RMC No. 87-2026: BIR's Updated VAT-Exempt Drugs and Medicines List (2,277 Items)

Revenue Memorandum Circular (RMC) No. 87-2026 publishes the Bureau of Internal Revenue’s (BIR) updated, FDA-endorsed list of VAT-exempt prescription drugs and medicines, bringing the total to 2,277 items — 14 more than the previous published count. The BIR announced the update on August 5, 2026. The list implements the value-added tax (VAT) exemption under NIRC Section 109(1)(AA) for prescription drugs and medicines covering diabetes, high cholesterol, hypertension, cancer, mental illness, tuberculosis, and kidney disease, as amended by the TRAIN Law (Republic Act No. 10963) and the CREATE Act (Republic Act No. 11534).

This guide covers what RMC No. 87-2026 changes, the statutory basis behind the exemption, how the current 2,277-item list breaks down by disease category, and a worked example showing how a drugstore applies the exemption on its BIR Form 2550Q and invoices. For the full catalog of Section 109 exemptions beyond medicines, see VAT-Exempt Transactions Under NIRC Section 109; for how VAT-exempt status interacts with the broader VAT-versus-percentage-tax framework, see VAT vs. Percentage Tax.

What does RMC No. 87-2026 do? #

RMC No. 87-2026 publishes the FDA’s latest endorsement letter updating the master list of VAT-exempt drugs and medicines, which the BIR uses as the authoritative reference for which specific products qualify for the Section 109(1)(AA) exemption. According to the Food and Drug Administration’s advisory on the update — FDA Advisory No. 2026-0736, “Endorsement of Update on the List of VAT-Exempt Drugs and Medicines” — the FDA transmitted a signed endorsement letter dated July 2, 2026 to the BIR, which the BIR then adopted through RMC No. 87-2026.

This is not a new law or a new tax rate. It is a periodic administrative update: the FDA continually reviews and adds newly registered or newly qualifying drug products, and the BIR republishes the consolidated list so taxpayers, drugstores, and manufacturers know exactly which products are covered as of a given date. Prior updates brought the list to 2,263 items by April 2026; RMC No. 87-2026 adds 14 more products to reach 2,277.

What is the legal basis under NIRC Section 109(1)(AA)? #

The exemption itself comes from the National Internal Revenue Code (NIRC), not from the RMC — RMC No. 87-2026 only updates which specific products the exemption currently covers. Section 109 of the NIRC lists transactions exempt from the 12% VAT, and subsection (AA) covers the sale or importation of prescription drugs and medicines for specific chronic and life-threatening conditions. As commonly reproduced in tax-advisory summaries of NIRC Section 109(1)(AA), as amended by RA No. 11467 and the CREATE Act:

“(AA) Sale of or importation of prescription drugs and medicines for: (i) Diabetes, high cholesterol, and hypertension beginning January 1, 2020; and (ii) Cancer, mental illness, tuberculosis, and kidney diseases beginning January 1, 2023.”

The provision traces back to the TRAIN Law’s original diabetes/high-cholesterol/hypertension exemption, expanded to the four additional disease categories once the CREATE Act’s effective date took hold. The law also directs the Department of Health (through the FDA) to issue and periodically update the specific list of approved drugs and medicines — which is exactly the mechanism RMC No. 87-2026 exercises.

Which medicines are covered now, by category? #

The updated 2,277-item list spans all seven disease categories the statute covers, with cancer medicines making up the largest single share. As reported in coverage of the BIR’s August 5, 2026 announcement, the breakdown is:

The update adds 14 newly qualifying products across these categories. The BIR frames the expansion as supporting President Ferdinand R. Marcos Jr.’s 2026 State of the Nation Address directive to expand access to affordable healthcare by lowering the cost of essential medicines for Filipinos managing chronic and life-threatening conditions.

Does the exemption apply automatically, or only to listed products? #

Only products actually named on the FDA-endorsed, BIR-published list qualify — a drug prescribed for a covered condition is not automatically VAT-exempt just because the condition itself is covered by Section 109(1)(AA). This is the detail drugstores, distributors, and manufacturers most often get wrong: the statute names the diseases, but the exemption applies transaction-by-transaction to the specific branded or generic products that the DOH/FDA list identifies, consistent with how RMC No. 87-2026 and its predecessor circulars operate — each update is itself a list of qualifying products, not a blanket rule for a therapeutic class.

Practically, that means:

1. A pharmacist or accounts-payable clerk checks the current published list (as updated by the latest RMC, now RMC No. 87-2026) before treating a sale as VAT-exempt.
2. A product not yet on the list — even if chemically similar to a listed drug, or prescribed for the same condition — is charged 12% VAT until the FDA adds it and the BIR republishes the list.
3. Sellers should keep the applicable RMC on file as substantiation for VAT-exempt treatment claimed in their books and BIR Form 2550Q filings.

