Picture: 123RF/KENG PO LEUNG
Picture: 123RF/KENG PO LEUNG

Pharmaceutical manufacturers have welcomed health minister Aaron Motsoaledi’s announcement of a 3.78% private-sector medicine price increase for 2019.

Medicine prices in the private sector are tightly controlled by the health department, which usually permits one increase a year on the ceiling price for each drug. While pharmaceutical manufacturers can freely determine the launch price of their products, from that point on they may not increase their private-sector prices beyond an annual threshold set by the minister, known as the single exit price.

“The single exit price has been quite a controversial issue. This is welcome because it brings us closer to inflation and is likely to be implemented in January,” said pharmaceutical task group spokesperson Stavros Nicolaou.

“It is more closely aligned to trading conditions and its more timeous implementation will assist the difficult environment and also reduce administrative burden in the sector, per President Cyril Ramphosa’s call to reduce red tape and reduce the cost of doing business in our country,” he said.

The task group represents 90% of the pharmaceutical industry in SA and is made up of four pharmaceutical manufacturing bodies: the Innovative Pharmaceutical Association of SA, a body for multinational drug firms; Generic and Biosimilar Medicines Southern Africa; Pharmaceuticals Made in SA; and the Self-Medication Association of SA.

This comes after drug makers have been consistently disappointed in the annual price increases they are permitted.

Earlier in 2018, the department received a backlash for a 1.2% single exit price that Nicolaou said “caused a lot of operational difficulties for companies” and was considerably lower than inflation. Pharmaceutical manufacturers lobbied the department for an extra price increase to offset the rand’s steep slide, which made their imports of active ingredients and finished goods more expensive.

Nicolaou said the task group is now engaging with the department’s pricing committee to revise the mechanism used to determine single exit price increases and introduce a formula that brings the number closer to inflation, thus providing greater certainty to drug manufacturers.

The latest consumer price index showed that inflation for November was at 5.2%.

“Medicine prices have come down significantly in our country since the inception of the single exit price,” Nicolaou said.

In 2003, medicines constituted about 24% of private health spend. It is now down to about 16%, according to data from the council for medical schemes.

menons@businesslive.co.za