Drug-price benchmark could hurt local revenue

As part of its long-running efforts to cut the cost of medicines in the private sector, the government published draft regulations last December, outlining its proposed methodology for controlling pharmaceutical manufacturers prices. It gave the industry until the end of last month to comment.<!--par0-->

<!--par1--> At the heart of the draft benchmarking regulations is a proposal that the prices of originator medicines for the private sector be set by choosing the lowest price among five countries SA, Australia, New Zealand, Canada and Spain. <!--par0-->

<!--par1--> Generic medicines will be pegged at 40% below the price of the originator medicines. Generics are copies of originators, usually made only once a patent has expired but sometimes produced under licence while the patents are still in effect.<!--par0-->

<!--par1--> The most important submission to the health departments medicine pricing committee is a joint document from all of SAs key industry groups representing pharmaceutical firms Innovative Medicines SA (Imsa), representing multinational firms the National Association of Generic Manufacturers the Self Medication Manufacturers Association of SA, representing firms that make over-the-counter preparations and the Pharmaceutical Industry Association of SA, which includes multinational firms and generic manufacturers. <!--par0-->

<!--par1--> Two independent sources told Business Day that the multi- national firms had calculated that the proposed methodology would slash revenue from their local subsidiaries by about a third. <!--par0-->

<!--par1--> The health departments head of pharmaceutical evaluation and economic planning, Anban Pillay, expressed scepticism, saying pharmaceutical firms had not provided sufficient data to back up the claim.<!--par0-->

<!--par1--> We asked for a product-by-product assessment but theyve only given composite numbers of the overall impact, he said. <!--par0-->

<!--par1--> Imsa executive director, Val Beaumont, said pharmaceutical manufacturers were concerned about the effect international benchmarking might have on the industry in SA. Industry also wanted assurances from the government it would take steps to ensure price reductions were passed on to consumers. <!--par0-->

<!--par1--> Industry sources said the pharmaceutical manufacturers submission proposed medicine prices be based on the average of the basket of countries, rather than picking the lowest prices. Drug makers had suggested certain low-priced drugs be exempt, including antiretrovirals. <!--par0-->