August 25, 2005

The manufacturers' selling price (MSP) of pharmaceuticals produced and sold in South Africa dropped 2.1% in June 2005 compared to the same period last year. However, this represented a 0.7% rise over May 2005. Meanwhile, the MSP for drugs produced in South Africa but sold on foreign markets fell 15.6% y-o-y for June 2005.

In the past, pricing levels were virtually uncontrolled in South Africa and as a result had been set relatively high. From 2002 onwards, the government set about reforming this system, introducing the Medicines and Related Substances Amendment Act. As a result of the new legislation, drug prices in the country fell an estimated 19% in the first eight months of 2004. The retail sector has been hardest hit with the previous mark-up system being replaced by a regulated fee-based structure with a clearly defined ceiling. Drug prices are calculated by taking into account MSP, VAT as well as a disputed 'logistics' fee. Pharmacist organisations have claimed that this has led to the closure of 150 outlets in 2004.

Further reforms in the country have included the creation of a pharmaceutical Pricing Committee, which will help make pricing more transparent. Also, consumer discounts and product samples have been abolished and restrictions have been placed on marketing practices.