2. Zokufa HZ, Pillay T Pharmaceutical Policy and Planning National Department of Health- South Africa

3. SA experiences with the introduction of Pharmaceutical Pricing Legislation South Africa National Drug Policy  Establishment of pricing committee  Single exit price for medicines  Fixed fee for wholesalers  Fixed fee for pharmacists  Transparent pricing system  No volume discounts, rebates or bonuses.

4. Pricing Survey- (WHO/HAI) Amoxycillin 250mg 500’s Wholesaler markup: 34.34% R93.33 (ex VAT) Retail Markup: 41.52% R159.60 Patient Pays R161.08 Ex Manufacturer Excluding VAT: R61.19 Wholesaler sometimes offers a 10% and the pharmacist offers a 20 % to 30% discount. So the lowest the patient can pay is R83.21.

5. Interventions to reduce ex-manufacturer price 1.Reference pricing 2.International price comparison 3.Mandatory generic substitution 4.Request economic analyses for selected drugs 5.Powers to request manufacturing and related costs 6.50% across the board cut to “level the playing field” 7.“Web based” transparent pricing system 8.Introduction of a single exit price i.e.

6. Exchange rate vs PPP Exchange rate based on  short term factors and  does not indicate anything about degree of affordability So how do we compare prices with affordability in mind?  World bank uses purchasing power parity or PPP  What is PPP? It estimates the value of a dollar in each country.  One dollar will buy the same quantity of goods and services in all countries.

7. Options for Wholesaler fee and dispensing fee Price regulation mechanism DescriptionComments Cost + fixed percentage Wholesalers and retailers add a fixed percentage price. May encourage stocking and sale of more expensive items Cost + declining percentage The more costly the drug, the lower the percentage markup Provides incentives to sell less expensive items. Cost + fixed dispensing fee A fixed fee is paid per prescription. Reduces the incentive to prescribe or sell higher priced drugs. Cost + differential dispensing fee Fee paid per prescription is higher for generic products Encourages generic prescribing Maximum allowable price Involves price setting of producers’ price and fixed percentage markups for distribution. Individual drug prices may be limited but incentives exist for retailers to sell more expensive drugs

8. Wholesalers vs Distributors  Wholesalers  Trade in medicine.  Mainly supply generic drugs  Offer frequent deliveries so pharmacies do not have to hold large stocks.  Offer purchases on credit which may benefit small rural pharmacies  Distributors  Manufacturers have a financial interest in these companies.  Distribute mainly patented products  Do not offer credit or frequent deliveries which may disadvantage small rural pharmacy

9. Dispensing fee - fixed and declining percentage Pharmacists  Previously used a % mark-up system which encouraged the use of expensive drugs.  The Pharmacy Council published “unit based activity” for dispensing.  Pharmacists given a maximum dispensing fee of R24 per item. This fee is higher than the fee for doctors since the “stockholding risk” is higher in a pharmacy. Dispensing doctors  Dispensing doctors would have to complete a dispensing course before receiving a licence to dispense.  Dispensing doctors given a lower fee of R16 since the stockholding risk is much lower.

10. Transparent Pricing system Manufacturers would have to publish their selling prices a web page. These prices are the only prices that a manufacturer may sell a drug. Drugs prices may decrease at any time More informed consumers buying the cheapest drug Competition will serve a mechanism to drive down prices. Manufacturers print the recommended selling price on the patient ready pack so that patients are aware of the price and it prevents others in the supply chain from over billing.

11. Conclusions  Multifaceted intervention required  Requires access to good price information  Political commitment  Consultation with stakeholders  Committee to be representative of different government sectors such as DTI, Finance, Competition commission.

12. Implications for research  Need for greater international collaboration.  Research into measures of affordability.  International database of medicine prices.