Republic of tlle Philippines

Department of Health
OFFICE OF THE SECRETARY

DEC 1 7 2015

ADMINISTRATIVE ORDER
No.20l5 - Oo5l

SUBJECT: Guidelines in the Implementation of the Philippine Drus Price

Reference Index (DPRI) to All Public Hospitals and Health Facilities

BACKGROUND AND RATIONALE

The high and extremely variable prices of medicines in the Philippines impact on access
to effective, efficient and equitable health care. In 2009, a study conducted by Health Action
International revealed that there was extreme variability in the procurement prices of essential
medicines in thB national and local public health facilities in the country. On average, originator
brands and generic equivalents were procured almost l6 times and 3 times higher, respectively,
compared to prices available on the international market.

In addition, the common unavailability of essential medicines in public health facilities

forces patients to obtain their medicine requirements at a higher cos{ from private outlets.
Furthermore, the No Balance Billing (NBB) policy implemented by PhilHealth in 2011 has so
far only been adopted by few public health facilities, further limiting access to medicines,
especially for the indigent population in the Philippines.

The enactment of the (Jniversally Ac,cessible and Affordable Quality Medicines Act of
2008 (Republic Act 9502) has created a momentum to improve access to medicines in the
Philippines. Under Chapter 3, Section l9 C. the "secretary of the Department of Health shall
have the power to implement the fair price of drugs and medicines for purposes of public health
insurance and government procuren'lent based on the order of the President of the Philippines
irnposing maximum retail prices". The law provides the government the mandate to institute a
fair and rational drug pricing system in the country, where the cost of drugs consider the 'public
interest' nature of access to essential medicines.

The law likewise ensures that transparency is guaranteed in the determination of

medicine prices and mark-ups to give consumers informed choice and to help government in
reducing cost of its procurement of essential medicines. The same mandate is articulated in the
Philippine Medicines Policy (PMP). which proposes measures to ensure access to affordable
rnedicines.

Republic Act 6713, otherwise known as " Code of Conduct and Ethical Standards for
Pubf ic Officials and Employees", Rule IV, Section 2 also states that, "it is the responsibility of
heads of departments, offices and agencies to establish measures and standards that will ensure
transparency of and openness in public transactions in their respective offices such as in

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Building l, San Lazaro Compound, Rizal Avenug Sta. Cruz, 1003 Manila o Trunk Line 651-7Efi) Dtrect Line: 7ll-9501
Fax: 743-1E29; 743-17E6 o URL: htto://www.doh.sov.phl e-mail: osec@doh.eov.ph
biddings, purchases, other financial transactions including contracts, status of projects and all
other matters involving public interest".

The Philippine Department of Health (DOH) introduced the Drug Price Reference Index
(DPRI) in2014 through the Department Order (DO) No. 2014-0146, making it mandatory for all
DOH hospitals and Regional Offices (ROs) to adhere to a price ceiling when procuring drugs
listed in the Philippine National Formulary (PNF).

The DPRI aims to guide all public health facilities in the fair pricing of essential
medicines and tb increase efficiency of the drug procurement process in the public sector.

Among all the medicines procured by DOH hospitals, analysis showed that the top ten
most commonly procured medicines costs the DOH around Sixty Seven million pesos. After
using the Drug Price Reference, the DOH cor"rld potentially save as much as Fifty percent (50%)
or around Thirty Two Million pesos.

The DPIU is envisioned to improve the efficiency of procurement, stretch the health care
budget by generating savings and prevent corruption in the sourcing of essential medicines not
only across DOH hospitals but also across all public health facilities.

II. OBJECTIVES

A. GENERAL OBJECTIVE
To set national guideline for the implementation of the Philippine Drug Price Reference
Index (DPRI) that will improve the efficiency of procurement and sourcing of medicines in all
public health facilities nationwide and government agencies procuring medicines.

B. SPECIFIC OBJECTIVES:
1. To establish systems and methods for maintaining a database of reference prices for
essential medicines from DOH facilities;
2. To create a formula in setting reference prices of medicines in the Philippine National
Formulary;
3. To set the DPRI as the mandated ceiling price for all public health facilities and
government agencies procuring medicines ; and
4. To provide guidelines for the enforcement, implementation and monitoring of the
DPRI system across public health facilities and governinent agencies procuring
medicines nationwide.

