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NEW PUBLIC SECTOR MEDICAL PLAN TO SHAKE UP SOUTH AFRICAN SECTOR

August 23, 2005

The South African government has published details of its new tender for eight major medical service contracts for public sector employees, which is expected to have a significant impact on healthcare and drug provision in the country. Bids are expected by September 1 and the tender should be finalised by early October.

The bids will carry a 20% weighting for price and "black empowerment status," which should encourage local suppliers of lower-priced medicines. However, observers are unsure whether the plan -- which will bring 450,000 government employees under a single medical insurance structure -- could still fail due to trade union opposition.

Further, even if the new plan proves successful, some local sources doubt whether low-income workers will be able to afford treatment, as the scheme will be compulsory. Private provision currently accounts for half the country's healthcare spending, but this covers only 20% of the population. Nevertheless, officials expect the scheme -- which will eventually be South Africa's largest medical plan -- to increase the government's bargaining power and drive down treatment costs.