Dr Manto Tshabalala-Msimang, Minister of Health
Tomorrow's Government Gazette will carry draft Regulations Relating to a
Transparent Pricing System for Medicines and Scheduled Substances made in terms
of the Medicines and Related Substances Control Amendment Act of 1997.
These regulations are a major development in our effort to ensure that South
Africans have access to affordable, good quality medicine. You will recall that
when this Act was passed in 1997, it was strongly opposed by pharmaceutical
companies. It took these companies almost four years to withdraw their court
action in 2001 and finally accept the legitimacy of our efforts and genuineness
of our respect for the international trade treaties that we are party to.
We are now in the process of implementing various provisions of this Act.
These Regulations articulate the processes and mechanisms to be followed to give
effect to the provisions of Section 22G.
This section makes provision for:
* The introduction of a transparent pricing system for all
medicines and Scheduled substances sold in South Africa. This includes the
requirement that a manufacturer or importer must set a price at which a
particular medicine shall be sold to any person other than the State. The price
is termed single exit price and will be published on the container
of a medicine.
* An appropriate dispensing fee to be charged by a pharmacist or by
a person licensed in terms of Section 22C(1)(a) to dispense medicines.
* An appropriate fee to be charged by pharmaceutical wholesalers or
distributors or any person selling Schedule 0 medicines.
In terms of the draft regulations, distributors and wholesalers can only
charge a fee up to 15% of the manufacturer's exit price for a medicine that
costs less that R40. Where the price is R40 or more, the maximum fee is R6.
A pharmacist can charge a dispensing fee to the maximum of 24% of any
medicine with an exit price of less than R100. Where the single exit price is
R100 or more, the dispensing fee will not exceed R24. Any other person who is
licensed to dispense medicine can charge a fee of not more than 16% of a single
exit price of less than R100 and R16 for medicine with a price that is higher
The regulations require the manufacturer - not the Government - to set the
exit price for each medicine. However, they do establish a ceiling for the
original exit price and provide that the price may be increased only once a year
- while it may be reduced any number of times, in the spirit of competition.
Our research has indicated that formally listed Manufacturer Net Price of
medicines has been inflated to allow for the impact of a complex system of
bonuses, rebates and other incentive schemes within the pharmaceutical industry.
This incentive system allows hospital groups, pharmacy groups and other major
outlets to obtain medicines at prices about 50% below the listed Manufacturer
Net Prices. Due to complex mark-ups in the distribution chain the consumer
seldom benefits from this incentive system. Furthermore, not all outlets are
eligible for the bonuses and rebates.
Section18A of the Medicine Amendment Act, which comes into effect on the 2nd
of May 2004, will prohibit the supply of medicines through these incentive
schemes. The single exit price and regulated fee system will become effective at
the same time, thus ensuring that all the consumer pays less for medicines.
In the light of the current gap between the listed price (the
Manufacturer Net Price) and price effectively charged, the regulations require
that the single exit price should be set no higher than 50% of the present
When these regulations are fully implemented, the price of medicines to
consumers would be between 40 and 70% lower than the current levels and this is
a major saving for consumers. In general, medicines with the lowest prices will
have small percentage reductions and those with the highest prices will have
greater reductions. This should put a reasonable halt to the trend of a general
increase in medicine prices in South Africa over the last few years.
These draft regulations will be open for public comment for three months as
from tomorrow. We urge all interest parties to submit written comments or
representations on the proposed regulations to the Director General of Health.
We fully understand that these regulations will have a profound impact on the
entire medicines sector in this country and, as Government, we are concerned to
get things right.
We are well aware that our primary goal of affordable medicine for all is
served through a healthy manufacturing, wholesale and retail industry. We have
no wish to undermine this industry - only to make it fully accountable in the
interests of the consumer.
Dr Manto Tshabalala-Msimang
Minister of Health