Drug prices, not patients, fuelling cost spiral — Mediscor review

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The annual Mediscor review says that growing expenditure on medicines is largely driven by higher prices, not because people are sicker and using more products, reports Business Day . The Mediscor review, an authoritative medical benefit management company that helps schemes control their pharmaceutical budgets, publishes an annual assessment of medicine expenditure trends.

The report says it’s point about the impact of medicine prices on medical scheme expenditure comes at a critical time, as the pharmaceutical industry is lobbying the health department for an extraordinary price increase to offset increased import costs in the face of a weak rand. Medical schemes have countered the industry’s appeal, saying they cannot afford further medicine price hikes in 2018.

Mediscor’s latest review shows medicine expenditure per beneficiary rose 6.9% in 2017, primarily due to higher prices rather than increased utilisation. The average cost per item rose 6.3%, while the average number of items per beneficiary went up 0.6%.

The report says the key factors influencing the increased cost per item were adjustments to the government-controlled ceiling price of medicines, known as the single exit price, changes to pharmacists’ dispensing fees and the extent to which generics were substituted for off-patent originator drugs. The single exit price adjustment for 2017 was 7.5%. This continues the trend observed in 2016 and 2015 when overall spending rose 6.4% and 5.9%, respectively.

Mediscor scrutinises data from claims submitted by pharmacies, doctors and scheme members. The report says it does not include South Africa’s two biggest schemes – Discovery Health Medical Scheme and the Government Employees Medical Scheme – but nevertheless captures a significant slice of the market, which has 8.9m beneficiaries.

Its 2017 review highlights the growing cost pressures medical schemes face from expensive speciality medicines used by a tiny minority. Its analysis of the claims of 1m beneficiaries shows just 0.2% of medicines dispensed in 2017 were speciality medicines, yet they accounted for 11% of the expenditure.

 

Meanwhile, pharmaceutical manufacturers are anxiously waiting the decision by health minister Aaron Motsoaledi on their request for an extra price increase on medicines to compensate for the rand’s slide. Business Day reports that this was after an advisory committee submitted its recommendation to him last week.

Manufacturers usually get one increase a year for private sector prices, but the minister has the power to allow an extra increase, and has previously done so. He will have to weigh up the concerns of an industry that says it was hard hit by a January price increase that failed to cover rising input costs against the prices charged to consumers and medical schemes.

The report says the weak rand has made imports more expensive and squeezed pharmaceutical manufacturers’ margins: they cannot pass on their increased input costs to consumers because medicine prices are controlled by the Health Department.

Pharmaceutical manufacturers raised their concerns with the minister and his officials in August, before meeting the medicines pricing committee, which advises the minister. The committee’s chair, Fatima Suleman, said that it had made its recommendation to the minister.

According to the report, the Health Department’s deputy director-general for National Health Insurance, Anban Pillay, said a decision on whether to allow an extra price adjustment had yet to be taken.

Pharmaceutical Task Group spokesperson Stavros Nicolaou said the weak exchange rate threatened the continued supply of some products. He conceded regulatory provisions allowed drug makers to seek permission to raise the price of individual products if they had become unprofitable, but said the process was bureaucratic and companies have had “marginal success” with it in the past.

The Pharmaceutical Task Group represents South Africa’s key associations for drug manufacturers, the report says.
Business Day report
Review
Business Day report


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