Regulations on Dispensing and Pricing of Medicines: briefing

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Health

21 June 2004
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Meeting report

HEALTH AD HOC COMMITTEE
22 June 2004
REGULATIONS ON DISPENSING AND PRICING OF MEDICINES: BRIEFING

Chairperson:
Mr L Ncgulu (ANC)

Documents handed out:
Issues on dispensing: a briefing document
Government Gazette regulations on pricing
Issues on Dispensing
Dispensing Licence

SUMMARY
The Committee was briefed by the Department of Health on the dispensing and pricing regulations of medicines. The first leg of the briefing entailed a background and overview on the pharmaceutical dispensing legislation. Detail on the licensing process and its requirements were pointed out. The second half of the briefing entailed an explanation of the new regulations for a transparent pricing system. The Committee concentrated on the public controversy surrounding the regulations; whether the Department of Health had the capacity to monitor compliance and how consumers would benefit from the new systems of dispensing and pricing being introduced.

MINUTES
The Department of Health delegation comprised Dr P Mahthlati, Deputy Director-General of Human Resources; Mr H Sokupha, Chief Director of Pharmaceutical Policy and Planning and Ms D Peerman, Head of Legal Services. Dr Mahthlati commenced the briefing with background on the process that led to the formulation of the current pharmaceutical dispensing legislation. The National Drug Policy of 1996 had provided the underlying blue print for Act 90 of 1997. The framework and body of the legislation had to be formulated in such a manner that would allow the achievement of both health and economic objectives. It thus had to ensure the availability and accessibility of medicines whilst at the same time making it affordable. Dr Mahthlati provided examples of some of the dispensing registration and licensing requirements. Amongst those mentioned were that only registered and licensed practitioners could apply for dispensing licenses. Licenses were awarded by way of application and on completion of courses on dispensing. Courses were offered at Intec College, the Health Service Academy, Medunsa and the S. Buys Training Academy. Mr Mahthlati concluded the briefing by pointing out that to date 6250 applications had been received, 944 had been processed, 625 had been granted and 319 were pending.

For a detailed look at the briefing please refer to the attached document marked Annexure "A".

Discussion
Ms C Dudley (ACDP) said that pharmacists had complained that dispensing licenses had been awarded to doctors in areas where the availability of pharmacies were widespread. She asked what criteria were being used in the awarding of dispensing licenses.

Dr Mahthlati noted that disputes between doctors and pharmacists were a worldwide phenomenon. SA had a unique position in that a large portion of its population was indigent. It was easier to regulate prices via medical aid schemes than transactions done on a cash basis. The majority of South Africans pay doctors in cash. Mr Mahthlati said that clear criteria existed for the granting of licenses. Deviations from the norms would be monitored.

Ms B Ncgobo (ANC) asked whether the regulations applied to all health professionals.

Mr Zokupha said that the regulations applied to all health professionals, provided that they were affiliated and registered with their respective professional associations. For example, nurses should be registered with the Nurse's Council. The scope of their practices was also a consideration in considering the granting of dispensing licenses.

Ms S Njikelana (ANC) asked what lessons the department had drawn from similar pieces of legislation in the international arena. She asked how the department was intending to communicate the regulations to the public, given the bad publicity that had been associated with it.

Dr Mahthlati said that international practice had shown that the various professions within the health sector could complement each other. The Chair felt that not all the publicity had been bad. Dr Mahthlati shared the Chairperson's sentiments. He said that even though the court battles were an unpleasant consequence, many positive things had emerged. The biggest negative was the delays in the implementation of the regulations caused by the court cases.

Ms D Nxumalo (ANC) asked what the outcome of the court cases had been. She asked whether doctors had stopped dispensing by the 2 May 2004 deadline.

Ms Peerman said that the court had reserved judgment until 2 July 2004. The deadline for doctors was therefore extended until 2 July.

Ms Baadjie (ANC) asked what actions were taken against those doctors that had dispensed medicines without completing the required courses.

Dr Mahthlati stated that there were procedures in place to take appropriate steps against those doctors who had applied late or for those who had simply not applied for licenses.

Dr R Rabinowitz (IFP) asked if certificates of need were always granted when requested. If so, why was it a requirement she asked.

Dr Mahthlati said that a license to dispense was often confused with a certificate of need. He pointed out that certificates of need were granted in terms of the National Health Act. It therefore had its own set of regulations governing it.

Ms R Mashigo (ANC) asked whether it should not be required of newly qualified doctors to apply for dispensing licenses in their final years of study or when they were doing their internships. She pointed out that in rural areas it was expected of doctors to dispense medicines. The Chair agreed that indigent persons expect doctors to dispense medicines.

Dr Mahthlati answered that not all doctors intend to go into general practice and to dispense medicines. It would therefore not be practical to make it a requirement for all final year medical students to apply for dispensing licenses. Medicine was an evolving science and therefore required doctors to continually expand their knowledge. He noted that the regulations required doctors to breakdown the total fee charged into the consultation fee and the dispensing fee. The aim was to encourage transparency over the costs of medication.

