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Pathology labs slash ‘exorbitant’ PCR test charges after Competition Commission intervention

Following the intervention of the Competition Commission, the top three private pathology laboratories have cut the price of gold-standard polymerase chain reaction (PCR tests)  by almost half, after earning an estimated R8bn in “excessive profits” on the tests.

The Competition Commission said on Sunday (12 December) that it had reached agreement with the country’s two largest private pathology laboratories, Ampath and Lancet. This was then followed on Monday, 13 December, with the third largest private lab, Pathcare, to also reduce its COVID-19 PCR test prices from about R850 to no more than R500 (VAT inclusive) per test.

John Douglass, CEO of Pathcare, denied that the labs were making “massive” windfall profits.

Experts estimate the cost of a PCR test of between R150 and R400. Financial Mail’s Rob Rose estimated that SA’s leading labs had earned more than R8,3bn for COVID tests in just 20 months, extrapolated on figures from the country’s largest medical aid, Discovery Health.

Competition Commissioner Tembinkosi Bonakele said that the cost of the tests from all three labs would drop “with immediate effect” from their previous levels. James Hodge, the commissionʼs chief economist and acting deputy commissioner, said the regulator would also look into the pricing of rapid antigen tests for COVID-19. “In terms of the antigen test and the price of that … that is certainly next on our list,” said Hodge.

“PCR is the gold standard in testing — it seems that for travel it is becoming a requirement. But we also think that where alternatives such as the antigen test can be brought in where a PCR is not a requirement, that can also bring pressure on PCR test pricing,” reports BusinessLIVE.

The commission had received a complaint from the Council for Medical Schemes in October alleging that the price of COVID-19 PCR tests was unfairly inflated, exorbitant, unjustifiable and in contravention of the Competition Act. An investigation found private laboratories were earning “excessive profit” on the PCR tests — which it regards as an essential product or service to combat the pandemic — because they failed to reduce prices in response to falling testing costs.

Thus far, 19,7m COVID tests have been conducted, according to the National Health Laboratory Service. More than half, 10,65m, were done by the top three labs, Lancet, Ampath and Pathcare, which charged R850 per polymerase chain reaction (PCR) test. In recent weeks, they had slashed those fees to between R710 and R725

Discovery Healthʼs Noluthando Nematswerani told the Financial Mail that in the 20 months to November, the medical aid has paid R2,1bn for 2,7m COVID tests, nearly a quarter of all the private tests (on average, R785 a test). “These are not cheap tests,” she says. “Many people will have gone for more than one test during the different waves and in some cases, it may be a requirement.”

Aslam Dasoo, of the Progressive Health Forum, told the Financial Mail that while the R850 price might have been justified in March 2020 because of the scarcity of tests, this is no longer the case. “Now there are plenty of testing kits, so the labs can certainly drop their prices. Because, I can assure you, they have been making out like bandits,” he says.

But working out the real cost of testing isn’t easy. At the start of the pandemic, GroundUp canvassed various experts to come up with an estimated cost of a PCR test of between R150 and, at the top end, R400. Others also put the cost at R400. Since then, however, the test costs have apparently halved in price.

Says Dasoo: “It’s hard to know what their cost is, because there are different tests, and different reagents. But at a cost of R850, the laboratories are making vast amounts of profit.”

John Douglass, CEO of Pathcare, argued that the idea of windfall profits is misplaced. Labs use up to 10 different PCR tests, he said, all of which have different base costs. “The most typical ones from GeneXpert cost more than R500 just for the cartridge. But our biggest cost is our people. So, no, weʼre not making massive profits.”

Actually, he says, at the beginning of COVID, Pathcare made losses on its tests. “The costs have been very variable, but once we saw the inputs stabilising, we wrote to [health minister Joe Phaahla] in August to say weʼre ready to review our costs. And weʼve since reduced them.”

Douglas said that the government was also scoring in tax from these private tests, since the labs pay R111 in VAT for each test. If the government zero-rated the tests for VAT, it would immediately bring down the price.

He said the R850 price was first agreed to by former Health Minister Dr Zweli Mkhize early on in the pandemic, in a joint conference call with all of the labs.

