The Philippines has released a Drug Price Reference Index (DPRI) which makes it obligatory for government agencies to adhere to a price ceiling when procuring drugs listed in the national formulary.
IHS Life Sciences perspective | |
Significance | The Philippine Department of Health (DOH) released the Drug Price Reference Index (DPRI) on 10 September, making it mandatory for all government procuring agencies to adhere to a price ceiling (acquisition cost) when procuring drugs listed in the national formulary. |
Implications | Until now, there was no formal link between a listing on the Philippines National Formulary (PNF) and actual drug prices. The DPRI is therefore a significant step towards adopting formal pharmacoeconomic criteria in its drug pricing system and is aimed at increasing transparency and efficiency of government procurement of essential medicines. |
Outlook | The introduction of the DPRI paves the way for the creation of the planned Drug Price Regulatory Board, which would assess the prices at which drugs represent good value for the DOH and the Philippine Health Insurance Corporation (Philhealth), and the likely integration of pharmacoeconomic criteria into its pricing and reimbursement system. |
The Philippine Department of Health (DOH) released the Drug Price Reference Index (DPRI) on 10 September, making it mandatory for all government agencies to adhere to a price ceiling or acquisition cost when procuring drugs listed in the national formulary, according to Philippines New Agency. The DPRI can be accessed online here.
The DPRI sets out the obligatory ceiling prices that government hospitals and Regional Health Offices (RHOs) must comply with when sourcing medicines listed in the Philippines National Formulary PNF. Similarly, the DPRI also applies to all government agencies which are engaged in increasing the efficiency of their drug procurement processes in the public sector. The DPRI, which comes under the jurisdiction of the Philippine DOH, will be updated annually.
All drugs in the PNF are included in the DPRI, which is set at the median value of prevailing tender prices of most PNF medicines. Price data was taken from the DOH Central Office and its 72 retained hospitals, RHOs, and the Philippine International Trading Corporation (PITC), a government trading arm mandated through its subsidiary PITC-Pharma to source and supply low-cost medicines to government hospitals, health centres, prisons, and community pharmacies.
The introduction of the DPRI is aimed at helping hospitals and other government agencies increase drug pricing efficiency, good governance and fair pricing, the report said. "We believe that the transparent and fair pricing of medicines is an important pillar of universal healthcare by improving the availability and access of patients to medicines," health secretary Enrique T Ona was quoted as saying. The DOH began studying the procurement prices of essential medicines in 2011, with the goal of setting up a standardised reference index.
Outlook and implications
The introduction of the DPRI is a significant step forward in the Philippines' progress towards developing a drug pricing and reimbursement system based on pharmacoeconomic criteria. Non-standardised mark-ups on drugs and rising procurement prices have contributed to a lack of access to medicines in the Philippines, where treatment prices do not match health needs. This is a particularly urgent issue in a country where a quarter of the population lives below the poverty line (source: CIA Factbook).
The DPRI, which was conceived as a guide to fair acquisition prices of essential drugs, is likely to inform future reimbursement caps for medicines. It paves the way for the creation of the planned Drug Price Regulatory Board, which would assess the prices at which medicines represent good value for the DOH and Philhealth and set maximum retail prices of medicines. However, progress towards the creation of the Drug Price Regulatory Board may be rocky – the proposal has met opposition from local pharmaceutical and medical services interests (see Philippines: 20 April 2012: PHAP Opposes New Price Monitoring Body in Philippines).
Looking ahead, it will be interesting to see how the Philippines treats the pricing of innovative drugs, or drugs not listed in the PNF. One factor to consider may be that rather than lowering the price of essential medicines, drug manufacturers may simply resort to raising the prices of the drugs outside the DPRI to recoup their losses. Interestingly, it is worth noting that while the Philippines has yet to introduce international reference pricing (IRP) and the DPRI is a national framework, it was designed with informal reference to IRP and prices in Thailand, Malaysia, and India (source: National Center for Pharmaceutical Access and Management, DoH). On the other hand, Egypt includes the Philippines in its IRP basket of countries, so lower prices in the Asian country as a result of the DPRI may affect prices in Egypt.
As the Philippines works towards its goal of universal healthcare coverage by 2016, it is expected to continue building pharmacoeconomic controls into its pricing and reimbursement system (see Philippines: 23 January 2014: Philippines extends PhilHealth coverage to 80% and Philippines: 23 June 2013: Philippine president signs law to introduce universal health insurance). Although the Cheaper Quality Medicines Act (2008) gave the government the power to set maximum retail prices, it did not adequately control price variability, nor link prices to affordability of the Philippine government budget. The DPRI would theoretically reduce the prices of drugs further upstream, which would feed through to lower prices to patients. The success of the DPRI mechanism will be a determining factor for the Philippines' continued healthcare reforms.