New Year’s wishes for 2019

At the close of the year 2018, the Department of Finance (DOF) announced the mandated implementation of tax exemption for selected medicines and drugs. Exempted from payment of the value-added tax (VAT) starting tomorrow, January 1, 2019, are all drugs and medicines prescribed for diabetes, high cholesterol, and hypertension – regardless of brands.

After all, brands no longer matter because the Generics Law require all doctors to prescribe and write down the generic name only of drugs and medicines. The whole idea of Republic Act (RA) 6675 or the Generics Law is to help bring down the prices of drugs and medicines within affordable reach of consumers, especially those needed by indigent patients.

The DOF announced in its official Twitter post over the weekend the VAT exemption of these specific drugs and medicines. The announcement came before the close of office hours in all government agencies. As previously declared by Malacañang, all government agencies, currently enjoying long weekend holidays, would resume offices this Wednesday, January 2.

The early announcement apparently is a lesson learned from the backlash of public outcry over the first package of tax reforms so far implemented under the administration of President Rodrigo Duterte. This is RA No. 10963, otherwise called as the Tax Reform for Acceleration and Inclusion (TRAIN) Law.  The resulting inflationary effects of the TRAIN Law made it the most unpopular piece of legislation approved by the 17th Congress.

The TRAIN Law, the first package of the administration’s tax reform program, lowered personal income taxes but offset the losses by increasing duties on fuel, sweetened beverages and vehicles. It also limited VAT exemptions to necessities such as raw agriculture food, education and health. It, however, retained the exemption of purchases of senior citizens and persons with disabilities.

The Department of Health (DOH) welcomed the implementation of the VAT exemption on medicines, citing its benefits to millions of patients afflicted with such types of ailments as among the top “killer” non-communicable diseases in the Philippines. In its official statement, the DOH noted this development proves that the TRAIN law is “indeed a health measure bringing more affordable medicines to our patients while raising prices of sugary beverages, alcohol and cigarettes which bring harm to the general populace.”

This is in compliance with Section 109 (AA) of the National Internal Revenue Code, as amended by the TRAIN Law. According to the DOF, the VAT-free status of these medicines will be implemented as prescribed under Joint Administrative Order (AO) No. 2-2018 of the DOF, Bureau of Internal Revenue (BIR), and the Food and Drug Administration (FDA) issued on Dec. 21, 2018.

Accordingly, the BIR shall apply the VAT-exemption to the manufacturers, distributors, wholesalers and retailers of drugs and medicines prescribed for the treatment and/or prevention of diabetes, high-cholesterol and hypertension.

“The sale of drugs not included in the list of VAT-exempt diabetes, high-cholesterol and hypertension drugs published by the FDA shall be subject to VAT,” the AO stated. Further, the same AO clarified “the importation of the above-prescribed drugs and medicines shall be subject to VAT under Section 107 of the Tax Code, as amended.”

For this purpose, the BIR said a list of VAT-exempt diabetes, high-cholesterol and hypertension drugs as identified and published by the FDA will be posted in the BIR website through a Revenue Memorandum Circular.

The impact of this VAT exemption would be far more felt than what the inutile RA 9502 or the Universally Accessible Cheaper and Quality Medicine Act, or in short Cheaper Medicine Act. Perhaps, if this Cheaper Medicine Act – passed into law in April 2008 – has indeed effectively been able to bring down the prices of all drugs and medicines, there would be no more need for other special laws.

These are maintenance drugs and medicines that are mostly prescribe to treat or manage such life-threatening illnesses as diabetes, hypertension and high cholesterol afflicting many Filipinos in all age brackets. If not managed properly, complications set in and may prove fatal to a person, whether young or old.

Unfortunately also, the letter and intent of the Generics Law have not apparently gained much headway to bring down the prices of these drugs and medicines since 1988 when it was approved into law.

This special provision under the TRAIN Law on these specific drugs and medicines would hopefully do the trick. The 12% VAT on top of the price of any drug and medicine is really a big burden, most especially for indigent and other low-income patients.

But since this is just a special provision of the TRAIN law, it applies only to these three selected types of drugs and medicines.

We could only make a wish that our lawmakers at the 17th Congress can come up with a comprehensive VAT exemption to all drugs and medicines and not just this select few. However, given the limited period of remaining sessions before the present Congress officially adjourns in June this year, this may remain a wishful thinking for this New Year.

Also taking effect starting tomorrow as provided for by the TRAIN Law is the second tranche of hike on specific tax on gasoline, diesel and other refined petroleum products. Fortunately, we have been seeing a downtrend in the world oil prices that have brought down our own domestic prices of gasoline etc. for the past three weeks now.

Hopefully, independent players will continue to set the trend in our domestic oil industry. They have jumped the gun with big price rollback of P1.80 per liter on gasoline and P1.30 per liter on diesel taking effect ahead of the regular Tuesday adjustment.

That’s another wish for this New Year of 2019. Cheers to one and all.