For decades participants in the supply chain linking drug manufacturers to patients have profited handsomely in an environment that shielded them from public scrutiny. Elaborate discounts and incentives provided to doctors, hospitals and pharmacists have invariably meant more money in the pockets of those providing care, and ever-increasing bills for consumers.
Government is right to intervene in this grossly inefficient system, but it will have to tread carefully and communicate better to avoid inadvertently making matters worse.
The medicine pricing regulations introduced this week, and a simultaneous ban on discounts and other perverse incentives, serve to strip away the shroud of secrecy that has cloaked the industry for too long. When the regulations come into full effect on August 2, consumers will finally know precisely what each drug cost as it left the factory gate, and the mark-up added by the pharmacist or doctor.
After a shaky start, the health department appeared to have reached an acceptable compromise with drug manufacturers, heading off Big Pharma's threats of disinvestment. But while it extinguished the fire at the head of the distribution chain, it left another to blaze at its foot. Pharmacists are furious that instead of their traditional dispensing fees, based on a percentage of the rand value of the medicines sold, they will be permitted to charge only a 26% professional fee, capped at R26. That fee is even lower (16%) for sales of schedule 1 and 2 medicines such as paracetamol, when sold without prescription. The industry is now threatening legal action and warning that many pharmacies will go to the wall. Government must take the warnings seriously.
More than 90% of SA's pharmacists work in the private sector. In this saturated market, an individual typically dispenses 20 scripts a day, in stark contrast to the public sector, where the figure is closer to 120. Pharmacies have historically pushed up margins to compensate for low volumes, but with their mark-ups set to shrink dramatically, they need to dispense in far greater volumes to survive.
If the health department's policies were implemented according to plan, the extra demand should come from the surgeries of doctors who are no longer allowed to dispense. When the department began the transformation process, the underlying message was that dispensing doctors would become the exception rather than the norm, since licences to dispense would be granted only if there was no pharmacy in close proximity. This policy is in line with the World Health Organisation view that patients get a better deal if doctors diagnose and a third party, unencumbered by conflicts of interest, dishes out the drugs.
The health department said when the draft pricing regulations were published in January that the new strictures placed on retail pharmacists would be mitigated by a reduction in the number of dispensing doctors. But the thread binding the two interventions appears to be unravelling.
The National Convention on Dispensing, which represents the interests of dispensing doctors, has already been to court to delay the implementation of the new licensing laws, pending the outcome of its constitutional challenge. Although that legal argument will be heard by the end of the month, it could take some time before the court's decision is finalised. The health department says almost 1500 applications for dispensing licences have been received so far, and just 85 have been granted. But it won't say how many have been turned down. If all who apply are successful, this bodes W for the pharmacy sector.
As usual, the health department has failed dismally to communicate its thinking effectively. It needs to clear up the confusion once and for all, so both pharmacists and doctors know exactly where they stand.
Editorial Comment: Business Day, 4 May 2004