Worked example: a drugstore’s mixed VAT-exempt and vatable sales #

A VAT-registered drugstore selling both FDA-listed exempt medicines and ordinary vatable items reports the two revenue streams separately, charging 12% output VAT only on the vatable portion.

MedCare Pharmacy is a VAT-registered retail drugstore in Quezon City. In the third quarter of 2026, its sales are:

On its BIR Form 2550Q, MedCare reports ₱800,000 as vatable sales with ₱96,000 output VAT, and ₱1,200,000 separately as VAT-exempt sales generating no output VAT. Its point-of-sale invoices must itemize the two categories — an invoice covering both a listed diabetes medicine and a vatable item (say, a vitamin supplement) shows the VAT-exempt line and the vatable line with VAT computed only on the latter, so the total tax shown matches what MedCare actually owes. Input VAT the pharmacy pays on purchases directly tied to the VAT-exempt medicines is generally not creditable against its output VAT and instead forms part of the cost of those goods — the same allocation principle that applies to any VAT-registered business selling a mix of exempt and vatable goods.

If MedCare’s monthly or quarterly summary lists (RELIEF/SLSP-type reporting) include these purchases and sales, the VAT-exempt medicine transactions should be flagged as exempt rather than vatable, so the totals reconcile with the exempt-sales figure on BIR Form 2550Q rather than inflating reported output VAT.

Frequently asked questions #

What is RMC No. 87-2026? #

Revenue Memorandum Circular No. 87-2026 is a BIR issuance publishing the Food and Drug Administration’s updated list of VAT-exempt prescription drugs and medicines under NIRC Section 109(1)(AA), as amended by the TRAIN Law (RA No. 10963) and the CREATE Act (RA No. 11534). The BIR announced the update on August 5, 2026, bringing the total number of VAT-exempt medicines to 2,277.

How many medicines are now VAT-exempt under RMC No. 87-2026? #

The updated list covers 2,277 VAT-exempt medicines in total, an increase of 14 newly added items over the prior published list. The breakdown by disease category is 708 for cancer, 537 for hypertension, 331 for diabetes, 300 for mental illness, 172 for high cholesterol, 152 for kidney disease, and 77 for tuberculosis.

Which diseases do the VAT-exempt drugs cover? #

NIRC Section 109(1)(AA) exempts prescription drugs and medicines for seven disease categories: diabetes, high cholesterol, and hypertension (VAT-exempt since January 1, 2020 under RA No. 11467), plus cancer, mental illness, tuberculosis, and kidney disease (VAT-exempt since January 1, 2023 under the CREATE Act).

Does the VAT exemption apply to any drug prescribed for these conditions, or only listed products? #

Only to specific products included in the FDA-endorsed list that the BIR publishes through a Revenue Memorandum Circular such as RMC No. 87-2026. A drug or medicine prescribed for one of the seven covered conditions but not named on the current published list remains subject to 12% VAT until the FDA adds it and the BIR publishes the addition.

Does a drugstore need to VAT-register separately to sell VAT-exempt medicines? #

No. A pharmacy or drugstore that is already VAT-registered because its total vatable sales exceed the VAT threshold continues to sell VAT-exempt medicines without charging output VAT on those specific items, while still charging 12% VAT on its other vatable goods. VAT-exempt medicine sales do not, by themselves, trigger or remove VAT registration.

Where does a VAT-registered drugstore report VAT-exempt medicine sales on BIR Form 2550Q? #

VAT-exempt medicine sales are reported as VAT-exempt sales on BIR Form 2550Q, separate from the vatable sales line that carries 12% output VAT. The exempt sales generate no output VAT and, consistent with general input VAT allocation rules for mixed operations, input VAT tied directly to those exempt purchases is generally not creditable.

Summary #

RMC No. 87-2026 does not change the law behind the VAT exemption on essential medicines — NIRC Section 109(1)(AA), as amended by the TRAIN Law and the CREATE Act, already exempts prescription drugs for diabetes, high cholesterol, hypertension, cancer, mental illness, tuberculosis, and kidney disease. What the circular updates is the specific FDA-endorsed product list that operationalizes the exemption, now standing at 2,277 items after 14 additions announced by the BIR on August 5, 2026. Drugstores, distributors, and manufacturers should check the current list before treating any sale as VAT-exempt, keep the applicable RMC on file as substantiation, and report exempt medicine sales separately from vatable sales on BIR Form 2550Q. For the broader Section 109 exemption list beyond medicines, see VAT-Exempt Transactions Under NIRC Section 109; for how exempt status compares with the VAT-versus-percentage-tax choice facing smaller sellers, see VAT vs. Percentage Tax.