Coming to a friendly chemist near you

The last scuffle over the Medicines and Related Substances Act saw the health department announce a ­complex four-tier dispensing fee for pharmacists. This was intended to satisfy the requirement of the Constitutional Court, which last year ordered that an “appropriate” fee be drawn up for the purpose.

When each consumer’s private actuary has done calculating the cost and attempting to square this with what the medical scheme will allow as reimbursable, there is a chance that the Medicines Act will influence the prices of medicines downwards in the way it was intended to about 10 years ago when the first drafts of the Act appeared.

Medical scheme actuaries and the designers of benefits will be happy that there is a degree of certainty in the environment, even if the ­complex fee structure has the effect of distorting prices.

Also important is the health department’s simultaneous announcement of the start of the process of international bench­marking of ­medicine prices used in the calculation of the ex-­factory price of ­medicines—known as the single exit price (SEP).

This process, which kicks off with an invitation for proposals on methodology to be used, forms the basis of the calculation of each medicine price.

With luck (and fewer court cases) this may finally address the problem South African ­consumers have always had with medicine prices: why does it seem to be cheaper everywhere but here?

The department and the pricing committee (which reports to the health minister) have decided on four countries against which to benchmark prices: Australia, Canada, New Zealand and Spain.
These countries have similar regulatory regimes to ours.

Happily for consumers, the department and pricing committee have decided that generic copies of brand-name drugs will also be benchmarked. This is expected to put an end to anomalies in generics pricing, with many prices higher than they should be—for no good reason. The department has said that generics should cost at least 40% less than the original drug it copied.

Built into the process will also be a proposed annual increase for the manufacturers, this week for the first time being set at 5,2% on the current exit prices.

The initial phase of international benchmarking will see the fox let loose in the henhouse.

Multinationals will conduct the initial benchmarking exercise, using the same medicines as they have on the South African market. This will then be audited and checked.

The newly announced 5,2% increase is the first in three years and has taken into account the ­consumer price index during the period as well as the rand-dollar exchange rate until July this year.

It has so far been greeted by a few grumbles and a surly silence. The appetite for court challenges by manufacturers has been absent since their earlier high court defeat.

The trio of announcements—the dispensing fee, the annual increase of the SEP and the start of the process of international benchmarking—should finally bring to life the intention of the Medicines Act.

The possibility remains for a ­community pharmacy fight, and a few odds and ends (such as ­ doctors dispensing fees) still need to be sorted out. Medicines account for close to 16% of the total spend in medical schemes, according to the Council for Medical Schemes’s latest annual report—with hospitals at 35,3% and medical specialists at 20%.

Pat Sidley is head of communication at the Council for Medical Schemes

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