Briefing by the Minister of Health on Private Hosptials and Fees, Price Fixing on Drugs and Dual Therapy

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26 February 2008
Chairperson: Mr L Ngculu (ANC)
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Meeting Summary

Dr Manto Tshabalala-Msimang, Minister of Health, addressed the issues of Private Health Care Costs, collusive tendering and price fixing. She was concerned at the rate at which the private healthcare sector was raising its prices beyond inflation. Several interventions had been implemented in order to regulate the private health care sector. Cases of collusive tendering and price fixing were investigated and brought to the Competition Commission.

Dual Therapy was the use of nevirapine and AZT to prevent the transmission of HIV/AIDS from mother to child. Minister Tshabalala-Msimang emphasised that they had questioned mono therapy and were forced to implement it before they had completed their research. She was not pleased with the Western Cape’s decision to implement dual therapy before the policy and guidelines had been completed and instituted.

The Committee was concerned with the fact that the private health care sector was able to inflate their prices because the public health sector was lacking. Even though the Minister had indicated a reduced cost in medicines, the Committee questioned whether more people had access to affordable healthcare. The Committee was dissatisfied with the Department’s presentation of dual therapy and requested that the Department should return and present a more coherent document.


Meeting report

Introductory comments
The Chairperson indicated that the Legislative Programme for 2008 was the Medical Schemes Amendment Act, SA Medical Research Council Bill, National Health Amendment Bill, Medicines and Related Substance Bill. This would be the only legislation that the Committee would be dealing with in the year. The deadline for receipt of the legislation was the 29 February 2008.

The Minister informed the Committee that DoH would be able to complete the policy on African Traditional Medicine. DoH would be appointing a council this year as well as establishing an African traditional medicine institute and a journal. Walter Sisulu University had commenced the training of clinical associates. They were hoping to have another group of clinical associates around June.

Private Health Care Costs presentation
The Minister explained that one of the key challenges for the Department of Health since 1994 was access to and affordability of health care. The health care system had been segregated along racial lines. Currently, the public health system was under resourced and the private health sector was only accessible to 20% of the population. Policy interventions had been focused on the provision of accessible, affordable and quality healthcare for all South Africans.

One of the foremost challenges was improving access to affordable medicines. The interventions introduced included provision for parallel importation of medicines, essential medicines policy, generic substitution policy, expedited registration for essential medicines, single exit price for medicines as well as reference pricing and pharmaco-economic assessments. Since the introduction of medicine pricing regulations there has been approximately a 20% reduction in medicine prices resulting in a saving of over R2, 3 billion on medicines. The decline in medicine prices was proportionally linked to the increase in utilisation of medicine. However the reduction in medicines prices had not resulted in overall healthcare savings for the patient. This was primarily due to the increases in the tariffs of private hospitals, specialists and medical scheme administration.

Since 1999 there has been a significant increase in private hospital tariffs. After 2000 there was been a consolidation in private hospital ownership with three dominating groups that owned over 80% of the private beds in the country and one group was dominant in each of the regions. The Competition Commission ruled against collective price negotiation that weakened the bargaining power of medical schemes. Private hospital price increases had surpassed inflation. In 1997 medical aid schemes paid R803 per beneficiary for hospital benefits. This was increased to R2320 in 2005. The situation was unsustainable and could lead to the demise of the private healthcare sector.

In 2007 the legislated National Health Reference Price List (NHRPL) provided a transparent basis for the determination of the true costs of goods and services in the private sector. It was anticipated that the NHRPL would contribute to the lowering of costs in the private sector.  A Private Healthcare Sector Indaba was convened where all were in agreement that the private healthcare sector and government would have to take regulatory measures to ensure that the sector was sustainable. However, soon after the meeting it was realised that private sector hospital groups had raised their tariffs at a rate of 8 to 33% that took effect on 1 January 2008.

Minister Tshabalala-Msimang met with the private hospital groups and medical schemes to assess the situation. The Minister proposed that the private hospitals limit their increases to the Consumer Price Index (CPIX). She would be meeting with the private hospitals on whether they agreed with her proposal. There had been reports that private hospitals were over billing inhalational anaesthetics and the Minister reminded the sector that they were in violation of the law and could face prosecution.

