e"istence/
)n August 2..51 %)(C as designated as the key agency in the implementation of former %res/ #loria $acapagal ArroyoAs -.@%oint &egacy %rogram1 one thrust of hich is to lo er the price of essential medicines 0y ;. percent 0y 2.-./ %)(C %harma1 )nc/ <%%)> as createdas a su0sidiary to procure the re=uired drugs internationally and distri0ute them locally/ 'nder the approved arrangement1 %C8O earmarks the money for %)(C to procure the -2 drugs1 %)(C distri0utes the purchased drugs to the CHDs1 the CHDs ill sell to the BnBs ithin the respective catchment areas1 and the selling price <including markup> ill 0e determined 0y the ;. %harma %roDect $anagement 'nit <%$'>/

B# Performance of PI"C Cis<a<Cis D%9 and ;$?s

Ball and (isocki <2..9> assessed the pu0lic procurement prices of medicines in the %hilippines 0ased on a survey of DOH retained1 provincial and municipal hospitals in si" regions as ell as %)(C/ (he study covered a 0asket of ;. medicines <originator 0rands as ell as generics> and compared local prices ith the corresponding international reference prices usually of not@for@profit suppliers/ (he median price ratio <$%+> indicates ho the local unit price compares ith the international reference price/ (he study <(a0le 26> finds the follo ingF <-> DOH retained1 provincial and municipal hospitals procure generic medicines at 2/9 times the international reference price/ 3hen originator 0rands are procured1 they are on average -;/7 times more than the international reference prices/ <2> For generic procurement1 DOH retained hospitals <$%+ 2/2> are generally more efficient than provincial hospitals <$%+ 4/2>1 and provincial hospitals ere more efficient than municipal hospitals <$%+ 4/9>/ <4> %)(C %harma as a0le to procure lo @cost generic essential medicines using its current structures1 procuring generics on average at levels similar to the international reference prices <median $%+ -/.>/ <5> %)(C parallel imported originator 0rands are cheaper than locally availa0le originator 0rands and1 in some cases1 cheaper than pu0licly procured generic e=uivalents/ Ho ever1 %)(C %harma as a0le to procure generic captopril at prices lo er than that for the parallel imported originator 0rand <unit costs %hp 2/5 and 6/71 respectively>/ %rocuring generics is thus more advantageous for patients although pro0a0ly less lucrative for %)(C %harma <HA) #lo0al1 2..:0>/ <;> (he overall conclusion is that %)(C is more efficient than DOH and &#'s in drug procurement/ Because of this comparative advantage1 Ball and (isocki <2..9> recommend that %)(C concentrate on procuring =uality generic medicines for the pu0lic sector/

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"a+le 1># Cariation of *ctual Procurement Price .Php0 of $eneric *mo-icillin and Ranitidine at (ach Procurement (ntity in :CR, Region IC<*, and Region IC<B, 1!!2 %rocurement !ntity DOH retained hospitals %rovincial hospitals $unicipal hospitals +egion NC+ )2@A )2@A )B@B NC+ NC+ )2@A )2@B NC+ )2@B NC+ %rocurement %rice <%hp> #eneric Amo"icillin #eneric +anitidine 5/: ;/. 5/; 5/4 7/-6/2 2/9 @ ;/. ;/. 4/. 5/. 9/5 -5/. 2/@ 5/. ;/. 2/6 2/7 -/4 ./7

