OBJECTIVES: The objective of this study is to describe the current state of Philippine drug prices across various data sources. METHODS: Retail drug price data was gathered for a list of the 124 pharmacologically active ingredients most commonly reimbursed by PHIC. This list was generated from a systematic sample of 410 claims from a total 305,482 processed claims filed at the National Capital Region office during the calendar year 2000. This sample also served as a source of national drug price data. Other sources of price data included a survey of international drug prices, and a joint Department of Health-Management Sciences for Health drug price survey from 64 points of sale throughout the country. RESULTS: Data gathered from local sources displayed a large degree of variation. From the PHIC processed claims sample, the average relative price difference between identical drug preparations was 382.7% (SD ±1080.3). Similarly, price data from the joint DOH-MSH survey displayed an average relative price difference of 247.4% (SD ±538.4). Comparison of local to international price data showed that Philippine prices for certain drug products may be 10-15 times higher than those if purchased outside of the country. CONCLUSIONS: The results of this study substantiate the common belief that there is extreme variation and inflation of drug prices in the Philippines. Other related studies have also shown that these considerable discrepancies cannot be attributed wholly to the more common reasons for price variance such as transportation, purchasing power, market fluctuations, etc. This study's findings also give PHIC further license to develop an index of drug reference prices that will serve as a basis for drug reimbursement in the hope of encouraging the more rational and fair pricing of drugs.