The Food and Drug Administration (FDA) has submitted to the Department of Finance (DOF) a list of over 100 medicines with their corresponding generic names and brands for the treatment and prevention of diabetes, hypertension and high cholesterol, the sale of which are now exempted from the payment of the value-added tax (VAT) beginning Jan. 1 as provided under the Tax Reform for Acceleration and Inclusion Act (TRAIN).
This list, which also specifies the different dosages covered by this VAT-exempt privilege, is expected to also be published by the Bureau of Internal Revenue (BIR) through a revenue memorandum circular (RMC) and posted on its website.
Commonly prescribed drugs such as Metformin for diabetes, Amlodipine for hypertension and Simvastatin for high cholesterol are on the list and are now cheaper with the VAT-exemption as provided under the TRAIN Law.
The FDA informed the DOF that some products no longer sold here may still be on the list because these drugs still have valid Certificates of Product Registration.
Secretaries Carlos Dominguez III and Francisco Duque III of the Departments of Finance (DOF) and of Health (DOH), respectively, said this VAT-exemption is part of the Duterte administration’s efforts to widen the people’s access to affordable medicines and promote better healthcare among Filipinos so that they may become more productive contributors to society.
“The government is committed to ensuring that Filipinos, especially the most vulnerable, reap the benefits of the TRAIN Law,” Dominguez said, in sync with President Duterte’s priority program on human capital development.
Dominguez stressed that “The goal of the CTRP (Comprehensive Tax Reform Program) is for the government to provide comprehensive socioeconomic development, and ensuring that we have healthier Filipinos is a key part of that objective.”
Duque said, meanwhile, that “the DOH supports the implementation of VAT exemption on medicines for hypertension, diabetes and high cholesterol, which are non-communicable diseases (NCDs) affecting millions of Filipinos. Prices of medicines have long been monitored by the DOH. We will make sure that this tax measure under the TRAIN Law will bring relief to patients who rely on affordable medicines especially when they are taken daily to prevent serious and even deadly complications.”
“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,” he added. “We laud the Congress and the national government under the leadership of President Duterte for this very progressive tax measure.”
The DOF and DOH, in coordination with the BIR, issued Joint Administrative Order (JAO) No. 2-2018 last Dec. 21, 2018 setting the general guidelines for this VAT exemption and delineating the roles of the government agencies tasked to implement this new policy.
Upon the recommendation of the BIR, the DOF also issued Revenue Regulations (RR) No. 25-2018, also last Dec. 21, covering the rules for the availment of the VAT exemption and establishing a redress mechanism for violations of the rules under JAO 2-2018.
Under RR No. 25-2018, the BIR required manufacturers, distributors, wholesalers, and retailers of drugs and medicines covered by the tax privilege to prominently indicate the word “VAT-Exempt” in their invoices issued for the sale of drugs and prescribed for the treatment and 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,” according to RR No. 25-2018.
Section 34 of the TRAIN Law further amended Section 109 of the National Internal Revenue Code (NIRC) as amended to include an additional subsection (AA), stating that starting Jan. 1, 2019, the sale of drugs for the treatment and/or prevention of diabetes, hypertension and high cholesterol shall no longer be subject to the VAT.
The JAO issued by the DOH and DOF also recognized the role of the DOH in monitoring drug prices under Republic Act (RA) No. 9502, otherwise known as the “Universally Accessible Cheaper and Quality Medicines Act of 2008.”
This joint order provides for enhanced monitoring measures by requiring all drug manufacturers, distributors and retailers to include all VAT-exempted medicines in the Electronic Drug Price Monitoring System (EDPMS), in accordance with existing DOH guidelines.
All these manufacturers, distributors, and retailers were likewise required to submit to the DOH their respective sworn statements containing the wholesale prices, suggested retail prices and actual retail prices of their products prior to and after the effectivity of JAO 2-2018.
Under this JAO, the FDA was tasked to identify the drugs specifically prescribed for the treatment and/or prevention of diabetes, hypertension and high cholesterol; issue every quarter a List of VAT-exempt drugs for diabetes, hypertension and high cholesterol; and require the posting of the said list in FDA-licensed establishments.
The BIR, on the other hand, shall issue the appropriate issuance on the availment of the VAT exemption and address complaints on violations of invoicing requirement and other VAT-related issues.
The DOF shall set policy guidance on the joint order’s implementation and monitor the revenue impact of the VAT exemption, while the DOH shall monitor and study the impact of the VAT exemption on drug prices.
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