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Minister to decide on additional SEP increase

The Medicines Pricing Committee has
submitted recommendations to Health Minister, Aaron Motsoaledi following
requests from pharmaceutical companies for an additional increase of the single
exit price (SEP) on medicine amidst a sliding rand and increasing input
costs. Pharmaceutical manufacturers were only allowed a SEP increase of 1.2% in
the beginning of the year and are now asking an extra 2.8% after the rand lost
up to 19% of its value since January.

The Pharmaceutical Task Group (PTG), which represents most
of the manufacturers, met with the minister and the pricing committee last
month, warning that failure to increase the SEP could impact on the continuing
supply of some medicines. However, medical schemes have voiced their concern
about the proposed price hike saying it could lead to their costs spiraling with
an additional R260m this year.

PTG spokesperson, Stavros Nicolaou told Business Day that although regulatory provisions allowed manufacturers
to seek permission to raise the price of individual products if they had become
unprofitable, the process was bureaucratic and companies have had “marginal
success” with it in the past.

According to Nicolaou, the PTG wants the DoH to revise the
mechanism used to determine SEP increases and introduce a formula that provided
greater certainty to the industry. This would include an automatic review of
the SEP if the exchange rate changes by more than 10%.

According to the Health Funders Association, the annualised
impact of the proposed increase would be over R1bn billion in 2019, even before
next year’s single exit price adjustment.

“Our considered view is that medical aid schemes and the
South African healthcare consumer simply cannot afford to shoulder the burden
of this additional medicine price increase during this current cycle,” HFA CEO,
Lerato Mosiah, said.

“Overall cost inflation of medicine is driven not only by
the SEP adjustment but by volume growth as well, which compounds annual
medicine price increases. Our data shows that, despite this year’s regulated
SEP increase of 1.26%, during the first half of 2018 overall cost inflation for
chronic medicines has increased by up to 6%, and up to 8% in the case of cancer
medicines for some medical schemes,” Mosiah said, adding that it has been compounded
by the 1% VAT increase earlier this year.