Multinational drugmakers in South Africa have warned that government moves to regulate the prices of drugs could have a number of negative and unintended consequences. They have pointed to the fact that countries that centrally control prices end up failing to reap the full benefits offered by generics.
They cite the example of Germany, where price regulations have forced research-based drug companies, which hold patents on medicines, to lower their prices. However, generics have remained relatively expensive. As a result, there is a system in place whereby innovation is not rewarded. The drugmakers went on to stress the need for market forces to determine the price of drugs, claiming that this is the case in the most successful health systems in the world.
Until recently, pricing levels in South Africa were virtually uncontrolled. As a result prices were relatively high. However, due to mounting public pressure the government has begun to reform its pharmaceutical pricing legislation. The retail sector has been hardest hit with the mark-up system being replaced by a flat dispensing fee, set at a maximum 26% of manufacturers' selling price. In the first eight months of 2004, drug prices fell 19%.