His successor, Dr Joe Phaahla, recently told parliament: “The department has no idea why COVID tests still cost R850 per unit despite the volumes, scale and technological advances.” This, he said, was why an investigation was needed.

The Commissionʼs investigation had thus focused on the top three labs: Ampath, Lancet and PathCare.

Bonakele said the commission was concerned about the “abuse” of travellers who require urgent COVID-19 PCR tests when leaving the country. “We will be getting data on whatʼs happening at the airports.” He urged other labs to comply with the pricing settlement reached with the top three labs, despite not being party to the agreement.

He said the commission had received reports that some labs were charging as much as R1,000 for COVID-19 PCR tests.

In the settlement this week, the three laboratories also undertook to submit to the Commission a compliance report that will include financial statements every three months, to monitor prices charged for PCR tests and any material changes in costs.

In a statement, Siyabulela Makunga, spokesperson for the Competition Commission, said the reduction of the COVID test prices was a major victory for South Africans.

“This is especially so for the vulnerable groups during the time of a devastating and resilient pandemic,” he said. “The substantial reduction of PCR test prices will help alleviate the plight of consumers and enhance greater access to COVID-19 PCR testing, which is a critical part of the initiatives to avoid the escalation of the pandemic.”

He called on “all labs conducting PCR tests to be sensitive to the plight of the public in this time, and use the settlement as a guidance”. The price reduction shall remain in effect for a period of two years from the date of confirmation of the consent agreements as orders of the Competition Tribunal.

The Health Funders Association (HFA) has also welcomed the decreased prices of the tests, having previous expressed concerned about the high costs of the COVID-19 tests.

Lerato Mosiah, CEO of the HFA, said they had attempted, on numerous occasions, to “engage with the National Pathology Group to secure a revision in price under the current block exemptions, which allow medical schemes to address the PCR pricing directly with the pathologists”.

Despite these efforts, she added, “regulatory intervention was required to secure a price reduction”.

In terms of Prescribed Minimum Benefit (PMB) regulations, medical schemes are compelled to pay in full for COVID-19 PCR tests when a doctor has referred them, subject to specific criteria being met by the patient, regardless of the outcome of the test. The PMBs were put in place to ensure that all medical scheme members can access health services relating to COVID-19, irrespective of the benefit option they are on.

"The issue of COVID-19 test pricing is an important case study, demonstrating the extent to which the regulatory requirement for medical schemes to cover PMBs at cost significantly impairs their ability to negotiate lower pricing for the sake of affordable access for all," she added.

"HFA is grateful to the Council for Medical Schemes for lodging the formal complaint with the Competition Commission that the excessive price for these PCR tests is in contravention of Section 8(1)(a) of the Competition Act read with paragraph 4 of the Regulations."

Some countries now give citizens cheap, rapid DIY antigen tests, which can be done at home, adds the Financial Mail. While less sensitive than PCR tests, Harvard immunologist Michael Mina said they are still pretty accurate when it comes to identifying people most likely to transmit the virus.

In the UK, the state-run National Health Service (NHS) sends rapid antigen tests to peopleʼs homes for self-testing, free of charge.”
Here, however, the SA Health Products Regulatory Authority apparently doesnʼt want people using these rapid tests. Partly, because they arenʼt as reliable as the PCR tests, and partly because of “the risk associated with misinterpretation” of the results. In other words, the (less reliable) antigen tests may lead some people to think theyʼre not infectious, when they are. A pity, since these rapid tests cost about R150.


Cost of rapid Covid-19 test next in Competition Commission crosshairs (Restricted access)


Pathcare also agrees to drop Covid-19 PCR prices to R500 – CompCom (Open access)


Financial Mail article – ROB ROSE: Behind the R8bn Covid test racket (Restricted access)


See more from MedicalBrief archives:


State laboratory begs provincial health departments to pay bills on time


Cele blames COVID-19 and finances for massive Forensic Science Lab backlog


New device can diagnose COVID-19 from saliva samples


Saliva test for COVID outperforms FDA-authorised nasal and oral swab tests


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