DoH investigations had suggested that the current administrative costs in the medical scheme industry were high and must be reduced. The Medical Scheme Amendment Bill would be presented to Parliament this year. It strengthened governance structures of medical schemes thereby making the trustees and principal officer of the scheme more accountable for the administrative costs within a scheme.

Because the Health Charter task team had not yet reached an outcome in its discussion on making healthcare affordable, the Minister had decided that the challenges would have to be resolved through legislative interventions.

The Competition Commission had found instances of collusive tendering between Adcock Ingram Critical Care (Pty) Ltd (AICC), Dismed Criticare and Thusanong Health Care. Another firm implicated was Fresenius Kabi South Africa (FKSA) but due to its cooperation, it was granted immunity. The representatives of the companies colluded amongst themselves about who would be awarded tenders and were part of price manipulation for the pharmaceutical and hospital products concerned in the tender.

The Commission found that Adcock and Fresenius Kabi were engaged in dividing markets in the supply of pharmaceutical products and services to private hospitals. The finding of the Commission would be presented to the Competition Tribunal for a decision. Collusive behaviour was undoubtedly one of the contributing factors to higher prices in the healthcare market. They would be reviewing the current tender processes with National Treasury in order to take the necessary measures to discourage collusive pricing practices.

Mr A Madella (ANC) asked if there would be a possibility that the price increases would be reduced.

Minister Tshabalala-Msimang replied that she would not divulge which medical aid schemes had adhered to their suggestions. Some had brought down their hospital tariffs. At the next meeting further responses would be given. The immediate things that had been done were largely the legislative frameworks that sought to ensure that the negotiations were transparent.

Ms L Matsemela (ANC) made the point that affordable healthcare was long awaited by many South Africans, particularly the poor. She asked if the interventions that had been made addressed, the Millennium Development Goals (MDG). 

The Minister replied that in their view they had already seen the impact of what government had started because medical coverage had increased to 83%. She cautioned that medicine was only a fraction of what was needed. Only when healthy lifestyles had failed, should they resort to medication. The interventions that had taken place were in part a result for the achievements and had brought them closer to their MDGs.

The Chairperson noted that they had not addressed the issue of bringing affordable healthcare to the people. He wanted know what they had done wrong.

The Minister felt that it was a valid question and she understood the impatience for those that were disadvantaged. Their objective was to introduce Public Health Insurance. Other countries, such as Germany and Thailand, had taken long for them to reach the level of healthcare that they were experiencing. South Africa’s advantage was that they were learning from experience. It might seem as if there were things that needed to be done. Even countries that had gotten it right, were now experiencing problems. They had achieved quite a lot. Perhaps they should place everything that they had done into one report to give an overview of what had been achieved thus far.

Mr M Waters (DA) asked if the Department had looked at liberalising the market and allowing for more health care institutions. He mentioned the lack of doctors in Mpumalanga. He added if the Minister had received petitions to build private hospitals and if so how many had she approved.

Mr Thamsanqo Mseleku (Director-General: Department of Health) replied that applications for new hospitals were done at a provincial level. In the provinces there were the presence of the same groupings. There were approximately 133 medical schemes however it did not necessarily follow that if there were larger numbers that the prices would be lowered

Mr Waters asked if there was a possibility of the private sector assisting in the training of doctors to address the high demand for doctors in the country. He wanted an indication of the role of the private sector.    

The Minister replied that she did not have the figures for Mpumalanga, she had received those numbers from the press. There had to be engagement between DoH and the private sector. If there was time she could share the experiences that they had in creating hybrid-training programmes with the private healthcare sector. They needed to plan very carefully. The role of the private healthcare sector in this instance was to make money and violate the regulations of the country, and that was unacceptable

Mr Mseleku added that private sector healthcare training was an issue that they engaged in quite often. There were quite a lot of issues that needed to be taken into consideration. For example there were certain aspects and challenges that were unique to the public healthcare sector that the private healthcare sector were not equipped to deal with.

Mr M Sibuyana (IFP) asked if the private sector increased their prices because of supply and demand. He commented that if public hospitals were better equipped, it would not drive people to private hospitals. 

The Minister replied that sometimes it was the lack of knowledge as to which medicines should be prescribed. Studies found that 86% of the medicines required were available in the public clinics. This challenge was international. It was a bigger problem than the microcosm that was seen in South Africa. They needed to look at the other determinants of health for a portion of the budget that had been allocated such as social services were crucial. The issue of perception was very serious. 