Dr I Cachalia (ANC) felt that dispensing by doctors was a grey area. Doctors inevitably charge a flat rate that does not allow for transparency. He also asked how practical it was to require doctors to prove a need for dispensing, especially since a great deal of information would be needed to be submitted by doctors.

Mr Mahthlati said that it could not be said that doctors charge a flat rate. He said that doctors in the same area might have similar rates. Doctors would in terms of the regulations now be required to give a breakdown of their consultation and medication charges.

Ms Peerman said that most of the information required of doctors as proof of need was readily available. The requirements were reasonable and she did not foresee problems over it.

Ms Njikelana asked to what extent the department had counteracted the disinformation that had been spread over the regulations. She felt that proper communication with the public should be undertaken.

Dr Mahthlati said that extensive debates had taken place with health professionals. The issue was also extensively covered on television and radio.

Dr Rabinowitz asked whether transparency could not be achieved without price-fixing.

Ms Peerman said that the regulations did make provision for manufacturers to decrease prices so as to promote competition. Consumers rarely had a choice over the prices paid for medicines. Ms Peerman said that the legislation attempts to alter the discrepancies of the past.

Ms Rabinowitz reacted that if the maximum exit price was fixed it would allow for bulk discounts.

Ms Dudley said that many pharmacists felt threatened by the regulations. She was concerned over the impact that it would have on the numbers of students studying pharmacy.

Dr Mahthlati said that students taking up pharmacy for monetary gain would be affected. He felt that if there was true commitment by students it should not be a problem.

Mr Zokupha noted that at the outset the entire health sector had felt threatened. The aim of the regulations was now better understood and it was clear that everyone would have to adapt.

Ms Ncgobo asked what monitoring mechanisms the department had in place to keep a check on the black marketing of services around dispensing.

Dr Mahthlati responded that a special inspectorate carried out inspections. The criminal justice system would take its course in the event of deviations from the regulations.

The Chair called for a five minute break before commencing with the second leg of the briefing, viz. medicine pricing.

The department said the first draft of regulations had been drawn up in 2003, and submitted on 16 January 2004 for comments. They had received 94 comments over a period of 17 days from wholesale and retail sectors, private hospitals, dispensing doctors and other groups. The regulations had been promulgated on 30 April and took effect on 2 May 2004. It would be phased in over a period of 90 days. Mr Zokupha stated that the regulations provided a legal framework for medicine pricing in South Africa.

He made specific reference to the regulations highlighting those portions dealing with the pricing of medicines. He commenced with the definition of discount (Reg2a), which he claimed was buried in "perversities" within a system which attempts to lure the prescriber, dispenser or seller to choose one product over another.


He went on to define logistical services (Reg2e) as those services provided by distributors and wholesalers and explained the difference between the two roles. Single exit price (Reg2e) was defined as the price set by the manufacturer. He claimed the price must include VAT and the logistics fee. It is the price of the lowest unit of medicine (in other words, the price of one tablet multiplied by 20 in a pack of 20). This means that there is no benefit to bulk buying, as there are no discounts or rebates according to the new legislation. This should lead to prescribers choosing the most appropriate medicine rather than the cheapest.

In order to promote transparency and efficiency, manufacturers and importers are obliged to publish information about the product in the Government Gazette (Reg3). The Director-General would be entitled to publish a notice claiming that the single exit price is unreasonable, after consultation and discussion (Reg22.3).

The single exit price would have to be clearly written on all packaging (Reg4). He claimed that from 2 May 2004, the manufacturers would have to provide new pricing based on examining 2003 sales, and the expectation was that within one month the final single exit price provided would be lower than any prices before 2 May 2004. It would be a two-step process, as the manufacturer would firstly have to peel away everything such as discounts from the price. Once this was done, the DG would compare the resultant price to international prices, and adjust accordingly. Manufacturers would be offered incentives to obtain the best deals from wholesalers and retailers. The lower the logistics fee, the lower the single exit price. It was believed that this would lead to a lowering of prices in South Africa which generally were higher than in developed countries. The methodology for this would be completed by this time next year.

The single exit price could be increased once a year and the Minister would determine the extent after consultation with the Pricing Committee (Reg7and 8). In exceptional circumstances, the Minister may authorize a manufacturer to increase the prices during the year, but a change would have to be applicable to all manufacturers (Reg9). The price can be lowered and raised again, but not above the original single exit price.

Mr Zokupha explained that that the pricing structure (Reg10) for dispensing retailers would be as follows:
Non prescription drugs
Drugs costing under R100 - add 16% of the price marked on the product
Drugs costing above R100 - add R16 to the cost price, i.e. total selling price R116

Prescription drugs
Drugs costing under R100 - add 26% of the price marked on the product
Drugs costing above R100 - add R26 to the cost price, i.e. total selling price R126

The DG had the right to request any information from those involved in the process about the products and pricing (Reg14 and 15). Any application for medicine registration had to take place one month before the commencement of sale (Reg19).

