Pharmaceutical industry in China

In a surprise move yesterday, Parliaments health committee scrapped a controversial Medicines and Related Substances Amendment Bill clause which gave the health minister the final say on whether new medicines could be sold in SA.

Empty spaces on pharmacy shelves, and shortages of some cold and asthma medicines as well as appetite suppressants, are unintended consequences of the battle to prevent the manufacture of tik, an addictive methamphetamine widely abused in poor communities in the Western Cape.

Health Minister Manto Tshabalala-Msimang has called on the continent's health industry to improve access to affordable medicine. Access to healthcare is a constitutional right for all citizens of this continent.

An independent report which has just been released has revealed that the average cost of medicines has dropped by just over 8% in South Africa since December 2004.

The draft medicine price regulations constitute the most fundamental shake-up of the private healthcare sector in decades - and threaten the super-profits traditionally earned by most corporates operating in this sector. Not only should they occasion an immediate reduction in the price of medicine, if introduced as envisaged on May 2, they should also curb annual increases in medicine prices and thereby help rein in medical inflation, which has raged at double digits throughout most of the 1990s. A pricing committee of 13 technical experts chaired by University of Cape Town health economics professor Di McIntyre developed the regulations. They are entirely consistent with what exists in most European Union countries and in Australia, fundamentally free-market economics. Discovery Health estimates that the regulations could cut a staggering R4bn (roughly 40%) off the medical schemes industry's annual drugs bill. If passed on to members, that would translate into an 8,5% reduction in annual contributions. Though the means to achieve this involve the state fixing the price of medicine and interfering in the free market to regulate profit-taking in the distribution chain, the advantages clearly outweigh the disadvantages. The pros are cheaper medicine and a transparent pricing system where the factory-exit price of a drug is known and the mark-ups added by middlemen are limited to a ceiling set by government. This will prevent undue profit-taking in the distribution chain; and because it will no longer be more profitable to sell higher-priced drugs, the market should shift as a whole towards cheaper generic drugs. The downside is that any discounting of the factory-exit price will not be allowed. This will eliminate volume-based discounting, a function of free markets the world over. Among the hardest hit will be New Clicks, Dis-Chem and other big pharmacy and hospital groups, which will no longer be able to use their size and buying capacity to negotiate better wholesale prices than their smaller competitors. However, the reality is that in the past bulk discounts have seldom been passed on to the consumer, allowing some players to make unreasonable profits on the sale of medicine, reportedly of up to 350%. The problem is that though savings on drugs of 40% are achievable, the various players in the industry who stand to lose out under the new system - private hospitals, pharmacists, dispensing doctors, wholesalers and drug manufacturers - are unlikely to give up a collective R4bn without a fight. It's the job of civil society, large medical aid administrators, the health department and the pricing committee to ensure that players don't buck the new system. For this to be credible and transparent, the future watchdog role of the pricing committee needs to be clarified. In terms of the regulations, its future role is limited to setting the annual amount by which drug manufacturers will be allowed to increase their factory-exit prices - and issuing public warnings if it feels a new drug is unfairly priced. This role should be adequate, provided the industry players work together to implement the new system in the interests of making private healthcare more affordable and sustainable. This goal is in every player's best interest. Whether the corporates can rise to the challenge remains to be seen. (Source: The Financial Mail, 23 January 2004)

The use of cheaper generic medicines is significantly lower locally than in wealthier, more literate countries, resulting in significant savings for them and higher healthcare costs for South Africa. Humphrey Zokufa, cluster manager of pharmaceutical policy and planning at the department of health, said yesterday: Speaking at the launch of the first Generics Week, aimed at promoting the use of generic medicines, Zokufa said the increasing use of generics in the developed world could be seen in legislation changes in France and the US. The US was looking at bringing generics to market faster, thereby saving consumers an estimated $3 billion a year. Of the estimated R8 billion pharmaceutical market in South Africa, the state accounts for R2.5 billion. Of the remaining R5.5 billion, about 80% is spent on branded medicines as opposed to generics. It does not follow that more expensive products result in better healthcare Zokufa said. Branded products have a higher profit margin for the retailer and therefore have been more aggressively sold than generics. Ronnie Green-Thompson, the head of the KwaZulu-Natal department of health, said the cost of pharmaceuticals and the expenditure incurred for them contributed 12% to 18% of the provincial health budget. Generics are available in South Africa for a wide range of illnesses, including malaria, tuberculosis, scabies, depression, and cardiovascular and cholesterol treatment. Generic antiretrovirals are before the Medicine Controls Council, but even if approved they will not be made available unless a compulsory licence is issued, because of patent protection. The council has a comprehensive regulatory process with which generic medicines have to comply before going to market. The Pharmacy Act of 1997 and the Medicines Control Amendment Act, among other things, have made it mandatory for dispensers of medicine, be they doctors or pharmacists, to offer the patient a generic substitute if one is available.(Source: Business Report, 24 June, 2003).

