Title
RA 7581 Price Act Provisions on Drug Price Control
Law
Bfad Bureau Circular No. 4
Decision Date
Jul 30, 1996
The Price Act mandates automatic price control on essential drugs during emergencies, empowers the Department of Health to monitor and regulate drug prices, and prohibits illegal price manipulation practices such as hoarding and profiteering.
price act
essential drugs
automatic price

Legal basis: RA 7581 and implementing agency

  • R.A. No. 7581 establishes the Price Act framework for regulating the prices of covered goods during conditions affecting public welfare.
  • R.A. No. 7581 designates the Department of Health (DOH) as the implementing agency for the provisions covering drug products.
  • The DOH conducts monitoring of drug products within the National Drug Policy Program, in coordination with BFAD.
  • BFAD Bureau Circular No. 4 is issued to support compliance by drug establishments with the Price Act provisions on drug price control.

Coverage of goods: basic and prime commodities

  • R.A. No. 7581 covers drugs classified as essential drugs by the DOH as a Basic Commodity.
  • R.A. No. 7581 covers drugs not classified as essential as Prime Commodity.
  • Essential drugs as a Basic Commodity are subject to automatic price control under the Price Act.
  • BFAD Bureau Circular No. 4 directs drug establishments to familiarize themselves with these covered categories.

Automatic price control and duration limits

  • Section 6 of R.A. No. 7581 provides that, unless otherwise declared by the President, prices of basic necessities in an area shall automatically be frozen at their prevailing prices or placed under automatic price control when any of the following conditions occur:
    • The area is proclaimed or declared a disaster area or under a state of calamity.
    • The area is declared under an emergency.
    • The privilege of the writ of habeas corpus is suspended in that area.
    • The area is placed under martial law.
    • The area is declared to be in a state of rebellion.
    • A state of war is declared in that area.
  • Section 6 allows that if the prevailing price of any basic necessity is excessive or unreasonable, the implementing agency may recommend to the President the imposition of a price ceiling at a price other than its prevailing price.
  • Under Section 6, price control remains effective for the duration of the condition that brought it about but not for more than sixty (60) days, unless sooner lifted by the President.
  • Section 6 defines “disaster” and “calamity” to include those brought about by natural or man-made causes, whether local or foreign.

Presidential mandated price ceiling

  • Section 7 of R.A. No. 7581 authorizes the President to impose a price ceiling on any basic necessity or prime commodity when conditions so warrant.
  • The President may impose a price ceiling upon the recommendation of the implementing agency or the Price Coordinating Council.
  • Section 7 specifies qualifying conditions:
    • The impendency, existence, or effects of a calamity.
    • The threat, existence, or effects of an emergency.
    • The prevalence or widespread acts of illegal price manipulation.
    • The impendency, existence, or effect of any event that causes artificial and unreasonable increase in price of the basic necessity or prime commodity.
    • When the prevailing price has risen to unreasonable levels.

Illegal price manipulation: hoarding, profiteering, cartel

  • Section 5 of R.A. No. 7581 makes it unlawful for any person habitually engaged in production, manufacture, importation, storage, transport, distribution, sale, or other disposition of goods to engage in illegal acts of price manipulation of the price of any basic necessity or prime commodity, without prejudice to other existing laws on goods not covered.
  • Hoarding (defined under Section 5(1)) is unlawful when a person or combination of persons accumulates basic necessities or prime commodities beyond normal inventory levels, unreasonably limits or refuses to dispose/sell/distribute stocks to the general public, or unjustifiably takes goods out of production, trade, commerce, and industry channels.
  • Prima facie evidence of hoarding arises under Section 5(1) when a person has stocks fifty percent (50%) higher than usual inventory and unreasonably limits, refuses, or fails to sell to the general public at the time of discovery of the stocks.
  • For hoarding prima facie proof, a person’s usual inventory is reckoned from:
    • the third month immediately preceding the discovery, if the person has been engaged in the business for at least three (3) months; or
    • the time the person started the business, if the business has been conducted for less than three (3) months.
  • Profiteering (defined under Section 5(2)) is unlawful when goods are sold or offered for sale at a price grossly in excess of true worth.
  • Prima facie evidence of profiteering under Section 5(2) exists when the basic necessity or prime commodity:
    • has no price tag;
    • is misrepresented as to weight or measurement;
    • is adulterated or diluted; or
    • is priced more than ten percent (10%) above the price in the immediately preceding month.
  • Section 5(2) provides a proviso that the ten percent (10%) prima facie profiteering rule does not apply to agricultural crops, fresh fish, fresh marine products, and other seasonal products covered by the Price Act as determined by the implementing agency.
  • Cartel (defined under Section 5(3)) is unlawful when two (2) or more persons enter into a combination or agreement designed to artificially and unreasonably increase or manipulate the price of a basic necessity or prime commodity.
  • Prima facie evidence of cartel under Section 5(3) exists when:
    • two (2) or more competing persons or enterprises for the same market and the same basic necessity or prime commodity perform uniform or complementary acts tending to bring about an artificial and unreasonable increase in price; or
    • they simultaneously and unreasonably increase prices on competing products, thereby lessening competition among themselves.

Enforcement, complaints, and administrative process

  • R.A. No. 7581 authorizes the DOH, as implementing agency, to conduct investigations of violations of the Price Act.
  • After due notice and hearing, the DOH may impose administrative fines for violations.
  • Administrative fines must be no less than One Thousand Pesos (P1,000.00) and no more than One Million Pesos (P100,000,000.00).
  • The DOH takes cognizance of complaints for probable violations of the Price Act.
  • When a complaint is filed before BFAD, BFAD must forward the complaint to the DOH-OLA for the conduct of due process and hearing.
  • The disposition of such complaints must proceed in accordance with the Price Act.

Compliance guidance and knowledge of law

  • BFAD Bureau Circular No. 4 instructs that all drug establishments, outlets, drugstores, and hospital pharmacies must familiarize themselves with the Price Act provisions.
  • The Circular emphasizes that lack of knowledge or ignorance of the law does not excuse compliance failures under the Price Act.

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