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III. SCOPE AND COVERAGE

This Ofder is issued to provide technical guidelines for all govemment agencies,
government hospitals, hospitals managed by the DOH including specialty centers, government-
owned and controlled hospital corporations, local government hospitals, and all other types of
government hospitals, in implementing the DPRI as the unified pricing system for the
procurement of medicines in the public sector.

IV. DEFINITION OF TERMS

l. Access - refers to the ability to utilize health services and its logistics support without
barriers or obstacles.
2. Affordability - cost of treatment in relation to peoples' income. In the WHO/HAI survey,
this is defined by the number of days the lowest paid unskilled government worker would
have to work in order to afford the cost of the complete course of treatment.
Anatomic Therapeutic Classification (ATC) system - divides the drugs into different
groups according to the organ or system on which they act and according to their
chemical, pharmacological and therapeutic properties. Drugs are classified in groups at
five different levels. The drugs are divided into l4 main groups'(first level), with two
theraBeutic/pharmacological subgroups (second and third levels). The fourth level is a
therapeutic/pharmacological/chemical subgroup and the fifth level is the chemical
substance. The second, third and fourth levels are often used to identify pharmacological
subgroups when these are considered to be more appropriate than therapeutic or chemical
subgroups.
4. Bioavaiiability - refers to the rate and extent to which the active ingredient or therapeutic
ingredient is absorbed frorh a drug and becomes available at the site of drug action.
5. Bioequivalence - refers to the rate and extent of absorption to rryhich the drugs do not
show a significant difference from the rate and extent of the listed drug when
administered at the same molar dose of the therapeutic ingredient under similar
experimental conditions in either a single dose or multiple doses. Bioequivalence shall
also refer to the absence of a significant difference on the rate and extent-to-which the
active ingredient(s) of the sample and reference drug becomes available at the site of drug
action when administered under the same molar dose and under similar conditions.
6. Approved Budget for the Contract (ABC) - refers to the budget for the contract duly
approved by the head ofprocuring entity.
7. Current Good Manufacturing Practice (cGMP) - refers to the current system of quality
assurance aimed at ensuring that products are consistently manufactured to b quality
appropriate for intended use. It is thus concerned with both manufacturing and quality
control processes and procedures.
8. Drug'Piice Reference Index (DPRI) - refers to the mandated ceiling price of essential
medicines for government bidding and procurement set by the DOH for all DOH
facilities in order to have a transparent and unified pricing scheme in medicines
procurement. Winning bid prices of essential medicines shall therefore not exceed the
DPRI.

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 Essential Medicines - refers to those medicines that satisfy the priority health care needs
of the population. They are selected with due regard to public health ielevance, evidence
on safety and efficacy, and comparative cost-effectiveness. Essential medicines are
intended to be available within the context of functioning healih systems at all times in
adequate amounts, in the appropriate dosage forms, with assured quality and adequate
informatiqn, and at a price the individual and the community can afford.
External Reference Pricing - the practice of using the price(sj of a pharmaceutical
product in one or several countries in order to derive a benchmark or reference price for
the purposes of setting or negotiating the price of the product in a given country.
ll. Generic drugs - refer to drugs that have the same active pharmaceutical ingredient as the
innovator drugs and are not covered by patent protection. These drugs are labeled by their
international nonproprietary or generic name and may or may not have brand name.
Interchangeable Pharmaceutical Product - an interchangeable pharmaceutical product is
one which is therapeutically equivalent to a comparator product and can be interchanged
in clinical practice (WHO Technical Report Series 937,2006).
Internal Reference Pricing - refers to the practice of using the price(s) of identical
medicines (ATC 5 level) or similar products (ATC 4 level) or even with therapeutically
equivalent treatment (not necessarily a medicine) in a country in order to derive a
benchmark or reference price for the purposes of setting or negotiating the price or
reimbursement of the product in a given country.
Mark ups - refers to the amount added to a cost price in calculating a selling price,
especially an amount that takes into account overhead and profit.
Philippine National Formulary - refers to a list of drugs prepared and periodically
updated by the DOH on the basis of health conditions obtaining in the Philippines as well
as on internationally-accepted criteria. It shall consist of a core list and a complgmentary
list.
Procurement - refers to the acquisition of Goods, Consulting Services, and the contracting
of lqfrastructure Projects by the Procuring Entity. Procurement shall also include the
lease ofgoods, and real estate.
Procuring entities - refers to any branch, department, office, agency, or instrumentality of
the government, including state universities and colleges, government owned andlor
controlled corporations, government financial institutions, and local government units
procuring goods, consulting services, and infrastructure projects.

