Lobbying by South African pharmaceutical manufacturers has won them a second price
increase for private sector medicine sales this year, with Health Minister Dr Joe Phaahla agreeing to a “top up” hike of up to 1.73%.
However, it does not go far enough to completely offset inflation, which averaged 6% in the first six months of this year.
The Pharmaceutical Task Group (PTG) told Business Day that Phaahla had agreed to the rise after discussions in the wake of the “puzzlingly” low 3.28% increase in December, which came into effect in January.
“The initial quantum received was not reflective of the economic realities in the country or the sector at the time, and conditions have not improved,” said PTG chair Stavros Nicolaou. “Was it what we expected? No. But at this stage it will certainly provide some relief.”
The Health Department regulates medicine prices in the private sector, and usually permits one upward adjustment to the single exit price (SEP) a year. The Health Minister can make additional price increases during the year, but rarely does so: two extraordinary increases have been implemented since the SEP regulations came into effect in 2004.
As medical schemes account for the lion’s share of private sector medicine spending, consumers largely do not know about the SEP increases. But given the scale of medical scheme spending on medicines – which ran to R32.1bn or 15.6% of the total benefits paid out in 2021, according to the Council for Medical Schemes – even a small price increase has an impact.
Health Department spokesperson Foster Mohale said the Minister was made aware that there might be interruptions in the supply of medicines if a second price increase were not approved. “After consultation with the pricing committee, the minister approved the second SEP increase (for 2023) … to ensure security of supply,” he said.
In an editorial, BusinessLIVE commented that while it was known that Phaahla receives input from a committee, what it advises and the extent to which he deviates from its counsel is anyone’s guess.
It is time to disclose the committee’s work, it added.
Regulations oblige pharmaceutical manufacturers to sell medicines at the same price to all of their private sector customers regardless of the volume purchased, and control the mark-ups that are added at each step of the supply chain, from factory gate to pharmacy checkout. Price increases are tightly controlled, and usually announced once a year.
But it’s unknown whether Phaahla’s decision to grant this rare, midyear “top-up” price increase corrects a previous stuff-up or reflects undue influence from an unknown quarter.
It is time to open the process, and disclose the committee’s work.
BusinessLIVE article – Health minister agrees to extra price hike for medicines (Restricted access)
BusinessLIVE article – EDITORIAL: Time to open up on medicine price increases (Restricted access)
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