HEALTHCARE MARKET INQUIRY
Warning on Remgro and Afrocentric surprises healthcare market inquiry
The report was not on the inquiry’s list of planned publications
The size and breadth of Remgro’s and Afrocentric’s financial interests in the private healthcare industry could stifle effective competition, according to a research note published by the Competition Commission’s healthcare market inquiry.
The development has caught the industry by surprise, as the report was not on the inquiry’s list of planned publications.
The inquiry was established to determine why medical inflation had historically risen faster than consumer price inflation and to determine whether there were barriers to effective competition in private healthcare.
SA lacked legislation restricting cross-ownership and cross-directorships and these kinds of arrangements might also inhibit competition, the note reads.
Honing in on Remgro and Afrocentric, the inquiry said the scale and scope of their healthcare investments "may allow the groups to substantially influence the commercial and strategic decisions taken by the management of the portfolio firms".
"They may even influence the very structure of competition in the South African healthcare market," it said.
Remgro holds significant interests in MMI Holdings and Discovery, which have interests in medical scheme administration, managed care and brokerages. Remgro also has a 42% stake in private hospital group Mediclinic. Remgro CEO Jannie Durand sits on the boards of Discovery, Mediclinic, and the First Rand Group, which has shares in MMI Holdings, the report reads. "A substantial commercial relationship therefore exists between the largest and most influential owners of Discovery, MMI and Mediclinic," according to the inquiry.
Durand was not immediately available for comment.
Jonathan Broomberg, CEO of Discovery’s medical scheme administrator, Discovery Health, said on Monday the shareholdings and directorships outlined in the report were widely known. "These minority shareholdings and directorships have no impact at all on the extent of competition between Discovery Health and MMI, which is intense. Similarly, [they] have no impact at all on the relationship between Discovery Health, its client schemes and the Mediclinic hospital group," he said.
Roly Buys, Mediclinic’s head of funder relations, said cross-directorships and cross-holdings did not necessarily imply collective bargaining or collusive behaviour.
Afrocentric spokesman Kabelo Letebele said such arrangements might disincentivise vigorous competition in other industries, but it was not the case in healthcare. "Any service offering or innovation we introduce, no matter how diversified or integrated, is aimed at either decreasing contributions or increasing benefits on behalf of medical scheme members," Letebele said.
Afrocentric owns Medscheme holdings, a medical scheme administrator, various managed-care organisations and a brokerage with pharmaceutical manufacturers, medical product distributors and retail pharmacy outlets.
The inquiry called on stakeholders to make submissions if they had evidence that the ownership structures it had identified were stifling competition.