Good
Afternoon
We
are here to present to you a new dispensing fee for medicine in
South Africa
. It will ensure that South African citizens obtain value for money when
purchasing pharmaceutical products, whether this is in the public or private
health sector.
Since
the implementation of the medicine pricing regulations, the consumer has not
enjoyed the full benefits of the medicine pricing regulations. Patients are
billed different prices at different pharmacies, having to pay a so-called
administration fees and high dispensing fees in certain pharmacies.
The
new dispensing fee will produce a saving for such patients. It is important that
I emphasise that patients should no longer be paying administration fees for a
dispensing service. The only additional service linked to dispensing that
patients may be levied a fee for is the delivery of medicines.
As
you know, the introduction of the medicine pricing regulations in 2004 led to a
court challenge by retail pharmacies. The matter was heard in the
Cape
High Court
, Supreme Court of Appeal and ended in the
Constitutional Court
.
The
Constitutional Court
judgement of 30 September 2005 declared that the dispensing fee regulations
were invalid. The court recommended that the Pricing Committee reconsider the
fee of 26% of the single exit price cupped at R26, giving due regard to the
viability of retail pharmacies (especially rural and courier pharmacies).
The
review of the dispensing fee by the Pricing Committee included:
- A
survey of all retail pharmacies to obtain income and expenditure
information
- Data
on dispensing patterns from medical scheme administrators
- A
review of written submissions to the Pricing Committee on an appropriate
dispensing fee.
It
is worth noting that the viability of a retail pharmacy is influenced by both
its ability to generate income and the level of its operating expenses, which in
turn are each influenced by a number of factors.
Income from dispensing activities is influenced primarily by:
- Number
of items dispensed
- Distribution
of the value of items dispensed
- Dispensing
fee
The
key factors influencing expenses in the dispensary of a pharmacy include:
- Number
and skills mix of professional staff
- Other
recurrent expenses such as rent, electricity, insurance, etc
- Quantity
and type of capital equipment
The
Committee used a small efficient retail pharmacy as the basis for calculating
the new dispensing fee. After extensive research and consideration of inputs
from stakeholders the committee has determined that the dispensing fee shall be
calculated as follows:
- Where
the single exit price of a medicine is less
than seventy five rands, the dispensing fee, is a total of four
rands plus 33% of the single exit price of the medicine
- Where
the single exit price of a medicine is seventy
five rands or more but is less than two hundred and fifty rands,
the dispensing fee is a total of twenty
five rands plus 6% of the single exit price of the medicine
- Where
the single exit price of a medicine is two
hundred and fifty rands or more but less than one thousand rands,
the dispensing fee is a total of thirty
three rands plus 3% of the single exit price of the medicine
- Where
the single exit price of a medicine is one
thousand rands or more, the dispensing fee is a total of fifty
rands plus 1.5% of the single exit price of the medicine.
The
fee is currently structured in tiers to ensure that low cost medicines do not
become very expensive. The proposed fee will still offer consumers a saving on
their medicines when compared to the pre-regulation period. Consumers will
experience further savings once international benchmarking, reference pricing
and economic analyses are implemented.
It is anticipated that the price of medicines will reduce after the
implementation of international benchmarking. This may reduce the dispensing fee
income so the committee has decided to review the dispensing fee after the
implementation of the benchmarking methodology.
Annual
increase:
The
medicine regulations also make provision for an annual single price. The Pricing
Committee was expected to make a recommendation on a price increase in 2005
however the legal challenge to the regulations did not allow implementation of
this legislation.
In
2006 the committee called for submissions from interested parties on an annual
price increase. The committee has considered all submissions on an annual price
increase before making its determination.
Certain
manufacturers have made representations to the Committee about the urgency of
the price increase due to the depreciation of the
Rand
and the fact that there has been no price increase since the implementation of
the regulations.
Ideally
the committee would have preferred to implement the price increase after the
implementation of the international benchmarking methodology. The Pricing
Committee has therefore decided to declare the increase at this stage.
The
annual single exit price increase for the period 2006 /2007 should be a maximum
of 5.2 % of the ex-manufacturer price. The single exit price as at 01 October
2006 shall be used as the basis for calculating the price increase.
It
is recommended that manufacturers take note of the international benchmarking
methodology before implementing the price increase. The single exit price
increase should be implemented after the international benchmarking methodology
has been applied.
The
single exit price increase may be applied to those products that were priced
below the international benchmark up to the maximum permitted SEP increase, but
not to exceed the international benchmark price after the SEP increase. This
single price increase is effective until 01 July 2007.
The
committee has noted that certain manufacturers have indicated the urgency of
this matter. The committee recommends that such manufacturers may implement a
single exit increase after 30 days of supplying the necessary information
(electronic and hard copy) to the Directorate Pharmaceutical Economic
Evaluation.
International
Benchmarking
The
Committee has also made recommendations on a draft methodology for international
benchmarking. The committee would like to invite comment on their proposed
methodology.
The
Pricing Committee has proposed two different methodologies to benchmarking since
there are significant differences between multinational companies and local
manufacturers.
Multinational
companies will have to benchmark their products directly against equivalent
products in a basket of countries. Ideally the committee would have liked to
select countries with an equivalent GDP, burden of disease, health system,
population and regulatory environment as
South Africa
.
Unfortunately
it is impossible to satisfy all of these criteria so the committee had to
identify country that had a similar medicine regulatory environment as
South Africa
. The countries selected in the basket are
Australia
,
Canada
,
New Zealand
,
Spain
and
South Africa
.
Companies
that manufacture generic medicines will have to apply an indirect method of
benchmarking. The committee has proposed that the price of the generic drug
should be at least 40% lower than the internationally benchmarked price of the
originator drug.
Finally,
there are pharmacies that continued to charge the 26% / R26 fee even though
other pharmacies were charging higher fees. We would like to thank these
pharmacies for making medicines more affordable to our people. It is our
understanding that many of these pharmacies will continue with the 26% / R26
fee. We therefore would advise patients to shop around for your medicines.
Dr
Manto Tshabalala-Msimang
Minister
of Health
--------------------------------------------------------------
The
following documents can be accessed on the Department of Health Website link
below:
http://www.doh.gov.za/docs/ndf-f.html
-
Presentation by the Dept of Health: International
Benchmarking of Medicine Prices in South Africa
-
Presentation by the Dept of Health: Pricing Committee
recommendations on increase in Single Exit Price (SEP)
-
Annual Price Increase
-
Recommendations of the Medicine Pricing Committee on an
appropriate dispensing fee for pharmacists
-
Dispensing Fee for Pharmacists
-
Frequently Asked Questions
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