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Cheaper drugs - how it works

12 February 2004 Anso Thom

This is part two of a story about why South African consumers pay so much for prescription drugs.

Pharmacists will then be entitled to add a dispensing fee of 24 percent for drugs under R100 and R24 for drugs over R100. Dispensing doctors will be able to add 16% to drugs under R100 and R16 to drugs over R100.

Again the example of Bactrim: After May, the single exit price (Manufacturer Net Price) is R30,62. The wholesaler/distributor will mark it up by up to 15 percent increasing the price to R35,21.

The pharmacist will add a 24 percent dispensing fee and include 14 percent VAT. Ultimately the consumer will pay up to R49,78. In the case of a dispensing doctor, the cost of the drug would be R46,56.

With over the counter medication such as Paracetamol, retailers will be entitled to a maximum 16% mark-up on drugs.

Wholesalers, distributors, pharmacists, retailers and dispensing doctors have been given 45 days (from May) to get rid of the old stock without the printed price. Legislation to control the price of medicines is not strange or new. Although South Africa is one of the first lower to middle income countries to introduce such legislation, Australia, France, Germany, Canada and the United Kingdom, have used different models (depending on their particular health and social systems) to achieve the same outcome.

There is also general agreement that these measures would lead to huge savings in the medical aid industry but, said one industry insider: "The onus is on consumers to ensure that these are passed on to them in the form of decreased contributions."

Expectations are that private hospitals, that profit enormously from prescription drugs, will try and cushion losses by implementing increases in other areas like ward fees. The fact that wholesalers and distributors do not trade solely in drugs should also cushion the blow.

Distributors and wholesalers stock a range of products such as medical supplies and stationery items sold in pharmacies.

There are experts who believe that rather than cutting margins for pharmacists and manufacturers, medicines should be VAT exempt, however, the Minister of Health has no say in this matter as Treasury who controls decisions with regard to VAT.

Health department spokesperson, Jo-Anne Collinge, said consumers would have to become more informed and discerning and shop around for the best price they could get. She added that organizations such as the Diabetes Society or Heart Foundation could play an active role in this regard.

"We are not ruling out providing more consumer information in future including a complaint line," she said.

She added it was important for medical aids to be vigilant and for pharmacists to offer consumers the cheapest options, including generic substitutes.

A contravention of the Act caries a maximum penalty of 10 years in jail or an equivalent fine. "Of course this is the last resort," she added.

That South Africans will pay less for medication, is a given. How significant the reduction is will become clearer as stakeholders debate the draft legislation over the next few months.

Drug Prices

BACTRIM (20 adult strength tablets)

BEFORE MAY

Blue Book price (price at which manufacturer sells drug to wholesaler / distributor) R61,24

Wholesaler/distributor sells drug to retailer at R74,23

Retailers (pharmacist/dispensing doctor) sell drug to consumers at R111,35

Including VAT consumers pay R126,92

AFTER MAY

Single exit price (no blue book price) printed on box as R30,62

Wholesaler/distributor sells drugs to retailer at up to R35,21

Pharmacists sells drug at up to R43,66

Including VAT consumer pays R49,78

Dispensing doctor charges R46,56

AMOXICILLIN (150mg tablets x 15)

BEFORE MAY

Blue Book price (price at which manufacturer sells drug to wholesaler / distributor) R11,10

Wholesaler/distributor sells drug to retailer at R13,45

Retailers (pharmacist/dispensing doctor) sell drug to consumers at R20,18

Including VAT consumers pays R23,00

AFTER MAY

Single exit price (no blue book price) printed on box as R5,55

Wholesaler/distributor sells drugs to retailer at up to R6,38

Pharmacists sells drug at up to R7,91

Including VAT consumer pays R9,02

Dispensing doctor charges R8,44

PROZAC (20mg tablets x 30)

BEFORE MAY

Blue Book price (price at which manufacturer sells drug to wholesaler / distributor) R296,38

Wholesaler/distributor sells drug to retailer at R359,24

Retailers (pharmacist/dispensing doctor) sell drug to consumers at R538,86

Including VAT consumer pays R614,30

AFTER MAY

Single exit price (no blue book price) printed on box as R148,19

Wholesaler/distributor sells drugs to retailer at up to R154,16

Pharmacists sells drug at up to R178,19

Including VAT consumer pays R203,14

Dispensing doctor charges R194,02

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