V. IMPLEMENTING GUIDELINES

The implementation of the DPRI is in accordance with RA 9502 or the Universally

Accessible and Affordable Quality Medicines Act of 2008 and the Philippine Medicines Policy.

A. GENERAL GUIDELINES

1. The Drug Price Reference Index (DPRI) shall be calculated every year based on
prevailing procurement prices of medicines in government health facilities with
data collected by the DoH-Pharmaceutical Division from Reeional Offices

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 (ROs), DOH Retained Hospitals, Central Office Bids and Awards Committee
(COBAC) and the PITC Pharma, Inc. (PPI).
2. 'The DPRI shall be the maximum procurement price of essential medicines across
all government facilities and government agencies except in cases where the
previous years' procurement is lower than the set DPRI of the DOH. In which
case, the governmpnt health facility or agency should set the ABC at the level of
the previous years' procurement with an allowable variation of plus lA%o b
account for the inflation. '
3. For innovator products and drugs with limited competition (i.e. less than four (4)
manufacturers), the DOH may derive the DPRI from the lowest bid price or
through external reference pricing with countries of similar income status (i.e.
Thailand and India).
4. The DPRI shall include all medicines listed in the Philippine National
Formulary.
5. The DPRI shall be implemented in all public health facilities as defined in the
scope and coverage as the ceiling price for medicine procurement.
6. The DPRI shall be reviewed and updated annually and shall be made public by
the DOH through web-based posting, publication in newspaper of general
circulation or distribution of price booklets to all government health facilities.

B. SPECIFIC GUIDELINES
1. All ROs, DOH Retained Hospitals, COBAC and PPI must submit a copy of their
Annual Purchase Orders (PO) to the DOH-Pharmaceutical Division. The PO
shall include: active pharmaceutical ingredient, strength, dosage form, quantity
procured, acquisition cost per unit, total cost, mode of procurement, supplier and
manufacturer (with current Good Manufacturing Practice Certificate both Local
and International issued by FDA). '
2. All PO from the previous year should be submitted to the DOH-Pharmaceutical
Division on or before the end of first quarter of the succeeding year.
3. The DOH-Pharmaceutical Division shall consolidate, process, analyze and
synthesize the price data coming from DOH facilities and generate a price report
to be disseminated every third quarter of the year through an official website and
medicines price booklet.
4. The DPRI shall be calculated from the winning bid prices of essential medicines
sourced from reputable cGMP suppliers as cgrtified by the Philippine FDA.
5. The DPRI shall reflect the final acquisition cost to govemment health facilities
which should include the landed cost, packaging, drug content, quality assurance,
manufacturing overheads and FDA fbes. The DPRI excludes other costs such as
. pharmacy services, preparation and storage fees and applicable taxes to medicines
(i.e VAT) and other reasonable pharmacy mark-ups to be determined by the
DOH.
6. [n case of failed biddings, provisions of RA 9184 and its IRR shall apply.
7. In general, for essential drugs with sufficient competition (i.e. drugs with four or
more manufacturers), the DPRI shall be set at the median of the range of prices

