Regulation and pricing of medicines: briefing by Department and SA Pharmaceutical Council

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Health

15 November 2004
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Meeting report

HEALTH PORTFOLIO COMMITTEE

HEALTH PORTFOLIO COMMITTEE
16 November 2004
REGULATION AND PRICING OF MEDICINES: SA PHARMACEUTICAL COUNCIL AND DEPARTMENT BRIEFINGS

Chairperson:
Mr L Ngculu (ANC)

Documents handed out:
South African Pharmaceutical Council PowerPoint presentation
Department PowerPoint presentation: Practical Challenges of the Medicine Pricing Regulations

SUMMARY
The SA Pharmaceutical Council and the Department briefed the Committee on the regulation and the pricing of medicines. Detail was given on the process leading up to the formulation of the Regulations, and the challenges in implementation. Much discussion ensued over the charging of administration fees by pharmacists. Even though the actual price of medicines had decreased, the customer was now paying more for medication due to the fact that pharmacists were now charging fees for services rendered. Exchanges became heated when DA Members alleged that the Department had mismanaged the process.

MINUTES
The Chairperson proposed that the Committee postpone the adoption of its Annual Report and the ratification of the World Health Organisation Framework Convention on Tobacco Control (WHO FCTC). The Committee agreed to pay attention to the Annual Report during the recess, and to ratify the WHO FCTC after the Tobacco Control Amendment Bill had been passed in 2005.

South African Pharmaceutical Council briefing
The South African Pharmaceutical Council (SAPC) delegation comprised of Professor P Eagles, President, and Mr A Masango, Acting Registrar. Mr Masango presented the Committee with an overview of the policies and legislation that had led to the drafting of the pricing regulations. He noted that promoting transparency, affordability and accessibility were the key aims of the regulations.

Mr Masango also presented the Committee with background on the pricing of medicines prior to May 2004, as well as the situation until the end of October 2004. The way forward for the Council entailed the re-publishing of the Rules pertaining to the dispensing fees, as well as mediating in the current dispute.

Department briefing
Dr A Pillay and Dr H Zokufa presented the Department briefing. The Committee was given a comprehensive and detailed outline on the practical challenges associated with the medicine pricing regulations. The single exit price (SEP), wholesalers' and distributors fees', dispensing fees, a transparent pricing system, and the lack of bulk discounts, rebates and bonuses, were identified as key issues. Mr Zokufa reiterated that the aim of the regulations was to promote accessibility and affordability of medicines to all South Africans. The public sector spent R3 billion on medicines for 38 million South Africans, whereas the private sector spends R13 billion on only 7 million South Africans. The time had come to correct this discrepancy.

Mr Pillay proceeded to elaborate on interventions that had been introduced to target manufacturers, wholesalers and pharmacists in order to lower the price of medicines and to promote greater access. Detail was also provided on the implementation of the regulations. Specifics were given on how the dispensing fee was calculated. Dr Pillay emphasised that the dispensing fee calculation had not been 'thumb-sucked' as had been alleged. The Department mentioned the extensive process of consultation that had taken place with the Pharmaceutical Society of South Africa (PSSA).

Both Dr Zokufa and Dr Pillay expressed concern that pharmacists had started charging consumers' administration fees. This had commenced after judgement had been made in favour of the Minister. The PSSA had however lodged an application to lodge an appeal against the judgement. The Department felt that the administration fees seemed to vary and were clearly unrelated to the cost of any administration. Attempts were being made by the Department to effect amendments to the Regulations to stop the charging of administration fees.

Dr Pillay noted that complaints had been received that pharmacies were closing down as a result of the pressures of the regulations. However, an attempt by the Department to assess the validity of this claim had not met with much success due to the lack of co-operation from pharmacists. The Department had sent out questionnaires to 300 retail pharmacy stakeholders to assess the income and expenses of its dispensaries. The feedback received would reveal where losses were possibly being made. To date, only 80 of the pharmacies had completed the questionnaire. Dr Pillay noted that not all retail pharmacists supported the PSSA approach, even though the impression was that the PSSA had the backing of the pharmacy fraternity at large.

Discussion
Ms P Tshwete (ANC) referred to the unaudited financial statements of 176 pharmacies sent by the PSSA to the Department. She asked whether the pharmacies were chosen randomly, as the pharmacies should reflect a geographical spread. She also asked whether a task team had been set up by the SAPC to deal with complaints.

Dr Pillay said that the Department had also been concerned as to how the 176 pharmacies had been chosen. He noted that the 'Progressive Pharmacists', a group not supportive of the PSSA approach, were not part of the 176 chosen.

Professor Eagles said that a task team was in place to deal with complaints. Every complaint received was attended to. Fifty percent of complaints were received from the public.

Ms M Manana (ANC) expressed concern over the huge discrepancy in expenditure on medicines in the public and the private sectors, as described by Dr Zokufa. Ms Manana also felt that the SAPC needed to work more closely with the Department.

Professor Eagles said that there was close co-operation between the Department and the SAPC. He noted that Dr Zokufa sat on the Council.

