There is some confusion

The Board of Healthcare Funders comments on the proposed drug pricing regulations in this second of a two part series of articles.

The new pricing system establishes percentage mark-ups for pharmacists and those licensed to dispense drugs, and for wholesalers and distributors.

If the single exit price of a drug is less than R100, the pharmacist may charge a dispensing fee of 24%.

If it is more than R100, he may charge only R24.

"Firstly, it is not clear if the current 24% or R24 includes the distribution fee of R6 - which would mean that there are two scenarios, with the dispensing fee either R18 or R30," continued Kruger.

The BHF recommends that the distribution fee be in fact added to the maximum dispensing fee, enabling the pharmacist to claim back the distribution fee.

Fees?
"Secondly, the regulations do not specify whether the pharmacists can charge an appropriate professional fee. It would be impractical to assume that the sole professional remuneration of the pharmacist should come from the dispensing fee.

Many pharmacists have significant handling costs, since certain provisions and standards must be maintained in storing and dispensing drugs.

In fact, research undertaken by the Medicines Control Council indicates that some 80% of pharmacists would close down, since they would be unable to survive on the proposed fee."

She also points out that the lack of guidelines on setting professional fees could distort any gains the pricing committee could be trying to make.

Higher margin goods
"Not being able to charge more than 24% of a drug which costs less than R100 could encourage members of the dispensing community to dispense higher-priced medicines or scheduled substances in order to maximise their dispensing fee," she explained.

"The BHF believes that the dispensing fee should be revised with a view to creating greater incentives to dispense lower-priced drugs," she said.

There is also the impact which the dispensing fee proposal could have on the generics market.

80:20
"Currently, 65% of items dispensed are valued at under R100," Kruger commented. "Items priced at R100-R200 amount to only 28,1% with 6% of drugs costing more than R200.

There are two possible consequences, both negative, of these proposals. Firstly, they could push the price of generics to more than R100 - thus defeating the aim of reducing costs.

Alternatively, generic manufacture itself could become unaffordable and unsustainable because volumes would neither increase nor be sustained at current levels."

Enforcement of the regulations, Kruger emphasised, would be key in ensuring their legitimacy. "The regulations are not clear about structures to support the regulations.

"If they are implemented piecemeal, or not applied uniformly and with perhaps too much leniency or double standards, they will become ineffective."

She stressed that the regulations should be better contextualised within other supporting legislation.

Another plan needed
The BHF also believes it important that the Department of Health should come up with contingency plans in the event of the large manufacturing companies leaving the country.

"Access to affordable medicine is crucial to a sustainable healthcare delivery system," said Kruger.

Discussions BHF has conducted with various stakeholders have pointed to the very real concern that continued access to affordable medicine could be severely limited because of the departure or closure of both manufacturers and pharmacies.

"The current proposals state that manufacturers would have to justify cost increases to the pricing committee," she continued.

"In assessing price increases, the committee should consider a reasonable trend in expenditure data, such as three to five years of data.

“In future years, it would also have to assess whether areas of increased costs have actually materialized or not."

Be fair
Kruger stressed that the pricing committee establish objective criteria and an appropriate format to assess impact on manufacturers and suppliers.

Impact should also be measured against a reduction in doctors being able to dispense as well as the potential closure of certain retail pharmacies and remaining pharmacies picking up the slack.

"Some of our comments might fall outside the ambit of the pricing committee and be the responsibility of the Department or Minister of Health," she pointed out.

"However, we feel that the failure of the pricing committee to acknowledge them could adversely influence the objectives of the regulations."