After a complaint by Health Minister Aaron Motsoaledi about a 5% discount Dis-Chem customers get on non-dispensary products, an investigation has been launched by the Competition Commission, reports News24.
Separately, the Independent Community Pharmacy Association (ICPA) has also lodged a complaint with the South African Pharmacy Council about the discount.
As part of the retailer’s new Better Rewards loyalty programme, customers receive 5% discount on non-dispensary products if they fill their prescriptions at Dis-Chem.
Competition Commission spokesperson Siya Makunga confirmed the agency was now investigating to determine whether the programme was structured “in a way that could potentially restrict competition, specifically if it has the effect of inducing consumers not to engage with competitors”.
The commission has issued requests for information to Dis-Chem itself, nine other retail pharmacies, two pharmaceutical industry associations, and the national Department of Health.
However, Dis-Chem CEO Rui Morais said that reporting to the Competition Commission used the “wrong regulatory tool”.
The company is also facing a challenge from the ICPA, which is also unhappy about the incentive and lodged a complaint with the Pharmacy Council in December.
The ICPA believes the loyalty programme contravenes the Medicines and Related Substances Act and the Pharmacy Act, along with the industry’s code of conduct, said CEO Jackie Maimin.
She said the main problem was Dis-Chem tying the sale of prescription medicine to giving a 5% discount, even though it is for non-medicinal retail products.
“This crosses a fundamental line for us, as Section 18A of the Medicines Act does not allow any incentive or inducement for prescriptions.”
At the same time, she said, Section 43 of the Pharmacy Act states that no pharmacist will pay any commission to anyone or, in any way, reward them in connection with a prescription issued by a medical practitioner. Maimin believes this is, in effect, what Dis-Chem is doing.
Furthermore, the code of conduct of the South African Pharmacy Council also states that a pharmacist should not offer or give inducements to any person to encourage that customer to procure prescriptions from them, she added.
The code of conduct, which specifically refers to these as “perverse incentives”, also warns against attempting to tout for prescriptions.
This includes any inducement by way of a gift, reward, rebate, or participation in a competition in relation to professional services.
Unconcerned
Morais said the group had taken legal advice on its pharmacy booster and was confident it had complied with regulations.
He said although regulations state that a company cannot reduce the price of medications, this was not what Dis-Chem was doing. Instead, it was effectively reducing the price of front-of-shop products.
“So, we feel very confident because it’s pro-consumer. It obviously creates value in the consumer’s basket. We feel very confident that we’ll be successful as this process unwinds.”
Over six months, the loyalty programme gave consumers discounts worth R760m, of which the 5% discount only accounted for R80m to R90m.
Morais said if Dis-Chem were unsuccessful and changes had to be made, the group would “create different types of boosts to encourage the same kind of foot traffic”.
News24 article – Dis-Chem discounts probed after health minister’s complaint (Restricted access)
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