By Paul C.H. How, Reporter

Business World – February 28, 2007

The costs of importing patented drugs from cheaper sources may lead to a losing business venture for the government, the counsel of  major drug firm claims.

In a hearing last week in a Makati Regional Trial Court case filed by Pfizer Philippines against the Philippine International Trading Corp. (PITC), Pfizer legal counsel Ramon S. Esguerra said the government will have to get the drugs it wants to purchase from a middleman if it gets these abroad.

The presence of the middle-man, he said, would lead to the government spending on additional percentages and commissions that may defeat the state’s purpose of providing cheaper medicines to the poor.

Pfizer sued PITC after the government company purchased 80 samples of Pfizer’s hypertension drug Norvasc from Pakistan, and for applying for a permit to import the medicine before the expiration of Pfizer’s local patent for the drug.

PITC Chairman Roberto Pagdanganan admitted that the government bought the samples from a Pakistan-based consolidator

"The bottom line is if they will be able to sell the products cheaper, or at the same price as [local drug firms], when obtaining from these [foreign] sources. My belief is may patong din sila (there’s an add-on to their price)," Mr. Esguerra said.

He pointed out that tariffs and other duties would have to be considered as well, which would further raise product prices when sold here.

Mr. Pagdanganan however said that based on experience in importing other drugs such as pain reliever Ponstan, government has been able to reduce prices by 50% when selling these to the public.

"We pay for air freight, duties, profits [consolidators] make, reasonable margins of Botika ng Bayan (the outlets where drugs imported by PITC are sold), and for loans to finance our business, and we still sell at half the price," he said.

PITC itself, he said, managed a profit of about 10% to 15%.

Mr. Pagdanganan had earlier said Norvasc purchased abroad would cost the equivalent of P10, as opposed to the P45 drug sold in the country by Pfizer.

According to him, his agency will only import particular brands when there is a large price differential between the foreign and local drugs.

But Mr. Esguerra said the drugs sourced abroad could not be sold at such a low price, unless the government will sell at a loss, or provide subsidies.

The PITC, he said, was not mandated to do this. "Is it their policy to subsidize? No. The PITC is a government business concern, not a charity. They have to be transparent, and let people know [they] earn from it. It’s not fair to say we’re the only ones benefiting," he said.

Another issue to be considered, Mr. Esguerra said, is whether the state will source their drugs from legitimate firms abroad, as Mr. Pagdanganan has claimed.

"We may go into the issue of whether or not the goods were sourced from Pfizer, which has not been confirmed," he said.

Mr. Pagdanganan however said the India and Pakistan offices of Pfizer had refused to sell directly to his agency, due to pressure from their Philippine counterpart. He said the arrangement of purchasing from a consolidator will still be done even when Norvasc’s patent expires in June and the state firm imports the drug in commercial quantities.

The Pharmaceutical Health-care Association of the Philippines (PHAP), which represents major drug firms in the country, has opposed legislative moves to allow importation of drugs whose patents have not expired, citing safety risks and lack of liability of foreign firms. The intention of the measure is to spur competition and bring down overall prices of medicines.

The PHAP however has contended that drug firms have to be recompensed for the amounts spent on research and development of medicines.

House Bill no. 6035 or the "Cheaper Medicines Bill" remains pending at the plenary level at the House of Representatives.

The Makati court, presided by Branch 149 Presiding Judge Cesar O. Untalan, will be hearing the Pfizer-PITC patent case this afternoon.

The Office of the Solicitor General, representing the PITC, said it will be calling at least one more witness, the state firm’s vice-president, Teddie E. Rivera.