Mr Mseleku added that the cost of health care would be dealt with the introduction of National Health Insurance that would ensure all South African had access to a basic package of health services. It would have to be accompanied by the improvement of quality across the country that would enable South Africans to have quality healthcare wherever they went. Whilst they were pursuing these goals, they would have to take measures to save the private sector from itself. When these objectives were achieved, the issue of cost would be resolved.  

Ms C Dudley (ACDP) asked if the focus of government was primarily on private healthcare and if the demand for private healthcare was because of the lack of sufficient public healthcare.   

Minister Tshabalala-Msimang replied that their focus was on both. It would be unthinkable if she focussed completely on the private healthcare sector.

Ms Dudley asked if there should be incentives that enticed the private healthcare providers.      

Ms S Kalyan (DA) noted that the Health Charter task team was taking long time, while the challenge of making health care affordable was increasing. She asked what was being done to expedite the matter.  

Dr Kami Chetty (Deputy Director-General: Health Services) agreed that the Health Charter had been a long process but that it was very near finalisation. Part of the reason why it took so long was that there was a debate on whether the charter come before the National Economic Development and Labour Council (NEDLAC). It was decided that it would be debated within the task team. Some issues were reopened for discussion but they were hopeful that with one or two more meetings they would reach finalisation. If consensus had not been reached, then the Department would try to facilitate.

Mr Mseleku added that the Health Charter was a negotiation forum. They could not easily set a deadline. The parties include representatives from labour, business and others. If they did not agree, they would continue to negotiate until there was an overall agreement.

Ms Kalyan asked if there were loopholes in the current tender process that had allowed the collusive pricing to take place and if so, did the Department have an internal enquiry? 
Dr Anban Pillay (Cluster Manager of Health Economics: Department of Health) replied that there were no loopholes as such because the tender process was a rigorous process. If the parties decided to collude outside the process it was difficult to control. They would have to implement processes such as the signing of affidavits that stated they had not had discussions with competitors prior to the handing in of tenders. 

Ms Kalyan referred to the presentation that had taken place last week where it was stated that the South African Medical Association (SAMA) had threatened litigation and accused the Department of price fixing. She asked Minister Tshabalala-Msimang to comment.

Dr Chetty replied that the issue that SAMA raised had been raised before. When the Department took over the NHRPL from the Council of Medical Schemes, SAMA sent out a lawyer’s letter that stated they could not publish the NHRPL before the regulations were in operation. The Department adhered to that condition.  SAMA had alleged that the NHRPL could be seen as a form of price fixing. However, this had been clarified for them. It was a reference guide for both medical schemes and providers.

Ms Kalyan questioned the Minister’ statement that South Africa was reaching their MDG as the African Peer Review Mechanism (APRM) had reported that South Africa was not on track regarding the MDG set for HIV/AIDS.

The Minister suggested that the Honourable Member wait for the August report to make a determination on whether they were on track for the MDGs.

Ms R Mashigo (ANC) wanted to know when action would be taken against the private healthcare sector.    

Ms Mashigo asked if the medical scheme administrators would be prosecuted.       

The Minister replied regulations would have to be implemented.

Mr Sibuyana remarked that during the homeland system people received quality medical attention and while they were addressing legislation people were still being affected. Presently people were not receiving the same quality medical care that they used to receive.    

Minister Tshabalala-Msimang replied that they had decided in addition to the Hospital Revitalisation Programme they would have the Hospital Improvement Plan. They had chosen a few hospitals in each province to demonstrate that things could be done and considered as business as usual.

Ms Matsomela asked if the department had an oversight role on medical aid schemes.   

Dr Chetty replied that there was a statutory body called the Council for Medical Schemes that play the oversight role through an Act of the Department. The Department had a representative sitting on the board of the Council. The Council answered both to Parliament and the Minister regularly through a report according the Public Finance Management Act (PFMA).

Ms Matsomela noted that the private hospital groups that had emerged seemed to be those that were rigging the prices. She asked if they had a certain type of relationship with the medical aid schemes.     