WTO ministers meeting here reached a preliminary deal on access to generic medicines in developing countries, according to a copy of a draft text received Tuesday. The text states that a World Trade Organisation agreement on protecting patented pharmaceuticals does not and should not prevent countries taking measures to protect public health. The draft must still be approved at a plenary session scheduled at 14:00 (1100 GMT) of trade ministers and delegates who are then expected to continue final negotiations on a range of issues until midnight. If they agree on the documents, they will serve as a roadmap for fresh trade talks. The WTO accord, known as TRIPS - trade-related aspects of intellectual property rights - has been one of the toughest issues on the agenda at the five-day sesssion in the Qatari capital. Ministers have been locked in hard bargaining since Friday to find consensus on the contents and time frame of a new round of talks on further reductions in trade barriers. Developing countries, especially India and Brazil, sought assurances they would not be prevented by the TRIPS agreement - which offers patent protection to big pharmaceutical companies - from using cheaper, generic medicines to treat a health pandemic such as AIDS. They were opposed by Switzerland and the United States, who argued the current accord was flexible enough to not stand in the way of efforts by poor countries to respond to crises such as AIDS. They also warned that any weakening in the accord would discourage companies from investing in research and development. (Source: SAPA-AFP, 13 November 2001)

At the end of August the first phase of PharMIS (Pharmaceutical Management Information System) was launched by the Department of Health - Pharmaceutical Policy and Planning Cluster, supported by the EQUITY project. Expenditure on pharmaceuticals in provincial health departments is exceeded only by personnel expenditure, and up till now data about pharmaceuticals has been fragmented, incompatible and inaccessible for analysis and management. The system currently provides a datawarehouse of drug supply management information from most of the provincial depots, and a web interface to reports from this data. More information from pharmis.pwv.gov.za

While changes in the law prompted mainly by the Medicines Act and its proposed regulations (and to some extent changes to the pharmacy profession) will be good in parts for the local pharmaceutical industry, it nevertheless has several concerns about the law and its regulations. The concerns would ring familiar to most who watched the pharmaceutical giants square up to government in Pretoria earlier this year: the importation of drugs; the proposed pricing committee; and the single exit price. For those not well versed in that court case and the law, the single exit price has been a hot potato proposed and dropped and reinstated over many years. It would see one price of a drug at the factory exit. The way it has been cast in law would ensure that no matter what the size of the purchase the price would be the same. Unlike every other industry, a larger volume bought would not be able to trigger a discount. The move was inspired by a need to inject transparency into medicines pricing and a need to remove a range of corrupt practices in the industry (known as perverse incentives) and would go hand in hand with a pricing committee. The pricing committee would ideally see to it that there was transparency and rationality to pricing policy. But the industry fears price controls. Of the drugs that flow through medical aid societies, some 19% in rand value are generics. In volume the amount goes up to 27%, according to Fiona Robertson of the Board of Healthcare Funders that represents the medical aid industry. She believes prices are at least 50% higher than they should be, partly because there is no real incentive to prescribe or reimburse generics. And the system currently buffers the higher prices of generics. There is little proper competition, but that will change if legislators have the effect they desire, but parts of the local industry are unconvinced it will. Several groups, including local industry body the National Association of Pharmaceutical Manufacturers, have proposed an enforceable code of ethics with a pricing committee, instead of the current single exit price. The health department faces a mountain of submissions from interested parties on its proposed regulations, which range from pharmaceutical groups to retailers and users like hospitals. (Source: Business Day, 23 August 2001)

The Health Department has confirmed that a group of about 40 international pharmaceutical companies would take the government to court over provisions in the Amendment Act, in particular the uncontrolled importation or manufacture of cut- price versions of patented AIDS drugs, bringing to a head a three-year-old intellectual property dispute.  The setting of the court date - 5 March 2001 - holds out the possibility that this protracted matter will now be brought to a resolution, department spokeswoman Jo-Anne Collinge said. The department said government would oppose the application, which will be heard in the Pretoria High Court on March 5. London-based GlaxoSmithKline, the world's largest supplier of HIV/AIDS medicines, said the industry was alarmed by implications of the law. Clause 15c gives the health minister total power to dismiss patents without any process whatsoever. That is what the companies object to, company spokesman Phil Thomson told Reuters. The South African dispute is a thorn in the side of the international drugs industry which is eager to prevent the uncontrolled spread of generic AIDS drugs in the developing world that might leak back on to high-price markets in Europe and North America.