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 collected from the previous year for every drug preparation and formulation (see
Annex A for sample computation).
8, Where there is limited participaiion in government tenders (i.e. drugs with three
or less) for particular medicines because of few generic manufacturers, existing
market exclusivity for patented medicines or a non-responsive bid in the previous
year, the government shall develop a pooled sourcing mechanism and a system of
price-volume negotiation with suppliers guided by external reference pricing and
economic evaluations conducted in the Philippines to determine the best value for
money for such products. The DOH may also set the DPRI at the lowest winning
bid price achieved for this product for the previous year plus an allowable margin
to consider inflationary cost.
9. In situations where there is difficulty in achieving the mandated price ceiling, the
DOH and PPI shall develop an alternative procurement mechanism such as
importation as provided for by law accessible to all national and local government
procuring agencies.
10. PHIC shall consider the DPRI when reviewing the rates or costing its new
benefits.
1 l. DOH-Office for Health Operation through DOH-Pharmaceutical Division shall

disseminate this Order to the directors of ROs, and medical directors of DOH
retained hospitals to have a proper channeling in the regions.
12. In the event that there is undue increase in the price of a certain medicine (i.e
more than 10% of the previous year's procurement price) the DOH-
Pharmaceutical Division shall notify the facility to justify the sudden increase in
prices.

VI. ROLES AND RESPONSIBILITIES

The following roles and responsibilities of all parties cor,cerned shall be observed
for the purpose of the implementation of the system:

A. DoH-Pharmaceutical Division

l. Set policies, procedures and guidelines reiative to DPRI which will serve as a tool
in setting a standard pricing scheme that shall be used in all public health facilities
procuring medicines;
2. Oversee and manage the overall implementation of the DPRI;
3. Develop tools to monitor the adherence of all public health facilities covered by
this Order;
4. Provide technical aSsistance to the ROs and DOH hospitals on the implementation
of the program;
5. Address issues and concerns encountered in the implementation of the program to
guide its improvement;
6. Conduct a regular assessment of the program together with all the stakeholders in
public health facilities, other government agencies, health providers, patients and
the industry: and

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7. Monitor the compliance of DOH facilities to the set guidelines for the DPRI and
imposed appropriate sanctions for overpricing and/or. illegal act of price
manipulation when necessary and submit it to FDA.
Advise the Secretary of Health on appropriate pricing strategies on essential
medicines that will ensure their affordability across the government.

B. Philippine Health Insurance Corporation (PHIC)

l. Ensure the adoption of DPRI as reference in the costing of health services that
will be paid by PHIC.

C. Food and Drug Administration (FDA)

l.' Set the minimum standards of safety, efficacy and quality as a basis for
qualification of the suppliers in all government sourcing and procurement of
medicines; and
2. Provide an updated list of cGMP certified suppliers and manufacturers (local and
international) through their offi cial website.
J. Act on reports for sanctions and collect the charged imposed that have accrued as
a consequence undgr the provision of Implementing Rules and Regulation of RA
9502.

D. PITC Pharmao Inc. (PPI)

1. Adhere with the prescribed DPRI of the DOH when conducting its procurement
activities;
2. May serve as the procuring arm of the DOH and other government agencies as
mandated by law and ensure the selection and identification of national and
international legitimate suppliers which can provide quality pharmaceutical
products and services advantageous to the government; and
3. Establish a system that will ensure fair pricing and the efficient supply and
distribution of medicines through pooled procurement, parallel importation and
other means of sourcing as accorded by RA 9502.

E. DOH Hospitals and Regional Offices

l. The Head of agency shall ensure the compliance and adherence to the price
reference set by the DOH;
2. Regularly submit the updated procurement price data to the DOH-Pharmaceutical
Division through actual Purchase Orders and standard forms prescribed by the
DOH; and
3. Ensure the fair and efficient pricing of essential metlicines through good
governance in procurement using PPI or other mechanisms as allowed by RA
9184.

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 4. Report suspected illegal acts of price manipulation to the DOH through DOH-
Pharmaceutical Division as specified in the law such as hoarding, profiteering and
cartel.
5. The Regional Offices in coordination with the DOH-Pharmaceutical Division
shall conduct annual monitoring of DOH hospitals in adherence to the DPRI. The
post-monitoring reports shall be submitted by the ROs to the DOH-
Pharmaceutical Division.