Non@DOH hospital B&O$ %)(C %harma 8ourceF HA) #lo0al1 2..:a

C# Performance of PI"C Cis<a<Cis Private Sector

3hile %)(C outperforms other government procurers <DOH1 &#'s> in terms of price1 it does not 0eat the prices of a private pharmacy selling generics/ )n (a0le 271 all four drugs are cheaper in the generic private pharmacy compared to %)(C/ 8ometimes1 %)(C is also 0eaten 0y pharmacies selling 0randed generics <0oth 8al0utamol>/ Finally1 in at least one of the sampled drugs <8al0utamol 2 mg?;m& syrup>1 the difference 0et een the %)(C generic and the innovator <0randed> drug is surprisingly =uite close <%hp -../-. for %)(C and %hp -.:/.. for the innovator drug>/ (hese findings indicate that the private sector has a cost advantage <is more efficient> than %)(C1 especially for generic drugs/ "a+le 1@# Price Comparison of a Sample of (ssential Medicines *mong PI"C $eneric, Branded $eneric, Private<Sector $eneric, and Innovator Drugs, 1!!6 8ample of !ssential $edicines %)(C #eneric #eneric 8al0utamol 2 mg ta0 8al0utamol 2 mg?;m& syrup #li0enclamide ; mg ta0 Cotrimi"a,ole 5.. mg ta0 8ourceF #loor <2..9> 5/;. -../-. ;/-. :/.. ./;. 2;/.. -/;. -/;. %rivate 8ector Branded #eneric 2/4. ;;/7; --/6. 9/;.

)nnovator Drugs 7/.. -.:/.. -6/.. -9/;.

D# PI"C Challenges
3hile %)(C outperforms DOH and &#'s in drug procurement1 the private sector outperforms %)(C/ An assessment done 0y B)*C&)+ <2..9> cites some of the reasons for %)(CAs cost disadvantage/ (hese are the remaining challenges it needs to faceF

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<-> 8ustaina0ility %)(C %harma is funded 0y the DOH1 and its e"pansion is limited 0y the availa0ility of DOH funds/ Other1 non@DOH sources of government funds <%hilHealth1 D+Fs of government hospitals> have not evolved in the %hilippines to an e"tent that they could 0e tapped 0y %)(C %harma for financing/ Because of these developmental issues1 funding for %)(C %harma has 0een lo and erratic/ <2> 8hortcomings in )( %)(C %harmahas severe eaknesses in )( and inventory management/ )t ill 0e challenged to manage the distri0ution of drugs even if the money is found/ According to an intervie ee in the B)*C&)+ <2..9> report1 K)t is -9:. at %)(C %harma1 )nc/ (here are computers1 0ut theyAre used as type riters/ (here are spreadsheets1 0ut no data0ase/ )nformation is all entered 0y hand1 and nothing connects to anything else/L <4> %)(C %harma has not 0een a0le to send a purchasing agent a0road to 8outheast Asia or )ndia/ )nstead1 it is forced to rely on local interlocutors1 contacted 0y phone and e@mail/ )t is currently receiving technical assistance from !'1 0ut this consists of a single em0edded technical e"pert <B)*C&)+1 2..9>/ <5> Competition (heoretically1 there are clear 0enefits of a large procurement agency like %)(C as it is a0le to consolidate the individual procurements of each DOH and &#' health facility and BnB?BNB outlets1 thus conferring on it economies of scale to undertake 0ulk procurement and negotiate for 0etter prices/ Ho ever1 it needs to upgrade its institutional capacity to do so/

(# Strategic Considerations
(he future of %)(C %harma needs to 0e taken in the conte"t of overall government strategy in lo ering the price of drugs and oligopolistic elements in the distri0ution and retail of drugs/ Overall1 there has 0een progress over the past 5@; years1 mainly 0ecause of the push for %D) and generic drugs1 and the emergence of alternative private sources of drugs1 mainly through franchising arrangements/ Ho ever1 there continues to 0e serious capacity constraints all over the supply chainF %)(C %harma lacks more efficient procurement systems and skills trainingG BnBs remain fragile enterprises and need institutional supportG BNB performance is unkno n although they are gro ing and facing healthy competition from the non@%)(C@supported private sectorG and the %-.. treatment pack program remains very limited in reach1 despite its popularity and rapid e"pansion/ A maDor part of the pro0lem is the very small scale of government 0udget financing for pharmaceuticals1 compared to total pharmaceutical sales in the country/ <Added to this is the huge underutili,ed potential of %hilHealth to 0e the main source of pharmaceutical reim0ursement and financing1 0oth for inpatient and outpatient care/> Despite these limitations1 government has 0een a0le to make a significant dent on the reduction of pharmaceutical prices in recent years/ #iven the structure of private pharmaceutical sector in the %hilippines1 as ell as the level of poverty that re=uires pharmaceutical financing su0sidy1 hat needs to 0e highlighted is the importance of the countervailing po er of government in pharmaceutical procurement and distri0ution/ (hus1 e"isting opportunities to enlarge government financing of pharmaceuticals must 0e e"ploited1 includingL increasing DOH appropriation <e/g/1 through annual commitment to finance essential drugs>G pooling &#' procurementsG persuading %hilhealth management to e"pedite and massively increase pharmaceutical 0enefits1 0oth for inpatient and outpatient careG and strengthening BnBs and the %-.. programs so that reflo s of pharmaceutical funds are assured/ (hese e"ternal pro0lems must 0e sorted out1 even as %)(C %harma sorts out its o n internal pro0lems/

