South Africa’s Department of Health is poised to grant pharmaceutical companies an extra price increase to offset rand weakness, which has made imported ingredients more expensive.
Business Day reports that while the move will offer relief to drug companies under margin pressure, medical schemes and consumers are likely to be unhappy about further increases in medicine prices, which rose 4.8% in January.
The department has also committed to speeding up drug companies’ applications to adjust their prices that until now, have kicked in only 30 working days after they submit their paperwork, according to Stavros Nicolaou, head of strategic trade for Africa’s biggest generic drug maker, Aspen Pharmacare. The report says Aspen belongs to the Pharmaceutical Task Group, which represents four industry associations and has been negotiating with the department on this issue since 2015.
Nicolaou said pharmaceutical companies were hoping for a 3% price increase, along with a commitment from the Health Department to process documentation within seven working days. “The currency volatility has continued to affect the viability of certain low-margin products. We are very pleased we have managed to negotiate relief with an extraordinary price increase,” he is quoted in the report as saying.
The Department of Health’s head of regulation and compliance, Anban Pillay, has confirmed that Health Minister Aaron Motsoaledi had approved an extra price increase for private sector medicine sales, but declined to specify the amount as the increase had not yet been gazetted. “The increase is intended to ensure security of medicine supply, as manufacturers faced a sharp devaluation of the rand, which may impact on their ability to maintain continuous supply of medicines in the private sector,” he said.
The report says the weak currency has affected importers of finished medicines as well as domestic manufacturers that import raw ingredients, pushing up the cost of production and squeezing profit margins. Nicolaou said most raw materials were priced in dollars, as was the bulk of generic medicines imported from India. Indian imports had grown significantly in the past five years, he said.
The January price increase used September data, but the slide in the rand in the fourth quarter of 2015 prompted the Pharmaceutical Task Group to call on Motsoaledi to institute an extra price increase. There are provisions in the Medicines Act that allow him to do so. The rand has depreciated 9.2% since October 1.
The report says the task group represents the Innovative Pharmaceutical Association SA, a body for multinational drug firms; the National Association of Pharmaceutical Manufacturers, which represents generic companies; Pharmaceuticals Made in SA; and the Self Medication Association of SA.Full Business Day report