In South Africa, the public sector serves the healthcare needs of 84 percent of the population (42 million people) but only accounts for 16 percent (or R6.1 billion) of the total pharmaceuticals expenditure in the country and has access to 2,400 product lines. Public sector medicines are procured through tenders that are administered by the National Department of Health (DoH). Public hospitals can also initiate procurement of medicines from manufacturers and importers through tenders or quotation systems to cater for their own needs. Public healthcare is financed by the government, primarily through taxes.
South Africa’s Payer Stakeholders
South Africa’s healthcare system is comprised of a public and private sector. Currently, all citizens can access public hospitals, with or without medical insurance. Persons able to afford private medical insurance (approximately 16 percent of the population) do so through Medical Aid Schemes. These plans, which are supervised by the Council of Medicaid Schemes (CMS), maintain their own medicines lists, and usually cover generic medications in full. Branded medicines are subject to varying co-pay amounts, depending on the therapeutic category and plan purchased. The South African Government plans to fully implement a National Health Insurance (NHI) scheme by 2025.
Important Points to Keep in Mind
Pricing and Regulation
Prior to the advent of democracy in South Africa in 1994, the pricing of medicine was largely subject to market forces, with the result that multinational pharmaceutical companies were free to determine the price at which they sold their products in the country. Innovator brands dominated the market while generics held limited market share. Pharmaceutical companies promoted their products directly to doctors and pharmacists, and would offer samples, bonuses, discounts, rebates, and other incentives to encourage the prescription or dispensing of a particular product. This is believed to have led to doctors often prescribing more expensive medicines. In addition, pharmaceutical companies were able to discriminate amongst clients based on volume purchases and other considerations.
Furthermore, due to pharmaceutical companies’ ability to discriminate between customers, patients in poor and marginalized areas ended up paying more for medicines than patients in more affluent areas that were more likely to benefit from price and volume discounts. In 1994, the new democratic government undertook to reform the healthcare system. The drafting of the National Drug Policy (1996) sought to increase access to safe, affordable and quality medicines for all South Africans, and laid the foundation for subsequent revisions to legislation and regulations to reduce prices and improve access to pharmaceutical products.
Amendments to legislation in 1997 saw significant changes to the way pharmaceutical products were supplied and marketed in South Africa. In particular, the amendments made provision for the importation of medicines by companies other than the patent holder, prohibited sampling medicines, bonuses, rebates and any other incentive schemes, and made the generic substitution of products mandatory.
The amended legislation further called for the establishment of a Pricing Committee, which was tasked with correcting the pricing distortions in the market by developing a transparent pricing system for all medicines and scheduled substances sold in the country. To this day, the prices of drugs and devices are regulated by this Committee, which consists of 18 members from different industries and professional fields.
This led to the introduction of a Single Exit Price (SEP) regulatory framework in 2004. Under the SEP regime, the price at which manufacturers sell to pharmacies is regulated and cannot be varied according to volume sold. Manufacturers are obliged to supply medicines to wholesalers at the SEP plus logistic fees, and pharmacists must dispense all products to patients at SEPs plus dispensing fees. The objectives of SEP are to ensure price transparency and that manufacturers sell medicine at one price to all customers in the price sector regardless of order size, consumption levels or customer profile. Only scheduled medicines are subject to SEP (Schedule 1-7).
The Minister of Health (through the Pricing Committee) determines an annual percentage increase of SEP that is uniformly applied to all products. In exceptional circumstances (e.g. raw material cost increase), the Minister of Health may permit ad hoc price increases under Regulation 9 of the Medicines Act.
The process to obtain authorization to develop, test, and market a drug, biological or medical device is regulated under The South African Health Products Regulatory Authority (SAHPRA) and the Medicines Act. If approved, a market authorization is valid for five years. The sponsor must submit a renewal request at least 180 days before the license is due to expire.
Implications for Industry
Scoping Study into Life-Saving Drugs
The Competition Commission of South Africa (CCSA) conducted an internal scoping study in May 2017 following widespread complaints about the price of pharmaceutical products, in particular of “life-saving” drugs, and increased pressure from non-Government Organizations (NGOs) for the South African government to institute reforms on patent laws to make life-saving drugs more affordable. The scoping study considered the pricing dynamics as well as identified any potential issues associated with ‘life-saving’ drugs used in the treatment of HIV/AIDS, cancer, hepatitis B and C, and diabetes. Some of the key findings from this study concluded that South Africa was amongst the cheapest for certain drug treatments and the SEP regulatory framework has been successful in constraining the prices charged by manufacturers and retailers.
It is also worth noting that following the 2017 scoping study, the CCSA has decided to broaden its scope of assessment and consider all pharmaceutical drugs whose prices are potentially excessive in South Africa with priority focus on drugs that have high impact in the society (i.e. drugs that are used to treat prevalent diseases in South Africa). The project is still in the early stages.
As the healthcare system evolves in South Africa, GLOBALHealthPR can help you engage with key stakeholders to achieve market access success.
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