Tampering

Except during calamities and in tightly defined localities, government agencies ought to keep from tampering with prices markets set. Doing so leads to complications that are hard to predict.

For instance, prime commodities tend to disappear from the shelves when bureaucrats prescribe prices that are lower than actual costs. This has happened many times before in areas hit by calamity and most desperate for these commodities.

Yet it is difficult to restrain officials from appearing to be helpful by prescribing prices. The DTI, for instance, sets a “Suggested Retail Price” for certain items as a way to go around the hard fact that they do not have the power to set actual prices. That power belongs to the free market.

The Department of Health (DOH), we will recall, tried to interfere with our people’s salt intake by proposing a patently unenforceable excise tax on salted products. Met with strong public rejection, the DOH appears to have abandoned that idea.

But now, they are toying with an even more dangerous idea. They are looking at imposing maximum retail prices for select medicines in order to force manufacturers and distributors to bring down their prices.

We are not even sure if the Health Department can legally dabble in price setting. In 2009, the DOH (at that time also under Secretary Duque) tried its hand at price setting. It produced a near-calamity. Branded medicines were withdrawn from the shelves rather than be sold at a loss. At the same time, cheaper generics hiked their prices to approximate the prices prescribed by the agency.

In addition, the price controls were imposed on the manufacturers (which is enforceable) but not on retailers (which is next to impossible). What happened then was retailers increased their prices and enjoyed a profit windfall.

The net result is that poorer consumers had to pay more for generics. Wealthier consumers, for their part, found their preferred brands in short supply. Everybody suffered.

Now, on the argument that medicines were too expensive (as indeed they are), the agency wants to impose price controls.

In justifying this proposal, the health authorities cite the price difference between medicines sold here and the same ones sold in Europe. That is like comparing apples and oranges. It turns out medicine prices in the rich societies were heavily subsidized by their governments.

Domestic data show that medicines sold in government hospitals were significantly cheaper than those sold in commercial outlets. This is because, buying in bulk, government-run hospitals buy at a discount and often sell at break-even. They also do not apply incidental costs such as wages for pharmacists and space rentals to their final prices.

What the DOH can do is to increase public procurement of medicines for sale in government hospitals. That will require a bigger budget, of course. The practice, likewise, involves hidden subsidies.

In some select, but critical medicines, the DOH is proposing such low price ceilings we will likely encounter supply problems down the road. Manufacturers will not sell to our market if that will produce a loss.

Drug manufacturers have offered to sit down with DOH representatives to figure way by which medicine prices could be brought down further. As a matter of policy, government has also withdrawn excise and value-added taxes from maintenance drugs.

These initiatives could be expanded. The worse thing is for our health bureaucrats to impose price controls. This will only produce supply dislocation.

Unshared

Marinduque Rep. Lord Allan Velasco must be unhappy these days.

To mark his 42nd birthday a few days ago, he organized a lavish celebration with President Duterte as guest of honor. He must have expected the President to reiterate the term-sharing agreement for the Speakership. In that supposed agreement, incumbent Speaker Alan Peter Cayetano would serve for only 15 months while the remaining 21 months Velasco would sit as Speaker.

The attitude at the House of Representatives toward this term-sharing arrangement began changing a few weeks ago after public opinion polls showed Cayetano garnering approval ratings that overshadowed those of even Vice President Robredo.

The high ratings are unprecedented for the post. They are likely due to the prompt action at the House in passing the national budget and advancing the key economic reform measures the Palace advocates.

Too, the congressmen seem to be generally happy with Cayetano’s leadership. He worked hard to accommodate nearly everyone, even if this meant instituting a large number of deputy speaker posts.

Speaking at the Velasco reception, Duterte further distanced himself from the 15-21 term sharing arrangement. He had said previously the arrangement was nothing more than a “suggestion”.

Addressing the congressmen present at the reception, Duterte said: “I am not forcing anybody to take a stand. It’s your choice because the arrangement and the choice is yours. You can make or unmake the Speaker.”

These were not the words Velasco expected to hear from the President. He must have been expecting the President to reverse the words of his own spokesman who conveyed the same position.

Duterte is remarkable for his pragmatism. On the question of the Speakership, he must be thinking that “if it ain’t broke, why fix it?” The supermajority at the House is fairly settled and there was no compelling reason to rock the boat to accommodate one ally’s inflated expectations.

Too, Velasco should respect the independence of the chamber in a tripartite form of government. If he wants the highest House post, he should be courting the 300 congressmen rather than investing too much in the possibility of blatant presidential intervention.