Thabiso Mochiko: Business Report, 1 November 2006
PHARMACISTS have until the end of January to implement a new medicine pricing structure that will also allow drug manufacturers to increase their single exit price by up to 5.2 percent for the first time since 2003.
The single exit price is what pharmacies pay for medicine from suppliers or drug manufacturers.
Under the new regulations, drug manufacturers could apply from October 1 to raise prices by up to 5.2 percent. But approvals may take time as the government is benchmarking prices against those in countries such as Australia, New Zealand, Canada and Spain.
Vicki Ehrich, the chief operating officer of the Pharmaceutical Manufacturers' Association, said the industry welcomed the news as companies had been under pressure from the weaker rand and the fuel price increase.
However, Ehrich said the price increase implementation might be delayed as the government still had to do the benchmark study.
New Clicks chief executive David Kneale said the proposed regulations were viable and the return to the industry would be fair. He added that consumers would also get a better deal.
Thami Mseleku, the director-general at the Department of Health, said the single exit price increase was allowed to be applied to products that were priced below the international benchmark up to the maximum increase allowed, but not exceeding the international benchmarking price.
The news received a cold response from United SA Pharmacies (USAP), the 1200 member-strong retail pharmacy body, which expressed its disappointment with the new regulations.
Under the regulations, pharmacies are allowed to charge a dispensing fee of R4 plus 33 percent of the single exit price of medications that cost less than R75. For drugs that cost between R75 and R250, the dispensing fee is set at R25 plus 6 percent.
On medicines costing between R250 and R1000, the dispensing fee is R33 plus 3 percent. On medication that costs R1000 or more, the dispensing fee is R50 plus 1.5 percent of the price of the drug.
Pharmacies can apply the new fees at once, but have been given until the end of January to comply fully.
USAP chairman Julian Solomon said: "[We] are rather disappointed as this is not going to be adequate." USAP would study the regulations before commenting further.
Mseleku said the new fee structure would ensure that low-cost medicines did not become expensive. Consumers who would benefit the most were those who were not covered by medical aid.
Prices will drop even more once international benchmarking is implemented, the government anticipates.
Since the government and industry players began discussing pricing regulations, medical schemes have made savings of up to 22 percent on the prices of medicines. But those decreases have not been realised by scheme members.
Humphrey Zokufa, the managing director of the Board of Healthcare Funders, said this was because some healthcare services, especially hospital fees, had increased, which made it difficult for schemes to pass the savings through to consumers.