Discussion
Dr Rabinowitz (IFP) asked for clarification on the schedule zero medicines' markup, and why medicines on and off prescription were being treated differently. She asked what the position was on hospital pharmacies, and how the department had handled the issue of pharmaceutical manufacturers that were supposed to drop costs by 15%. She added that this number was still unfair despite being an improvement on the original 50%. She wanted to know whether the Health Department would improve its auditing resources in order to track this complex new system.

Mr Zokupha responded that the markup issue had not reached a conclusion yet. The dispensing fee for hospital pharmacies would be the same as they followed the same system of pricing. He emphasised that France, Germany, Australia and Canada have all taken this route very successfully, and while it cannot yet be claimed that prices will drop, international case studies show very positive results.

Ms Peerman responded that it would be impossible to police all the transactions, but that all manufacturers have to supply their prices and information to the DG. She pointed out that the system was based on competitiveness; it should therefore have a level of self-policing. Ms Peerman emphasised the need to have information available to the public. With regards to the 50% drop in price, comments from the industry emphasised that a blanket approach would be unfair, so prices will be dropped individually and hence there will be no flat 15% price decrease either, but that can be considered an average estimate.

Mr Nxumalo asked what the ordinary citizens of South Africa could expect to see with the changes made by the legislation.

Mr Zokupha acknowledged the need to communicate with the public. The department had to ensure the proper policing of the distribution of medicines and watching the packaging to ensure ethical presentation of prices. He said that doctors were entitled to charge whatever they liked for consultation, but had to follow the same guidelines as pharmacists for medicines. He stated that the department would instigate a toll-free line to assist the public.

Ms Baaidjies asked whether the single exit price would be lower for anti-retroviral drugs.

Mr Zokupha said that anti-retroviral drugs would receive the same treatment, and be compared to international pricing.

Ms Rajbally asked what impact the legislation would have on state hospitals.

Ms Peerman noted that the regulations did provide an exception to the state with regards to the single exit price. The regulations were more applicable to the private sector than the state. The state worked according to a different logistical system.

Ms Dudley queried whether medicine manufacturers would have to keep their original packaging in order to promote transparency. She asked whether the legislation intended to promote buying from prescribing doctors, as this would become cheaper than going to the pharmacy for the consumer. She raised concerns over reports that 1000 pharmacies could be closing due to the new legislation.

Mr Zokupha emphasised that there would be no benefit in bulk buying, as there would be no discounts. He claimed that the department did not believe that the pharmacies would face closure due to the new legislation, but declined to go into detail as the issue was currently in the courts.

Dr Cachalia asked what impact the legislation would have on the department's staff and financial resources. He asked for clarification on the Discovery Health statement that R4 billion savings would be made for medical schemes through this legislation.

Mr Zokupha acknowledged the need for intensive monitoring of prices, which would have an impact on the department's staff and financial resources. He said he was encouraged by Discovery Health's findings, but emphasised that this must not mean that there is any compromise in services offered to the public.

Ms Peerman added that the legislation allowed for medical aid schemes to use the savings to boost their reserves and make them healthier, or they could offer more benefits to their consumers, but the state did not have influence over such decisions. She emphasised that they needed to be sure that reduced medicine costs were not subsidised by increases in other areas of health care like consultation fees, and that such services were offered at a fair price.

Mr Njikelana asked how these regulations would assist in empowering the consumer and emphasised the need to break down a paternalistic relationship between the government and its citizens, and to use the legislation as an opportunity to empower them.

Mr Zokupha emphasised again how important communicating with the public would be, and noted how unfortunate it was that the head of communications was leaving. He noted that the department needed guidance from communication experts on how to do it.

Ms Ngcobo asked how the legislation would assist the "second economy", and how to communicate with illiterate citizens who needed to know about such changes.

Mr Zokupha acknowledged packaging the information into an easily digestible language was a challenge. He admitted that there needed to be more focus on the consumers affected by this legislative change. Communicating the legislation to illiterate communities had no easy solution.

Ms Rajbally asked what the pharmacists' reaction had been to the price changes.

Mr Zokuphs claimed that the manufacturing industry had welcomed this legislation, the wholesalers had had a few problems, and the health professionals had had a varied response. He said it was important to keep the balance between cost and quality, and that had been an area of concern from the beginning. Mr Zokupha emphasised adaptability as the key to success.

Dr Rabinowitz pointed out that despite the good news regarding medical aid schemes' potential savings they had been refusing to pay for the temporary increases resulting from pharmacies no longer offering discounts. Medical aid schemes refuse to pay the entire amount claimed and the consumer has to pay the shortfall. She suggested a toll-free line to assist customers understand the legislation. She asked how the regulations applied to medical devices and to the alternative medicines market.

Ms Peerman emphasised how the legislation challenges people in their comfort zones, and makes them re-evaluate their working principles. She hoped that medical aid schemes would act responsibly towards their consumers. This was especially important since medical devices formed part of health care. She added that alternative medicines were an area of focus that deserved consideration. Homeopathic medicines were in the process of being registered but it was a complicated area with a lot of cross-over. She felt that homeopaths were keen to adhere to the legislation.

The meeting was adjourned.

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