F. Local Government Units (LGUs) and Other Public Health Facilities

l. The Head of agency shall ensure the compliance and adherence to the price
reference set by the DOH;
2. In cases of bid failures, the LGUs may opt to source out their medicine
procurement at PITC Pharma, Inc.
3. Report to the DOH-Pharmaceutical Division suspected illegal acts of price
manipulation as specified in the law such as hoarding, profiteering and cartel.

G. Commission on Audit

t. Monitor the compliance of all government health facilities and agencies when
procuring medicines.
2. Enforce applicable sanctions subject to the usual auditing rules and regulations in
the public sector.

H. Department of Interior and Local Government

L Adopt the DPRI ds the ceiling price for essential medicines procurement across
all local government units.
2. Help the DOH to ensure compliance of the LGUs to the DPRI.
3. Report to the DOH cases of LGU non-compliance to the DPRI.

I. Department of Trade and Industry

l. Help the DOH monitor the compliance of drug manufacturers and suppliers to
the DPRI when participating in the government sourcing of medicines.
2. Enforce policies and sanctions pertinent to illegal acts of price manipulations of
medicines as provided for in RA 7581.

VII. ENFORCEMENT AND SANCTIONS

Non-compliance of this AO shall be subject to administrative penalties based on

applicable provisions under Republic Act Nos. 7581 and 9502.

l. First offense- written warning requesting the Chief of Hospital to explain/justify

the violation or non-compliance.

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 2. Second offense- endorse to l-egal Service for prosecution and/or appropriate
action in accordance with Republic Act 7581 and Republic Act9502.

V[I. SEPARABILITYCLAUSE

In the event that any provision or part of this Administrative Order is declared
unauthorized or rendered invalid by any courl of law or competent authority, those
provisions not affected by such declaration shall remain valid and effective.

IX. REPEALING CLAUSE

All other existing issuances whose provisions are inconsistent with this order are
hereby repealed.

X. EFFECTIVITY

This Administrative Order shall take effect after (15) days following its
publication in a newspaper of general circulation.

JANETT N" MD, MBA-H

of Health

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ANNEX A

Sample Computation of the Drug Price Reference

I . For drugs with four (4) or more manufacturers the reference price.is set at the median of
the range of prices collected for every drug preparation and formulation.

Paracetamol 500mg Tablet

Name of Lowest Quantify Brand Manufacturer Supplier

Hospital Procurement Name
Price

Jose Reyes 2.50 10,000 Rapidol Ad- Drusstel 'Metro Drug, Inc.
Medical Center

Philippine Heart
t.25 20,000 Biogesic JB Orchid Unilab Inc.
Center
Pharma

Westem Visayas
Medical Center
1.00 15,000 Selegesic Health Saver Qualifirst Health,
Inc.
Cagayan Valley
MedicalCenter 0.75 5,000 Aspirin Ad- Drusstel Sel-J Pharma, Inc.
Northern
Mindanao 0.50 22,000 Biogesic Flamingo Phil. PhilPharmawealth,
Medical Center Ltd. Inc.

Drug Price Reference: Php 1.00 (median)

Note: The above table is an example and does not reflect the actual procurement data of the
hoppitals.

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2. For drugs with three (3) or less suppliers the reference price is set at the lowest procured
pricel

Amoxicilli4 500mg Capsule

Name of Lowest Quantity Brand Manufacturer Supplier

Hospital Procurement Name
Price
National
5.00 13,000 Amoxil Harbin Phil
Children's
Pharmaceuticals Pharmawealth,
Hospital
Inc.

Quirino 4.00 20,000 Globapen JB Orchid Endure

Memorial
Pharma Medical Inc.
Medical Center
Singapore
Eastern Visayas 2.95 8.200 Harbimox Pharmawealth, Phil
MedicalCenter Inc. Pharmawealth,
Inc.

Davao Regional 1.98 10,000 Globapen JB Orchid Sel-J Pharma,

Hospital Pharma Inc.

Zamboanga City 1.05 20,000 Harbimox Singapore Phil

MedicalCenter Pharmawealth, Pharmawealth,
Inc. Inc.

Drug Price Reference : Php 1.05 (lowest)

Note: The above table is an example and does not reflect the actual procurement data of the
hospitals.

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