Mr R Coetzee (DA) remarked that the Department had passionately put across its point of view while at the same time attacking the PSSA. He felt it unfair as the PSSA were not present to defend itself. Mr Coetzee noted that a constitutional court judge had said it seemed that the dispensing fee amount had been thumb-sucked by the Department. He asked if the Department was willing to change the amount of the dispensing fee if needed. The whole idea of the legislation was to improve access to medicines, so why had the outcome been the opposite? He felt that the Department had mismanaged the entire process. The Department needed to sit down with role-players in order to reconsider the regulations.

The Chairperson said that the DA should not be the mouthpiece for the PSSA in attacking the Department. Mr Coetzee reacted strongly that the DA was not the mouthpiece of the PSSA.

The Chairperson there were no facts before the Committee in support of the allegation that there had been mismanagement by the Department. Even though the price of medicines had decreased, the consumer was still paying more. The Chairperson emphasised that the Committee's focus should be on the issues at hand.

Dr Zokufa said that the Department had at all times remained open-minded. These issues had been incorporated into the regulations so that they could easily be amended if needed. The dispensing fee of R26 could also not be changed 'on a whim'. Pharmacies had alleged that it was too little and was why many pharmacies were closing down. He noted that attempts by the Department to investigate the issue lacked co-operation from pharmacists. Amending the regulations was always an option to consider. Discussions with stakeholders had taken place at length and when the final regulations had been promulgated, concerns had been raised over the dispensing fee of R26. Dr Zokufa remarked that discussions could only be meaningful if both sides were willing to compromise.

Dr Pillay said that Mr Coetzee had failed to mention that the two other constitutional court judges had said that the Department had not thumb-sucked the dispensing fee amount. He felt it unfair that the Department was blamed for mismanaging the process. Dr Pillay stated that he was not surprised by Mr Coetzee's attack. He said that he had had sight of an email in which the PSSA asked the DA to lobby on its behalf.

Mr Coetzee conceded that he had been critical of the Department but said that the issue was whether the Department was open-minded in the intervention on this.

Dr Zokufa said that open-mindedness was the very aim of the questionnaires that had been sent out by the Department to pharmacists. It was a pity that so many had chosen not to complete it.

Ms C Dudley (ACDP) referred to the rules set by the SAPC for administrative fees, and said that the perception was that the Minister had asked for these to be withdrawn. She asked whether this was correct, given the independence of the Council. She was concerned that pharmacies were closing down. Maybe the reasons for pharmacies not wanting to participate in the Department questionnaire needed looking into. She said it would be helpful to hear comments from the Progressive Pharmacists and the PSSA.

Mr Masango said that the Minister had not been involved in the decision-making process over the withdrawal of the rules. He conceded that it could have been that the Council had not applied itself properly on the implementation of the rules, the consequence being its eventual withdrawal. Dr Pillay stated that the questionnaire had required pharmacies to furnish their tax and UIF numbers, and wondered why pharmacies were sceptical about furnishing such information to the Department. All such information received was kept in the strictest confidence.

Dr I Cachalia (ANC) asked what measures the Department had in place to ensure compliance with the pricing regulations. He also asked how the removal of bonuses and bulk discounts affected the prices paid by the public. He further asked what percentage of savings had been made by consumers and by medical aid schemes. What progress had been made on the second phase of implementation of the Act?

Dr Pillay conceded that ensuring compliance was a huge challenge. He cited one example of a pharmacist 'holding a customer to ransom'. As the pharmacist was the only importer of a specific type of medication, he had the power to charge whatever he wished.

Dr Pillay said that medical aids had made savings of 30% and 15% on acute and chronic medicines respectively. Increased costs in private hospitals were also an issue being grappled with. The situation was dynamic and never perfect.

Dr Zokufa added that phase two would commence with the publication of benchmarking guidelines within the next two weeks. Manufacturers' prices were lower, but because pharmacists incurred costs in packaging medicines, the prices over the counter tended to be higher. The Department was looking at ways of convincing manufacturers to package medication in smaller patient-ready packs.

Ms M Madumisa (ANC) asked whether pharmacies had sold old stocks of medicines at new prices. She also asked whether generic medicines' prices had been reduced to benefit consumers.

Dr Zokufa complained that in the interim period prior to the regulations taking effect; pharmacists had increased the prices of their old stock. Prices of generic medicines had come down and were expected to decrease even further with the implementation of international benchmarking.

Mr B Steyn (DA) noted that the regulations had caused spin-offs such as increases in tariffs by medical aid schemes. The consumer was not getting the benefit of reduced prices. He asked why this scenario had not been foreseen.

Dr Zokufa said that the Department's Pricing Committee was making recommendations to the Minister on ways to deal with the loopholes. Medical aid schemes were increasing their tariffs while private hospitals were increasing prices for the use of their facilities. Both increases were in reaction to the decreased profits being made on medicines.

Dr A Luthuli (ANC) said that prior to the regulations, the poor could obtain treatment and medicines from their local general practitioner, a 'one-stop shop'. The situation now was that the cost to the consumer was even greater. She asked what plan the Department had in place to prevent the poor from 'being taken for a ride'.

