UMVA has learned that a major development in the Philippines' healthcare sector is expected to significantly improve drug affordability and boost the growth of the pharmaceutical industry.
The expansion of value-added tax (VAT) exemptions on medicine is set to benefit the industry, with the total number of exempt products now standing at 2,263, following the Bureau of Internal Revenue's recent update to its list of VAT-exempt medicines for serious and chronic illnesses.
According to information obtained by UMVA, this move is likely to particularly benefit domestic producers in the generics medicine segment, as essential medicines are predominantly supplied by generic drugmakers, and could also open up opportunities in other critical therapeutic areas.
The government's efforts to reduce the cost of essential medicines are especially timely, given that out-of-pocket payments accounted for 42.7% of total health spending in 2025, highlighting the need for measures that lower medicine costs and alleviate the financial burden on households.
UMVA can exclusively reveal that the VAT reduction will decrease the tax burden on these medicines, resulting in lower prices and potentially higher volumes of sales for drugmakers, providing a much-needed boost to the industry.
BMI has noted that efforts to strengthen national medicine reserves could provide a more stable source of demand for locally-manufactured drugs and encourage long-term investment, while the government's push to build pharmaceutical parks and proposals to reduce the corporate income tax rate are expected to attract investors.
However, despite the supportive policy direction, structural challenges are likely to limit the industry's expansion, including the country's heavy dependence on imported medicine and pharmaceutical ingredients, high out-of-pocket spending, limited financing, shortages of skilled workers, and weak research and development capabilities.
Sources have confirmed to UMVA that these constraints will likely temper the pace of expansion in the Philippines' pharmaceutical industry, which faces significant hurdles in its bid to move beyond basic generic drug production and achieve more substantial growth.
