When the Constitutional Court returns a verdict in the case pitting Health Minister Manto Tshabalala-Msimang against pharmaceutical companies and pharmacists, it will in effect be ruling on the duel between the government’s developmental economics agenda and the conventional market approach.
The government, through the Department of Health, this week asked the court to confirm the legality of regulations aimed at circumventing prices set by the market and introducing price ceilings.
It says this will make medicine prices more affordable and accessible, discourage patients from using costly medicines when there are cheaper alternatives, and remove marketing practices where bonuses and rebates are given to bulk buyers without any real benefit to the consumer.
To that end, the regulations prescribe that health providers add a dispensing fee to the single exit price, which should not exceed R26 for items on prescription whose price is greater than R100, and 26% if the price is lower than R100.
The pharmaceutical companies, led by New Clicks and the Pharmaceutical Society of South Africa, say the government has arrived arbitrarily at the single exit price and has ignored market realities.
Wim Trengove, SC, for the pharmaceutical society, told the court that, while his clients were not opposed to capping the exit price of medicines, the regulations used to arrive at the contested ones were ”counterproductive, unconstitutional and therefore inappropriate”.
Trengove argued that the regulations as they currently stand could lead to a shortage of pharmacists, which in turn would mean that government’s own objective of making medicine accessible to all would be defeated.
Asked by Justice Albie Sachs whether the pharmaceutical companies took issue with the figures, Trengove responded: ”It is the numbers, not the principle.”
He added that an appropriate fee was the one determined by the market. ”But Dr [Humphrey] Zokufa [the health department’s head of pharmaceutical policy and planning] says ‘I don’t care about the market’.
”His attitude is that if they cannot survive, so be it. That’s an unlawful attitude.
”The regulations [of the Medicines and Related Substances Control Act] are inadequate because they do not allow [the pharmacists] to make a decent living.”
Trengove added that his clients sought a fee that would reward the best run businesses and sink the worst: ”The fee should be set at a level where efficient pharmacists make a living and inefficient ones don’t.”
Concerns about the operation of the market — but of a very different kind — also underpinned the Health Department’s case. In its heads of argument the department maintained that the markets were not transparent enough to be left to determine medicine prices.
Its papers pointed to a 1978 Steenkamp commission report entitled Creating Market Transparency that said: ”There often is insufficient information on both the quality and the price of competing medicaments, whilst the situation may be clouded still further by promotional efforts designed to differentiate these products from one another.”
The report added: ”Clearly there is a need here, first to create greater market transparency by providing more information on the quality and the prices of competing medicines for the medical practitioners.”
The Constitutional Court hearing marks the final leg of a long, acrimonious path through the judiciary. The case divided the Cape Town legal fraternity after the division’s President, Judge John Hlophe, and Judge James Yekiso wrote a majority judgement finding in favour of the minister of health.
The two found that it was in the interest of justice that the regulations governing medicine prices were in order, given the need to make medicines more affordable to a larger number of people. Judge Hlophe’s deputy, Judge Jeanette Traverso, wrote a dissenting judgement attacking the regulations as vague.
On the basis of the dissenting judgement, and after the court had not ruled for three months on an application for leave to appeal, the pharmaceutical companies approached the Supreme Court of Appeal for a second opinion.
The court ruled in favour of the pharmaceutical companies; and the government applied to the Constitutional Court for leave to appeal against the appeal court judgement.
Ruling on whether the government was entitled to cap the prices of medicines, the Supreme Court of Appeal held: ”In a country struggling with limited resources to meet the needs of the poor, it is laudable and noble to strive to reduce the costs of medicines. We are, however, a nation that subscribes to the primacy of the rule of law, and all measures to that end must comply with the principle of legality.”
The Constitutional Court, headed by Chief Justice Arthur Chaskalson, reserved judgement after this week’s hearings. Judge Chaskalson will have retired from the Bench when the court reconvenes.