&# *lternative %ptions for $overnment Drug Procurement

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#iven the large num0er of Filipinos ho remain poor and ho rely primarily on government health services and commodities1 there is strong economic 0asis for government involvement in the financingof drugs/ )ndeed1 government health financing under the previous administration fell or remained stagnant1 and this trend needs to 0e arrested/ Ho ever1 there is no e"@ante 0asis for government procurement of the drugs and related commodities1 especially if it can 0e sho n that the private sector can do it 0etter at a lo er cost/ )t must 0e mentioned parenthetically that controlling the prices of the private sector1 as as done in the #$A%1 is politically risky1 painful to producers1 e"pensive to monitor1 and engenders unintended conse=uences such as hoarding and artificial shortages1 and dampening longer@term investments in the sector/ Hey informants for this study unanimously endorsed the need for government to increase the financing and improve the procurement and distri0ution of medicines for the poor1 rather than trying to control prices across the 0oard/ (he options to dramatically increase pharmaceutical financing cover a much 0roader topic than hat could 0e dealt ith in this report1 e/g/1 'niversal Health Care1 %hilHealth reforms1 &#' financing1 and DOH financing1 and potential pu0lic@private partnerships/ (hus1 the options to 0e dealt ith in this section only cover alternative procurement arrangements/ (he follo ing options1 not necessarily mutually e"clusive1 can 0e consideredF <-> Option -F Contracting out procurement to international agencies <)nternational Dispensary Association or )DA1 'N)C!F?Copenhagen1 Cro n Agents1 and others>/ Hey informants noted that any of these arrangements could 0e more e"pensive than the status =uo1 since they involve foreign e"change costs and e"patriate management/ <2> Option 2F Contracting out procurement to local #$%@certified pharmaceutical firms/ For generics1 this is possi0le since the market has 0ecome competitiveG local procurement ould hasten the process and ensure an uninterrupted flo of supply <3HO1 2..9>/ 3HO is providing technical assistance for defining the strategies under this option/DOH prefers this route using COBAC procedures and the $aterials $anagement Department as lead unit/ Ho ever1 this re=uires pooling of procurements at the national level for economies of scale to 0e gained/ <4> Option 4F !"pand the drug consignment system no in place in certain government health facilities/ 'nder this system1 the private supplier places its drugs in a government health facility1 and the latter pays as it consumes the stocks/ (hus1 the pro0lematic areas of inventory and logistics management is Kprivati,edL as these risks are turned over to the private supplier and not internali,ed 0y the government health facility/ For instance1 e"pired drugs ill not 0e used and paid/ (his consignment system as pioneered in the 8outhern %hilippines $edical Center <%)D81 2.-->1 and has since 0een adopted in other government <&#'> hospitals as ell1 e/g/1 Negros Oriental %rovince/ <5> Option 5F Central purchasing via a %u0lic?%rivate%artnership K8ervice Access %rogramL of the %harmaceutical Healthcare Association of the %hilippines <%HA%>/ (his idea as 0roached 0y %HA% representatives1 0ut the concept note is still 0eing finali,ed/ <;> Option ;F 8trengthen %)(C%harma/ (he capacity@0uilding program should address the logistics1 information technology1 staff skills1 and management gaps already identified earlier/ )n addition1 greater attention should 0e placed to ards developing a more transparent1 open1 and competitive procurement system/

