It was easy after the legal battle between the SA government and multinational pharmaceutical manufacturers to imagine that the issues that provoked the clash would disappear quietly, and local manufacturers which the court finding should have favoured would be popping champagne corks in celebration of good times ahead.
But that would be too simple.
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. In other countries the proportion of generics is much higher. There is wide consensus in the healthcare industry, she says, that the price of generics (where local manufacturers are concentrated) is too high.
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.
Robertson thinks the government may look favourably on this suggestion.
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.
According to Adcock Ingram's financial director, Daryl Kronson, there is much uncertainty and a lack of clarity of how the law and regulations will hit the industry. But the general themes have been apparent for years, and says Kronson, the company has been preparing for change for several years.
Kronson raises a further issue on the way pharmacists will charge for prescriptions, saying the mooted flat fee (of about R25 a prescription item) will create problems for the lower cost drugs.
This fee will create an incentive for pharmacists to dispense a low cost item, which most in the industry believes is desirable, but some anomalies may flow from this.
Probably the largest problem for local manufacturers, however, is the seeming total lack of interest shown by government in creating incentives for the local industry. While encouraging words have come from government about the need for the industry, there has been a marked lack of action.
Source: Business Day, 23 August 2001
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