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Medicine regulations causing exploitation of consumers – expert

The new medicine price regulations that have been in force partially since 2 May have resulted in large-scale exploitation of unsuspecting or naive consumers.

So says Dr Louw Engelbrecht, head: clinical management at the medical scheme administrator Multimed. He warns consumers to watch out for providers who are out to profit excessively from the current confusion. “I would advise consumers to compare the prices of different providers before they buy, otherwise they may find that they have to pay large contributions from their own pockets.”

According to Dr Engelbrecht the reason for the current situation is uncertainty about the interpretation of the Act on the one hand and, on the other hand, providers (such as pharmacies) that are deliberately exploiting the system in order to make unfair gains before 2 August, when all profits on medicines will be replaced with a professional fee.
“Prior to 2 May there was a fixed 50% mark-up on the listed wholesale prices. However, pharmacies generally granted a discount (approximately 20%) for cash and to medical fund patients. From 2 May this discount on medicine has become illegal.

“At present the Act does not give any indication of the permissible profit margins. Funds such as Munimed have decided to ensure a cost-neutral position for the fund. For example, where previously the mark-up was 50% followed by a 20% discount to the fund, the fund now pays the wholesale price plus 20%. This means that medicines are not more expensive or cheaper for the fund itself.”

Dr Engelbrecht says that manufacturers may also no longer give discounts to wholesalers and pharmacies, with the result that in terms of the new regulation pharmacies will forfeit the “profit” from discounts. “There is only one way in which manufacturers can remain competitive in a no-discount environment, and that is to reduce prices. In any case, this is the intention of the Act - that prices should be reduced to a lower level for everyone, without discounts to large buyers.

“In practice the consumer is unfortunately not receiving these reductions, as there are pharmacies that have not reduced their prices to the extent that the manufacturer has reduced his prices, and they are also still charging the full 50% mark-up without any discount.”

Example: Well-known generic medicine at a pharmacy.
Price before 2 May - R116,00.
After 20% discount to fund/member - R92,80.
Manufacturer’s price after 2 May - R32,15 (including 20% mark-up).
Pharmacy does not adjust its (reduced) price and still claims the full 50% mark-up from the member.

Member personally pays more than R80,00 too much for the medicine.

Dr Engelbrecht attributes the exploitation to some pharmacists’ dissatisfaction with the proposed fee that is to replace the mark-up, pharmacies that have large supplies that might have been bought at higher prices, and pharmacists who want to derive maximum benefit from the system before the Act comes into force fully on 2 August.

“My advise to consumers is to compare prices before buying. There are pharmacies that are cooperating in the spirit of the new legislation and who are passing on the price reductions to consumers.”