Savings 'Limited' on New South African Pricing Regime

Controversy-prone South African Health Minister Manto Tshabalala-Msimang has stoked further debate over the government's recently introduced drug pricing reform. Speaking in a budget debate, the minister claimed that drug retailers have failed to pass on the cost savings offered by the new law to consumers.

The Regulation on the Pricing of Medicines and Related Substances, already the subject of several court battles since its enforcement in 2004, has been bitterly opposed by local pharmacy groups. The measure replaces the previous mark-up system with a fee-based structure. Under the law, dispensing fees for prescription drugs are capped at ZAR26, or 26% of cost, while fees on OTC medicines are capped at ZAR16, or 16% of cost. Pharmacists have argued that this has forced roughly 150 outlets to close in 2004 alone.

Tshabalala-Msimang has now claimed that despite cost savings of 19% on drug prices, or roughly ZAR2.3bn (US$338mn), benefits to consumers from the new framework have so far been "limited." Much of the blame is attributed to "a lack of cooperation at the retail pharmacy level" and "unnecessary" fees, which retailers claim are essential to maintain profitability. Trade association United South African Pharmacies has urged the minister to negotiate a solution, although it appears that the government is unlikely to rethink its cost-saving plans.