Who is the Pricing Committee?
The Pricing Committee is a team of experts appointed by the Minister of Health. They research various aspects of medicine pricing before making recommendations to the Minister.
What is the expertise of the Pricing Committee?
Committee has a range of expertise including health economics, pharmacoeconomics, pharmacology and health legislation. Members of the committee bring experiences that range from international medicine price regulation to retail pharmacy experience.
How does the Pricing Committee decide on the recommendations that they make to the Minister?
The committee first identifies the necessary information required to make an informed decision. A research proposal is then drafted to ensure that the methodology used for data collection is appropriate. The secretariat is tasked to collect and assimilate the information in a manner that would assist the committee in decision-making. Often the committee establishes task teams from its membership to oversee the research. The Committee also requests information from stakeholders. Examples of stakeholders are retail pharmacists, manufacturers, doctors, consumers, distributors and wholesalers. When stakeholders make written submissions the Committee discusses each submission before reaching a decision. The Committee prefers written representation since it allows all committee members (even those not present at a meeting) to evaluate the submission and give input. Furthermore oral presentations are time consuming.
What is SEP (Single Exit Price).
SEP is the price at which a pharmacy buys medicines from its suppliers. The SEP is made up of the Manufacturer’s price, Logistics fee (“delivery fee”) and VAT. This is not the price the patient will pay to the pharmacy for the medicine. The price to the patient will be the SEP + (dispensing fee plus VAT on the dispensing fee).
Why do I pay a dispensing fee?
The dispensing fee is the amount of money the patient must pay the pharmacist for dispensing a medicine. The activities of dispensing include reading and interpretation of your prescription (and if there is no prescription then advice on the appropriate medication for your complaint), counting, picking and labelling a medicine and then providing appropriate advice with regards to the use of the medicine. The dispensing fee must be clearly stated on your invoice so you are aware of the cost of the service.
In circumstances where the pharmacist has to make up a medicine (e.g. a dermatological preparation) then an additional fee may be charged for such services. The Pharmacy Council will soon publish a list of services for which a pharmacist may levy a fee.
How will the implementation of the law on medicine prices benefit me the patient?
Section 18A of the Medicines Act which works hand in hand with Section 22G has prohibited rebates, discounts and other perversities. The removal of these discounts had led to a 19% reduction in medicine prices. The establishment of a fee for logistics and dispensing means that the price of a medicine through the supply chain is transparent and can be calculated. The medicine pricing legislation also allows for the introduction of international benchmarking, reference pricing and pharmacoeconomic analysis, which will further apply pressure on those medicines that are excessively priced. Once these are implemented, patients can expect further savings.
Will all pharmacies be charging the same dispensing fee?
The dispensing fee that is published is the maximum fee a pharmacy may charge. Some pharmacies may choose to charge less than the published dispensing fee. Patients are encouraged to shop around for the best price of a medicine in order to decrease their costs.
If I choose to pay cash for my medicine and not use my Medical Aid, will the pharmacist still give me a discount?
The price should be the same for cash patients as well as medical aid patients. Both groups of patients can shop around for a dispensing fee that is lower than the maximum fee that pharmacies are allowed to charge.
Will we be charged administration fees or any other fees that we don’t understand when filling a prescription at the pharmacy?
Administration fees or any other fees are not allowed, as the dispensing fee covers all the dispensing related costs. All charges should be itemised on an invoice so that patients know exactly what they are being charged for.
Will the price of the medicine be displayed on the pack?
All pharmacists are expected to properly label any medicine sold. The label must include the price of the medicine. The price of the medicine will also be on the invoice supplied with your medicine
Now that medicine prices are lower will my monthly medical aid contributions decrease?
Medicines were the second highest consumer of the private sector health budget prior to the introduction of the medicine pricing regulations. The introduction of the medicine pricing regulations has seen a reduction in medicine expenditure of approximately 22% with an increase in volumes.
At the same time expenditure on private hospitalisation, specialist consultations and administration fees has increased significantly so the expected benefit to medical schemes was not realised.
Will the new fee cause the closure of retail pharmacies in previously disadvantaged areas where such services are needed?
The committee obtained detailed information on the costs involved in the operation of a dispensary within a retail pharmacy. These costs are applicable to pharmacies in previously disadvantaged areas. The fee has been calculated to cover the costs of dispensing (including salaries) plus a return on investment for an efficient dispensary.
The new fee is significantly higher than the 26%/R26 dispensing fee so pharmacies will be earning much more than they would have under the 26%/R26 fee. A number of medical schemes were only paying pharmacies a maximum of R26. Pharmacies in the affluent urban areas introduced an administration fee to increase their income.
Retail pharmacists in previously disadvantaged areas argued that the 26%/R26 fee affected them the most since they could not recover an administration fee from patients in communities that cannot afford to pay such fees. Despite these challenges pharmacies in such communities survived on the 26%/R26 fee. Therefore with a much higher fee pharmacies should certainly survive.
Has there been a decline in the number of pharmacies since the pricing regulations?
The Pharmacy Council is responsible for maintaining a register of all pharmacies in the Country. The Council register does not suggest any mass closure of pharmacies. Infact there has been an increase in the number of pharmacies on the register.
Why did the committee not produce a similar fee structure when the fee was first promulgated?
The decision of the committee is based on the information before the committee. During the initial drafting of the legislation the information from stakeholders was limited and of poor quality. This was highlighted to the Courts hence the judgement that obliged pharmacists to provide the necessary information to the Committee.
Since the Court judgement there has been a significant improvement in the information provided. However the information from individual pharmacies was still poor. The Secretariat has sent out survey forms to all pharmacies in the country (approx 2500) and conducted workshops at six major centres across the country. Only 161 pharmacies provided information that was valuable.
What is the relationship between the Department and retail pharmacy groupings?
Since the Court judgement, a number of pharmacy groupings came together to form the pharmacy stakeholder’s forum. The forum has provided constructive input in the determination of the dispensing fee. Their input has assisted in the development of this new fee. In addition, a number of groupings outside the pharmacy stakeholder’s forum provided valuable input.
What advice does the committee have for pharmacies that still experience difficulty with this new fee?
It is important for the dispensary to run efficiently. One of the major drivers of the dispensing cost is pharmacist salary. The committee suggests that the number of prescriptions is assessed to determine the number of pharmacists required. One should consider one or even two pharmacy assistants in circumstances where a single pharmacist cannot cope with the number of prescriptions.
In situations where a pharmacy dispenses very few prescriptions, the pharmacist should consider other methods of supplementing his/her income e.g. supplementary services, partnership with the state, limited operating hours for the dispensary. In areas where there are more than five pharmacies within a 3-5km radius, the probability of a dispensing a sub optimal number of scripts is high.
The other factors that influence viability include recurring expenditure such as rental, computer costs etc. Rental in large malls are often much higher than suburban shopping centres.
Improvement in stock management to reduce stock holding, expired stock etc. Strategies to procure “just in time” for chronic patients (especially high cost medicines).