Ideal time to push ahead with health-care reforms
The Covid-19 pandemic and lockdown exposed many underlying economic, health and social problems in SA.
Now, while the country works to deal with the fallout of the pandemic — and of the government’s hard lockdown — we have the ideal opportunity to adopt the necessary reforms that could place the country in a much stronger position in years to come.
A new declaration, initiated by the Geneva Network (UK) and supported by numerous international think-tanks, aims to provide policy guidance to the World Health Assembly (the decision-making body of the World Health Organisation). The declaration, and the policy recommendations contained therein, can help point SA in the right direction in implementing the necessary reforms in the area of medicine.
The following recommendations are presented in the declaration: reduce unnecessary medicine costs; accelerate access to new medical technologies and medicines; and support innovation, including intellectual property rights, during the Covid-19 crisis. These recommendations aim to increase access to medicines generally. If implemented speedily enough, they could also improve access to, and bring down the prices of, potential Covid-19 vaccines and therapeutic treatments.
The prices of many medicines are exceptionally high, to the point at which many South Africans cannot even consider contemplating their use. Some believe this problem could be solved through implementing the National Health Insurance. However, this would in fact increase the costs of goods and services, especially to cover the bureaucratic costs of administering an entire nation’s health-care needs. An effective, cost-reducing solution — made clear in the declaration — would be to uncover artificial price inflators, such as tariffs, and to eliminate them.
Along with cost concerns, bureaucratic delays in the approval of medicines means many South Africans are forced to wait much longer than people in other countries. The declaration points out that patients in Sub-Saharan Africa “must wait four to seven years for their regulators to approve medicines already approved by the FDA [US Food & Drug Administration] or EMA [European Medicines Agency]”. It makes little practical (and indeed, humane) sense for potentially life-improving medicine to be subject to yet another approval process in SA if it has already been approved by another major body.
In this specific regard, the declaration recommends that “developing countries should strengthen regional agreements relating to mutual recognition procedures for regulatory approvals to accelerate access to medicines”. African countries should — as members of the AU — build on the momentum of the African Continental Free Trade Area (AfCFTA), and adopt similar agreements and streamlining regarding medicines and medical equipment.
Given government’s decreasing fiscal runway (an 88% debt-to-GDP ratio by 2024 is a strong possibility), it would be rational and responsible for the departments of health and trade, industry & competition, and government more broadly, to reduce the number of complex, expensive and inefficient customs, import and export procedures for medicines and medical equipment. The declaration points out that the “time and effort involved in navigating these procedures adds to the costs of trade in medicines, costs which are ultimately passed on to patients”.
SA needs to stand out as an easy, transparent market for local manufacturers and foreign companies to trade. Paring back the number of superfluous and inefficient procedures is a fundamental step in reaching that destination. In April, the Trade Law Centre’s Talkmore Chidede made the case for a temporary suspension of import tariffs on medical products and equipment that could be considered essential amid the Covid-19 pandemic.
Such tariffs “may contribute to higher costs of [essential medical products and equipment]” and “could affect the movement and accessibility of such products”. Given the general difficulty for people in Africa to gain access to medical products more readily available elsewhere (and less expensive), one could argue that such a suspension of tariffs ought to become permanent. The declaration points to the harm caused by tariffs because they raise prices and act as disincentives for trade between countries.
Further, while a temporary suspension of tariffs is always welcome, the temporary aspect itself creates uncertainty regarding a country’s long-term policy direction. Where there is more uncertainty, there is less trade, as well as less long-term investment and growth.
A concern looming out of Covid-19 is that many countries will fall into the protectionist trap and become more isolated. A recent article in The Economist states that “the IMF counts 120 new export restrictions this year”. In a separate piece, the IMF projects that GDP in the Sub-Saharan African region will “expand 3.1% in 2021, compared with a forecast of 5.2% for the world economy”.
It is crucial that, for future growth and innovation SA — and indeed the whole Southern African region — do not follow a path of restrictions and increased tariffs. It would be to the benefit of the people if the SA government supported and adopted the policy recommendations contained in the declaration.
• Hattingh is project manager and researcher at the Free Market Foundation.
The full declaration can be found here.
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