Dr Zokufa said that the Department needed to engage in a robust communication campaign to inform the public on the regulations. The public should 'shop around' and not simply accept exorbitant administrative fees. The supermarket chains of Shoprite and Pick 'n Pay had welcomed the regulations.

Mr S Njikelana (ANC) asked for more information on stakeholder profiles. The business model of retail pharmacies seemed to be under the spotlight. In the past, there had been perverse incentives that had now been removed.

Dr Zokufa said that all stakeholders had taken part in discussions. A total of 90 submissions had been received, of which 70 had been oral. The Department had not received responses from stakeholders stating that they were willing to consider alternative business models.

Ms B Ngcobo (ANC) asked how the SAPC communicated with the public in general. She also asked what needed to be explained by the pharmacist to the customer. What was the Department doing to support rural pharmacies.

Mr Masango said that the SAPC did undertake visits and distribute information regularly. Dr Zokufa explained that pharmacists had to inform patients on how drugs should be administered, as around 50% of customers did not take medication properly. For the first time pharmacists, were being paid for what they knew and not for what they sold. Dr Zokufa stated that rural pharmacies struggled to survive and were not economically viable before or after the regulations. He agreed that the Department could do more to assist rural pharmacists.

Ms N Nkabinde (UDM) asked whether many complaints had been received over the increase in prices of medicines. She also asked what procedures were in place to protect the interests of pensioners, chronic disease sufferers etc., given the service fees charged by pharmacies.

Dr Zokufa noted that complaints had been received and were being investigated.

Ms Dudley stated that she had received complaints from pharmacy students that the regulations had made them despondent to continue on with their studies.

Dr Zokufa said that mindsets were focused on retail pharmacists, only one part of the pharmacy profession. The Department had interacted with pharmacy students over concerns about the lack of available internships, and the minds of the students had been put at ease. Alternative models for pharmaceutical care were already being considered.

Ms R Mashigo (ANC) asked when the capping of wholesalers' prices would come into effect. She also asked what interactions had taken place between the SAPC, the PSSA and the Progressive Pharmacists. She asked how well stocked public hospitals and clinics were.

Dr Zokufa said that the capping of wholesalers' prices should be public and be completed within two months. Mr Pillay said the logistics fees of wholesalers would be capped.

Ms S Nxumalo (ANC) asked the SAPC to comment on the mark-ups of pharmacists prior to and after the regulations.

Mr Masango noted that pharmacists had made huge profits prior to the regulations due to high mark-ups. Since the implementation of the regulations, profit margins were much lower. Pharmacists had decided that to make up for the decrease in profits by charging for their previously free services.

Ms Tshwete asked how doctors and pharmacists could be prevented from prescribing many drugs whose combined effect would be the same as a single drug.

Dr Zokufa said that a proposal for authorised prescribers and dispensers was on the books. It would ideally not be desirable for the prescriber to also be the dispenser.

Dr Cachalia felt that fraud in medical aid schemes was an issue that needed to be addressed.

Dr Zokufa agreed that tariff increases by medical aids was a great concern. Dr Pillay said that discussions with medical aid schemes were ongoing. The Department wanted medical aid schemes to pass on the savings made to its members.

Mr Njikelana asked for details on the trends of stakeholder profiles. He also asked to what extent the Department was engaged in efforts to empower the consumer.

Dr Zokufa said that the manufacturing sector embraced the legislation in general. Wholesalers had requested a 17% fee, whereas distributors were happy with 5%.

Dr Luthuli asked whether on a customer would be charged a service fee per item of a prescription, or on the script as a whole.

Dr Zokufa said that prescriptions were charged per item. The more items on the prescription, the greater the cost.

Ms Manana asked for timeframes for the re-publication of the rules governing administration charges. Something needed to be done to ensure that pharmacists behaved ethically. She recounted the case of one pharmacist who had pasted a cartoon of the Minister in his pharmacy and had inscribed comments below it.

Professor Eagles said that the rules would be finalised in two months time. He urged Members to forward the names of unethical pharmacists to the SAPC, and assured that Council Inspectors would pursue the matter. Dr Pillay said that Department representatives had taken much flack as well. He was often the target of racially charged abuse. It had worsened to the extent that he only answered calls on his mobile phone if he recognised the number appearing on it.

Ms Ngcobo asked whether there had been an 'exodus' of pharmacists from South Africa. Professor Eagles said that there was no evidence to prove that. Many pharmacists went overseas but inevitably returned. Thre were around 3 000 South African pharmacists overseas. They were not leaving due to the impending legislation, as overseas countries had the same types of legislation.

The Chairperson was concerned about the re-publication of the rules, and said that the Committee needed greater input. He also asked the Department to amend the regulations to stop pharmacists from charging high administrative fees. Huge tariff increases by medical aid schemes could also not be tolerated. Mr Ngculu was adamant that greed would not triumph over sound legislative policies.

The meeting was adjourned.

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