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Note that the overall pro0lem in this area is rooted in poor government financing of drugs and the fragmented drug procurements <arising from the devolution of health services> that need to 0e pooled through some mechanism/ (he procurement agency pro0lem1 hich is the focus of this section1 is secondary/

;;

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Flores1 Francisco %/1 (akusei'menai1 and 8usumu 3akal <2..->/!hould Community-Managed "rugstores be #hased $ut% *sia Pacific Bournal of Pu+lic 9ealth1 2ol/ -41 No/ -1 pp/ 9@-2/ #loor1 +einer 3/ <2..9>/ Ma-imum Retail Price and Fuality Medicines through Post Marketing Surveillance#%o er%oint presentation for the -.th National Health 8ector $eeting1 (ag0ilaran City1 Bohol/ $arch ;/ HA) #lo0al <2..:a>/Components of Medicine Price/ /hai e0/org /hai e0/org

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%a0lico1 Alecks <2..6>/ 0he state of the nations health: $f patent maladies and public remedies/ "he Daily PCIB/Philippine Center for Investigative Bournalism/ %arafina1 +edempto1 Deanna &iDauco1 and !d ard #acusana <2..9>/*ssessment of Pu+lic Sector Capacity to ?ndertake Procurement of Drugs and Medicines/ Nue,on City/ %edron1 Divina#racia !/ <2..9>/.rea)ing up cartels: 0he Cheaper Medicines ct ,((-/Business Mirror1 Culy -5/ %)D8 <2.-->/9ealth Market Innovations in the Philippines/8econd National +oundta0le Discussion1 22@ 24 Cune1 )nterContinental Hotel $anila/Organi,ed 0y the %hilippine )nstitute for Development 8tudies/ %)(C %harma <n/d/>/Brief on Su+sidies for the 9alf<Priced Medicines Program/ %)(C %harma <2.-.>/Importation of ;ow Priced Fuality Medicines/%o er%oint presentation/ Cloud 9 +esort and &eisure Clu01 Antipolo city1 $ay 6@7/ %)(C %harma <n/d/>/%ngoing Programs and Pro,ects/ /pitcpharma/com/ph?programs/html/

%)(C %harma <n/d/>/Price Comparison of Retail PricesE Botikang Barangay vs# "he $enerics Pharmacy/ %o er%oint presentation/ %)(C %harma <n/d/>/PI"C Procurement and Distri+ution Process for Botikang Barangay/ %)(C %harma <n/d/>/*ccomplishment Report for CD 1!!> to 1!!6/ +aga,a1 Can $arcel and Alliage $orales <2..9>/Botikang Barangay :ot in Poorest Places/ /gmane s/tv/ April 5/ +amos1 Coshua #/ <2..6>/Pharmaceutical Policiesfor *fforda+le *ccess/ %o er%oint presentation made at the Asian )nstitute of $anagement1 $akati City1 25 August/ 8u0ido1 Coy Angelica <2.-->/ Compliance made easier/ "he Philippine Star1 $arch -./ 2ego1 Her0ert <2.-.>/ Congress !hould 1o2 mend Cheaper Medicines ct/ Iloilo Ciews/ Novem0er -7/ 2reeke1 !d1 Cohn 3ong1 and !lfren+icalde <2..9>/Botikang BarangayE Survey Results, Cost Description and Monitoring System# +eport su0mitted to the Health 8ector %olicy 8upport %rogramme1 !uropean Commission/ 8eptem0er 2;/ 3HO <2..9>/0he #hilippines launches the #'(( programme/ (ssential Drug Medicine Policy/)ssue No/)O <2>/3HO 3estern %acific +egion/ 3iki%ilipinas <2.-.>/Philippine International "rading Corp/ / ikipilipinas/org

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