The new medicine pricing regulations have come under attack by pharmacists. This week judgement was reserved in the Pharmaceutical Society of South Africa’s appeal against last month’s high court decision upholding the medicine pricing regulations. The regulations set a single factory exit price for medicines and restrict pharmacists to a fixed dispensing fee.
The regulations were implemented a month ago. What should consumers do if they are charged an administration fee in a pharmacy?
We think under the current regulations it is reasonable for the pharmacy to charge an administration fee, but that is not something we would pursue in the long term. I would not like to see a situation where pharmacists keep charging for phone calls. Then we will be going back to square one, when we did not know what these extra charges were for. There is a loophole because we have not defined whether the dispensing fee includes or excludes administration costs. Because of this they are abusing that privilege.
What should consumers do until the court case is concluded?
Consumers need to demand to know what the single exit price is. Then the next question should be, “What is this administration cost for? What is it the pharmacist doing for me?” When we worked out the 26% and R26 dispensing fee pharmacists were already doing this. I can’t understand why they need to charge more administration costs now. The fact is that we did not include the definition of administration fees in dispensing fees means that this is a loophole … which we will close when we have further data on the actual cost of dispensing medicines.
If the consumer cannot afford the administration fee, what should they do?
The pharmacies in the disadvantaged areas are not charging administration fees because the patients can’t pay for it. The consumer should find another pharmacy where the costs are lower.
Are you sending the signal to pharmacy students that they should not bother going into retail?
We have been going to universities to tell them “you must understand that 2 500 pharmacists service seven million South Africans. If you want to go into retail pharmacy you must understand that you need to service the other 41-million in some other way.” They must geographically and economically position themselves so all people have access to pharmacies. There are lots of vacancies in the public hospital sector. A retail pharmacist uses less than 10% of his [or her] knowledge learned at university. In South Africa everyone is comfortable doing a technician’s job with a pharmacy degree — which is not sufficient.
What is the court case about?
The main issue is the dispensing fee but there are other peripheral issues.
Did you expect this level of resistance from pharmacists?
We certainly did, because this is what we call transformational legislation, which means everybody will have to change their business practices. Obviously humans are resistant to change. If we look at the experience in other countries you will see that this happened. They kicked and screamed and closed down pharmacies in protest, but at the end of the day those governments didn’t shift and the policy was carried through.
What are the long-term effects of this resistance? Do you see the retail pharmacy market becoming less saturated when pharmacies close down?
It is not the key intention of the legislation, but when you put up a dispensing fee that demands cost efficiency from a pharmacy, then it should legitimately justify its position in a particular area.
Won’t smaller pharmacies lose out to big retail chains?
We have not targeted the smaller guys, we have tried to protect them. In the previous system the big pharmacies could buy in bulk and get discounts. Now there is true competition. The issue is cost efficiencies and whether they can absorb the costs of running the pharmacy and make a profit. [Some] pharmacies in Durban are not charging extra and say they will survive on the new dispensing fee.
How will they survive, when the Pharmaceutical Society of South Africa (PSSA) claims small pharmacies are closing?
That is the critical question. When the PSSA said the dispensing fee will not work and pharmacies are going to close, they suggested a dispensing fee of 50% to 70%. We said that on the data they presented to us we couldn’t tell what the impact of 26% will be because that data does not predict pharmacy closures. We need data on what the incomes and expenses are of the dispensary. The PSSA did not have that data and they still don’t have it. We have now put in place a process where pharmacies that are claiming they are going to close down need to supply us with incomes and expenses to show why the 26% fee is putting them out of business.
Are you willing to admit that there could be a problem with the 26% dispensing fee?
If there is new data then definitely we will have to look at changing it.
Is this dispute a public relations problem or a political problem?
I think there are a number of issues. There is a perception that the national Department of Health is very weak and will accept anything you present to it. I think they got a rude shock when they realised we would apply scientific reasoning and methods in our response. The PSSA is like a trade union for pharmacists and they were trying to present a scenario and put a proposal on the table … which was totally against what we are trying to do.
Was the court case a result of fast-tracking regulations? Was there enough stakeholder participation and were you willing to bargain?
This process is a science. When we come out with a number, that is the number. It’s not about negotiating the number. You can’t come to the table and say this is the number we want and let’s compromise with a middle number. It needs to be backed up with science and facts.
What the pricing system means
The introduction of a “transparent pricing system” for all medicines and scheduled substances sold in South Africa came into effect in August 2004. This includes the requirement that a manufacturer must set a price at which a particular medicine will be sold. This price must be printed on the packaging and is termed the “single exit price”.
Under the new dispensing regulations a pharmacist may charge a maximum of R26 per prescription or 26% on any medicine with a price less than R100. Where the price is R100 or more, the dispensing fee may not exceed R26. The Pharmaceutical Society of South Africa says this fee is too low and proposed a dispensing a fee of 50% to 70% on medicines. Some pharmacists have started charging fees to cover their administration costs.