Zokufa HZ, Pillay T

Pharmaceutical Policy and Planning

National Department of Health- South Africa

SA experiences with the introduction of Pharmaceutical Pricing Legislation

South Africa National Drug Policy Establishment of pricing committee Single exit price for medicines Fixed fee for wholesalers Fixed fee for pharmacists Transparent pricing system No volume discounts, rebates or

bonuses.

Pricing Survey- (WHO/HAI)Amoxycillin 250mg 500’s

Wholesaler markup: 34.34%R93.33 (ex VAT)

Retail Markup: 41.52% R159.60

Patient Pays R161.08

Ex Manufacturer

Excluding VAT: R61.19

Wholesaler sometimes offers a 10% and the pharmacist offers a 20 % to 30% discount. So the lowest the patient can pay is R83.21.

Interventions to reduce ex-manufacturer price

1. Reference pricing 2. International price comparison3. Mandatory generic substitution 4. Request economic analyses for selected

drugs 5. Powers to request manufacturing and

related costs6. 50% across the board cut to “level the

playing field”7. “Web based” transparent pricing system8. Introduction of a single exit price i.e.

Exchange rate vs PPPExchange rate based on short term factors and does not indicate anything about degree of

affordability

So how do we compare prices with affordability in mind?

World bank uses purchasing power parity or PPP What is PPP?

It estimates the value of a dollar in each country.

One dollar will buy the same quantity of goods and services in all countries.

Options for Wholesaler fee and dispensing Options for Wholesaler fee and dispensing feefeePrice regulation mechanism

Description Comments

Cost + fixed percentage

Wholesalers and retailers add a fixed percentage price.

May encourage stocking and sale of more expensive items

Cost + declining percentage

The more costly the drug, the lower the percentage markup

Provides incentives to sell less expensive items.

Cost + fixed dispensing fee

A fixed fee is paid per prescription.

Reduces the incentive to prescribe or sell higher priced drugs.

Cost + differential dispensing fee

Fee paid per prescription is higher for generic products

Encourages generic prescribing

Maximum allowable price

Involves price setting of producers’ price and fixed percentage markups for distribution.

Individual drug prices may be limited but incentives exist for retailers to sell more expensive drugs

Wholesalers vs Distributors Wholesalers Trade in medicine. Mainly supply generic drugs Offer frequent deliveries so pharmacies do not

have to hold large stocks. Offer purchases on credit which may benefit

small rural pharmacies

Distributors Manufacturers have a financial interest in these

companies. Distribute mainly patented products Do not offer credit or frequent deliveries which

may disadvantage small rural pharmacy

Dispensing fee - fixed and declining percentage

Pharmacists Previously used a % mark-up system which encouraged the

use of expensive drugs. The Pharmacy Council published “unit based activity” for

dispensing. Pharmacists given a maximum dispensing fee of R24 per

item. This fee is higher than the fee for doctors since the “stockholding risk” is higher in a pharmacy.

Dispensing doctors Dispensing doctors would have to complete a dispensing

course before receiving a licence to dispense. Dispensing doctors given a lower fee of R16 since the

stockholding risk is much lower.

Transparent Pricing system

Manufacturers would have to publish their selling prices a web page.

These prices are the only prices that a manufacturer may sell a drug.

Drugs prices may decrease at any time More informed consumers buying the cheapest drug Competition will serve a mechanism to drive down prices.

Manufacturers print the recommended selling price on the patient ready pack so that patients are aware of the price and it prevents others in the supply chain from over billing.

Conclusions

Multifaceted intervention required Requires access to good price

information Political commitment Consultation with stakeholders Committee to be representative of

different government sectors such as DTI, Finance, Competition commission.

Implications for research

Need for greater international collaboration.

Research into measures of affordability.

International database of medicine prices.