Dr Chetty replied that it was not allowed according the Competition Act because it would be seen as vertical integration between providers and funders.  The Competition Commission looked at such mergers and arrangements and would rule whether those arrangments would be allowed. There was an active oversight role via the Competition Commission, the Council for Medical Schemes and the Department.

The Policy and Guidelines on Prevention of Mother to Child Transmission (PMTCT) Dual Therapy presentation
Minister Tshabalala-Msimang produced the document on the policy and noted that it also informed on what the current constraints were.

Ms Mnathari Matsau (Deputy Director-General: Strategic Health Programme: Department of Health) clarified that dual therapy was given in the context of mother to child transmission of HIV/AIDS. The background was that there had been a programme of PMTCT since 2000. At the time when the PMTCT was started there was one antiretroviral (ARV) used to prevent the transmission. There were scientists then that said that mono therapy was not adequate to prevent transmission and that Neviraprine had a high resistance level. Transmission would have been at a level of about 30%. There were estimations that Neviraprine used in conjunction with two or three other drugs could reduce that transmission rate to approximately 15%, but they did not have time to further investigate those conclusions.

Dual Therapy was ultimately the addition of
azidothymidine (AZT) to Neviraprine but changing the regime of dosage. The guidelines articulated what was needed to implement the whole programme. The key element was the enrolment of pregnant women and monitoring of them. The new ARV regimes for both women and infants because of that they would have to consider safe infant feeding. They needed to monitor and evaluate the dual therapy. 

When they had considered the expansion of the programme and that they had surpassed the target of access to PMTCT in the country and the new scientific evidence of what needed to be done, the policy guidelines stipulated an addition to the fundamental policy. They needed to train professionals because there were legal requirements in terms of the Pharmacy Act regarding who could dispense which types of medicines. The Pharmacy Act stipulated which professionals would then be trained.

Dual Therapy still encompassed the main elements of voluntary counselling and testing. The ARV interventions were premised on the original principles of the cluster of differentiation 4 (CD4) count that were below 200 and above 200. The PMTCT women that had a CD4 count of below 200 would be immediately prioritised. The next intervention would be how the infants would be fed, since women were required to make a decision on whether the infant would be breast of bottle fed. Mixed feeding was discouraged. The concept of Affordability, Feasibility, Access, Safety and Sustainability (AFASS) had the principle that addressed socio-economic situations and access to certain social amenities. The choices that the women make had to meet the criteria of AFASS. After the inventions, the guidelines stipulated that the infant born to a HIV/AIDS positive mother would be tested according to the Integrated Management of Childhood Illness (IMCI).

The cost of the implementation of dual therapy would be expensive. It was estimated that the implementation for the PMTCT programme for the end of the 2007 financial year would be R223million. In 2008 it was estimated at R282million. The escalation of costs was dramatic.

The Chairperson did not think that the presentation met the requirements of the Committee. He wanted a submission that was more coherent.  He asked the Committee to keep their questions brief as he did not want to spend much time on the presentation.

The Minister replied that she took the Committee’s grievance seriously and apologised for the presentations lack of coherence. It was important to note that South Africa was the first country that had questioned mono therapy. South Africa was forced to administer Nevirapine without substantive data. There had been interaction between themselves and other sectors. In order to align their policy, had produced this the guidelines. On Friday 29 February 2008, the National Health Council was meeting to finalise the Implementation Plan.
Mr Waters asked why the Western Cape was allowed to implement dual therapy before the other provinces even though the guidelines had just been approved. He referred to the presentation previously given by the National Health Laboratory Services that clearly illustrated a lower rate of mother-to-child transmission because of dual therapy.

The Minister replied that the Western Cape took its own initiative. The province ran a unitary health care system on a federal basis. She questioned the data that was mentioned and found it troublesome.

Mr Waters wanted to know about the progress in the other eight provinces and by which date could they expect implementation. 

The Minster replied that it would depend on a collective agreement from all provinces. There was a lot of work that needed to be done.

Ms Matsomela noted that the Nursing Act empowered certain professionals where there were not certain specialists, specifically in the rural areas. If they were to wait for the training of professionals, there was an issue in those areas where accessibility was poor.  She asked if the department looked critically into the area of qualification, specifically in the area of CD4 count.

The Chairperson felt that several issues were not addressed. He decided that the Department should return. He also indicted that timeframes would be discussed.

The Chairperson adjourned the meeting.


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