Medical aids are unlikely to lower rates when medicine prices are fixed
The dust that has been kicked up by the controversial Medicines Control Act
will settle in three or four months, when medicine prices are likely to
stabilise and drop. But don't expect your medical aid contributions to fall
The Council of Medical Schemes has warned that the benefits of medicine
price cuts will not be passed on to medical scheme members.
A year from now, according to Manto Tshabalala-Msimang, the minister of
health, South Africans should be paying nearly 33 percent less, on average,
for generic and brand-name products. But dispensing doctors, whose revenue
will drop by an estimated R503-million once the new medicine pricing
regulations are in place, are likely to increase their consultation fees to
compensate for their losses. Hospitals too, whose biggest cash cows are
medicines, could increase theatre costs to reduce their losses.
And with medical inflation in South Africa standing at 13 percent, the
effective reduction in medical costs won't leave much over in medical aid
Nationally, pharmacists stand to lose revenue of R580-million once the new
medicine pricing regulations are in place, and doctors will lose
R503-million, according to new research by Discovery Health. The medical
aid's actuarial forecasts predict a combined loss of R1.83-billion.
On May 2 it became a criminal offence for pharmacies to offer discounts or
incentives in medicine sales. Consumers have already complained of increases
of up to 30 percent in the price of medication.
Pharmacists have said that medicine prices will be unstable until old stocks
are cleared out and a single price is introduced on June 2.
Medicine manufacturers will set a price that will be printed on the medicine
The department of health this week issued a statement urging all parties in
the drug distribution chain not to abuse the new system and disadvantage
The ban on discounts should not lead to an increase on what consumers were
previously paying for medicines, the department said, as pharmacies had a
three-month period to clear their stock.
Gary Taylor, a director at Medscheme, said the latest drug manufacturers'
prices, published on Monday, had shown effective reductions of five to 50
percent. Branded names have dropped numbers significantly, [but] generics
are already significantly discounted.
He said Medscheme was doing impact studies to compare against its databases
to determine what reduction on medicine prices these would translate into
overall. We are hoping it will be about 20 percent.
Medscheme and Discovery have calculated that once the new pricing system is
in place on August 2, reduced medicine prices could save them on average 4,5
But this reduction is not likely to be passed on to members in the form of
lower medical aid rates. Medical schemes have, however, promised to use the
savings for increased benefits, or to lower membership fee increases over
the next year.
Maurice Goodman, the head of clinical management at Discovery, said the
medicine price cuts would definitely mean a cutback on rising medical cost
pressures. Prices won't come down, but they will go up at a lower rate, he
While he was confident that medical aids rates, which would be announced at
the end of the year, would reflect the factoring-in of reduced medicine
prices. There is not going to be a dramatic impact, he said, particularly
because hospitals, whose largest profits were from drugs, would find other
ways to make up for lost revenue. And dispensing doctors would hike
consultation costs to compensate.
When the third phase of the new regulations kick in on August 2, pharmacists
will charge a dispensing fee of not more than 26 percent on top of the
manufacturer's price for prescribed drugs under R100, or a flat price of R26
if over R100.
But the Pharmaceutical Society of South Africa warned that the new
dispensing fee caps could force two-thirds of all community pharmacies out
of business. Pharmacy representatives said that the health department had
agreed to re-examine the R26/26 percent rule if it cuts too close to the
bone. (Source: Caroline Hooper-Box: The Sunday Independent, 9 May 2004)