SA medicine price increase off to an early start

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Aspen Pharmacare has welcomed both the 7.5% increase in the single exit price for medicines and scheduled substances announced by Health Minister Aaron Motsoaledi as well as the early timing of its implementation, reports Business Day.

In the past, the implementation of the annual price adjustment was delayed for several months, having a significant detrimental impact on pharmaceutical manufacturers, especially when the exchange rate of the rand deteriorated dramatically in the interim. This time, however, implementation will be in January.

Aspen senior executive Stavros Nicolaou is quoted in the report as saying that the multinational welcomed the minister’s announcement in terms of both the quantum and the timing of the implementation on 6 January, which he said was “probably the earliest ever”.

The single exit price increase is applied annually by the minister on the basis of a formula and determines the increase in the factory gate price of medicines and scheduled substances. The report says the formula takes into account both the inflation rate and exchange rate fluctuations, as about 90% of the inputs into the relevant pharmaceutical products are imported.

Nicolaou explained that, in terms of the formula, the increase should have come out slightly higher than the 7.5%, but noted that government had granted a 2.9% increase in July to adjust for the deterioration in the exchange rate. This was only implemented in November, however. The 2016 increase was 4.8% plus the 2.9%.

The report says the single exit price is applied to the base prices of all medicines as determined in 2004. According to the government gazette notice issued by Motsoaledi, pharmaceutical manufacturers have to submit their applications for price increases on specified medicines between 6 January and 6 March 2017. The price adjustments applied for can be no higher than 7.5% of the single exit price that prevailed on 21 December 2016. The final date for re-submissions is 20 March.

“All medicines and their related pack sizes approved with an effective date after 21 December 2016 are not eligible for the single exit price for medicines in 2017. An applicant may only submit once in the 2017 cycle, unless a re-submission is made for not-approved medicines,” the minister’s notice said.

The report says Motsoaledi also announced the new dispensing fees for medicines or scheduled substances. The dispensing fee for those that have a single exit price of less than R117 (exclusive of VAT) must not exceed 30% of the single exit price. If higher than R117, the dispensing fee must not exceed R35.10.

Motsoaledi said the adjustment in the dispensing fee was based on the need to ensure the availability and affordability of quality medicines and scheduled substances, the annual inflation rate and information supplied by licensed dispensers.

 

Aspen Pharmacare has, meanwhile, added China to the countries where it owns the rights to two thrombolytic medications, reports Business Day. It has also cancelled a sub-Saharan Africa collaboration agreement with the UK group GlaxoSmithKline.

The deal, first announced on 12 September, appears to be an exchange valued at £45m. This was the option amount agreed to include China when Aspen acquired the rights to Fraxiparine and Arixtr in most countries in 2014. GlaxoSmithKline, in turn, has paid Aspen £45m to cancel its sub-Saharan Africa collaboration agreement with subsidiary Pharmacare.

Aspen said it “is pleased to announce that these transactions completed on 31 December”.

In the September statement, Aspen said the sub-Saharan Africa collaboration generated about R2.1bn in revenue during its 2015 financial year. Ending the collaboration “would enable GlaxoSmithKline to focus on its recently communicated strategic initiatives in Africa”.

“Aspen is retaining its existing African operations in Kenya, Tanzania, Nigeria, Ghana and Uganda, and will also continue its exports into approximately 15 other African countries. In addition, Aspen will continue to seek other opportunities in the region should they fit with its strategic goals,” it said in September.

Business Day report
Business Day report


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