CRITICAL CONSUMER Pat Sidley
PARLIAMENT is an interesting place these days. When the Minister of Health, Dr Nkosazana Dlamini Zuma, participated in the debate on the price of drugs on August 17, the House, it seems, was fully in support of her views.
This included Dr DR Madide, the Inkatha Freedom Party’s spokesman on health. In his contribution to the debate, he stated that in other countries prices of specific drugs were very much lower than in South Africa. He expressed a particular worry about the poorer communities and how they suffered when drug prices spiralled.
So far so good. But the flaw in his argument was his choice of drug: “I am very surprised to hear that in India one can buy Mandrax for 10 cents, but one has to spend R50 for it in South Africa.”
There was an interjection at this point. “Why can we not get it for the same price?” he asked. His question was followed by another interjection.
One hopes the interjections were to explain to Madide that the drug in question is banned in this country. Perhaps he is also interested in lowering the price of more useful drugs.
However, the basic import of the debate shows support for the minister’s ideas on how the country could cut spiralling drug costs.
The figures as presented in parliament are appalling. Medical aid societies, which buy as part of the private sector, spend close to a third of the benefits they pay out on drug costs.
The public sector (state and provincial hospitals, the army and clinics), which accounts for 80 percent of drug sales in the country and which works on a tender system, pays just short of 10 percent of its costs on medicines. The public sector also uses more generic medicines instead of the original brand name products. The prices in this sector are much lower.
Yet the pharmaceutical companies make their profits from sales to the the private sector. And the price of drugs rose 37 percent between 1990 and 1991 and by 39 percent the following year, according to the minister.
The culprit isolated by various MPs as well as by the minister is the profit motive and the various restrictive practices in the industry.
Attempts over the years to counter abuses and rocketing prices have not been entirely successful. The minister cited recommendations of various commissions and of the Competition Board. She mentioned two in particular: generic substitution and the “single exit price”.
Generic substitution is outlawed: in fact, some years ago the pharmacists themselves tried to get the law to state that they could substitute a cheaper generic drug for a more expensive drug which the doctor had prescribed. This progressive move was quickly trampled: pharmacists were told they had to supply the drug prescribed by the doctor.
The issue of the “single exit price” has at various times been dealt with by the Competition Board. Presently pharmaceutical companies sell drugs to dispensing doctors at a much cheaper rate than to pharmacists. (However, wholesalers and pharmacists add on huge margins).
The board recommended that a price subject only to a volume discount be used. The pharmaceutical industry successfully appealed against this.But Zuma has given new hope to people who suffer the extraordinary prices and to board members who kept making recommendations which would have kept prices down, but were stopped by forces more powerful than themselves.
The board believed as long ago as 1986 that if, at the retail level in the private sector, profit was removed from the dispensing of medicines, the motive to dispense expensive medicines with huge percentage markups would fall away.
It works like this. A consumer pays R100 for a prescribed drug. The pharmacist marks it up by 50 percent. The markup system means that 50 percent on the expensive drug provides the incentive for always dispensing the more costly medicine. The same applies to dispensing doctors.
But if both doctors and pharmacists were charged the same prices by the pharmaceutical companies, and neither was able to charge the public more but made their money on a dispensing fee, there would be no reason to dispense expensive drugs (except in cases where no other medicine will do).
Many countries, including the United Kingdom with its national health, have a similar system.
Zuma also suggests price controls may have to be reintroduced. According to the board, this system was introduced in 1973 when the profit margin, and not the price, was controlled. Manufacturers could make 250 percent, wholesalers 21,21 percent and retailers 50 percent. The examples in a report from the board show that even when wholesalers and pharmacists got discounts, they did not pass them on to consumers. In 1980, after an investigation by the board, price control was abolished.
In a later investigation into the selling of medicine the board found evidence of hidden discounts, bonuses paid to dispensing doctors and the giving out of free samples to doctors which were then resold to wholesalers. The litany of ethical abuses goes on: gifts from pharmaceutical companies, including overseas visits, and identical products registered under different names and sold at different prices.
And theft is rife. Drugs stolen from the public sector are resold on the private or black market for much more.
The board remarks that stolen drugs, and those handed to the sales representatives of pharmaceutical companies, are often not handled correctly and could place consumers’ health in jeopardy.
The pharmaceutical firms have pointed out to the board that no matter what pharmacists pay for drugs, they seldom pass discounts on to the public.
Now that chemists are allowed to advertise drug prices, this situation has changed slightly.
It was after the lengthy and thorough 1992 report into the industry that the board recommended single exit pricing. The government agreed, but the move was stopped by an appeal by the pharmaceutical companies.
Zuma has clearly had access to all this information. It now remains to be seen whether she can effect changes to the way the industry operates.