DRUG PRICE REGULATION : Hospitals hike fees to recoup losses

DRUG PRICE REGULATION : Hospitals hike fees to recoup losses
By Dona Pazzibugan
Philippine Daily Inquirer
Posted date: September 16, 2009
http://newsinfo.inquirer.net/inquirerheadlines/nation/view/20090916-225431/Hospitals-hike-fees-to-recoup-losses

MANILA, Philippines—The president of a group of private hospitals Tuesday said its members had increased fees to recoup losses from 21 commonly used medicines whose prices were cut in half under the government’s drug price regulation scheme.

Dr. Rustico Jimenez, president of the Private Hospitals Association of the Philippines (PrHAP), said member hospitals had jacked up prices of their services because of the government’s maximum drug retail price (MDRP) policy.

“We are affected. Where are we going to get the money to pay salaries for our nurses, our pharmacists? We went to the DoH (Department of Health) but we were told, ‘It’s your lookout,’” Jimenez said in Filipino at a forum on the regulation of drug prices.

Jimenez said a hospital was a different kind of business. “We will be forced to increase our services [fees] whether we like it or not. Otherwise, we’ll be bankrupt and close shop,” he said.

The MDRP policy, which cut in half the prices of 21 kinds of essential medicines that were found to be dominated by expensive brands, went into full implementation Tuesday.

Malacañang’s Executive Order No. 821 imposed the maximum price that drug outlets and hospital pharmacies could sell the medicines because prices did not go down despite the cheaper medicine law’s goal of encouraging parallel importation.

Health secretary incensed

At the forum, Health Secretary Francisco Duque III was incensed by Jimenez’s insistence that hospitals would go “bankrupt” because of the MDRP.

Duque said he found it incredulous that hospitals would lose money to the point of bankruptcy because of foregone profits from the 21 medicines, which include over-the-counter drugs for hypertension and high cholesterol.

“If you really stand by your claim that you will go bankrupt because of the 50-percent price reduction, show us your financial statement (FS). I am a health financier. I will go over your FS one by one,” Duque said at the forum arranged by the Philippine College of Physicians in Quezon City.

Profit centers

Duque, who was chair of Philippine Health Insurance Corp. (PhilHealth) before he became health secretary, pointed out that private hospitals had other “profit centers” aside from their pharmacies.

“You get reimbursed by PhilHealth. PhilHealth increased your OR (operating room) fees but we didn’t hear any thank you. You have board and lodging, OR, professional fees and laboratory fees. You have many profit centers,” the health secretary said.

“Why don’t you give in when it comes to medicines. Why don’t you join our goal in government to make medicines more affordable, so that our people would see that you are with them and that you’re not just concerned with your interest,” Duque said.

Delays in getting rebates

Pharmaceutical companies continued to oppose price regulation, claiming there was already market competition. Drugstores representatives, meanwhile, complained of delays in getting rebates from drug companies.

But it was the PrHAP’s insistence that its members would go bankrupt that got Duque’s goat.

Jimenez defended the practice of hospital pharmacies to sell medicines at higher prices than those found in drugstores.

“I agree it’s more expensive in hospitals. Could you get out of the hospital in the middle of the night to buy your medicine outside? What about the risk you have to take? So we have to be open 24 hours. You explain to me where you’re going to get the money [to sustain this],” Jimenez told a reporter who posed a question about high prices in hospital pharmacies.

Duque did not let Jimenez’s diatribe pass, and spoke out after Jimenez had returned to his seat.

“It’s easy to come up with words and declare that just because we have halved medicine prices, hospitals would immediately lose money. But from what Rustico (Jimenez) is saying, I do not see the clear basis for this,” said Duque, who looked at the audience while Jimenez kept his eyes on his table.

He said it did not follow that because medicine prices went down, the prices of all other hospital services would also go down. “That’s not correct,” he said.

Applause

When Duque said he would challenge the hospitals to open their books, some members of the audience applauded.

Jimenez did not make a response.

Representatives from different stakeholders—drug companies, drugstores, doctors, pharmacists, patients and government attended the forum.

Long-term viability

Dr. Ruben Flores, president of the Philippine Hospital Association (PHAP), took the floor to say that his group was supporting the cheaper medicines law.

But he said PHAP members were concerned about their financial viability in the long run.

“They are in this for business and they have to earn, of course with corporate social responsibility,” said Flores, who is also medical director of the government-run Jose Fabella Memorial Hospital.

Leading revenue source

Flores acknowledged that laboratory fees and pharmacy were the “leading revenue-making centers” in a hospital.

He said certain costs were bundled on top of the cost of the medicine itself and were not reflected in a patient’s bill. “It is not good practice to include medicine administration in board and lodging rates,” he said.

“We want to be transparent and there should be a rationale” in the billing, he added.

Increase in volume

Duque said the initial “setback” for drug companies and outlets could be compensated by increased volume in sales since, theoretically more Filipinos should now be able to afford and complete medication like antibiotics.

“At the end of the day, volume price compensation will make up for the losses. We don’t believe they will lose money. Maybe at first there will be a setback but when the market expands there will be a good effect of all this,” Duque said.

He urged hospitals to change the way they were doing things “because the public has been a victim of the high prices of medicines for a long time.”

A month since the MDRP was first implemented, the Food and Drugs Administration (FDA) has served notice to eight drugstores, most of which are located near hospitals, to explain why they continued to sell medicines at the old prices.

But only one, the South Star Drug branch in Matalino Street in Diliman, Quezon City, was recommended by the FDA to be fined the minimum penalty of P50,000.

The FDA said South Star did not immediately implement the new prices and was found to have sold the antihypertensive drug amlopidine at the higher price on Aug. 15.