SA to press drug firms to lower their prices

The Department of Health has launched a new salvo in its fight to lower medicine prices, and has instructed multinational drug firms that make patented medicines to disclose their prices in other countries.

The aim is to use the information to put pressure on drug companies to drop their prices in cases where SA is paying more than consumers in other parts of the world. It is the first concrete step towards implementing a mandatory international benchmarking system.

The move has caught companies on the back foot as it appears no hint of it had been given in prior discussions.

The department said on Thursday that if companies were selling patented medicines in SA at much higher prices than elsewhere, it would ask them to forego this year’s price increases.

Deputy director-general for health regulation and compliance Anban Pillay said the department would not legally be able to stop such companies from going ahead with this year’s price increases, but if they did the health minister would declare such prices unreasonably high.

This would effectively "name and shame" drug firms the department believed were charging too much. He doubted there was a company "brave enough" to weather the storm of public disapproval such a move would precipitate, Dr Pillay said.

The directive is contained in a government gazette published on Wednesday, which announces this year’s maximum permitted price increase for private-sector medicine sales.

The department publishes an annual notice of the maximum price hike allowed, which is 7.5% for this year.

The department has regulated private-sector medicine sales for the past decade and prohibits drug firms from giving customers discounts or rebates.

They are required to sell their products at what is known as the single exit price to all their buyers. The annual increase is typically pegged close to inflation.

For the past few years manufacturers have complained that the increase is too low and fails to adequately compensate them for unfavourable changes in the exchange rate.

This year the gazette contains a new provision. It says companies selling patented medicines must provide the prices of these drugs in Australia, New Zealand, Spain and Canada.

If the company does not sell such products in any of these countries, it must provide prices in all other countries in which it sells them.

The four countries already have mechanisms for regulating prices, and are the same basket of countries proposed in draft regulations on international benchmarking published last May.

The regulations proposed phasing the process in to give companies time to adjust their businesses, and included an appeal mechanism.

"It came as a surprise," said Innovative Pharmaceutical Manufacturers Association of SA (Ipasa) CEO Konji Sebati.

Ipasa represents companies that make "innovator" medicines, which are protected by patents and have no competition from generic copies. Prices of innovator medicines generally fall when patents expire and generic rivals enter the market.

Ipasa had believed discussions with the health department about its plans for international benchmarking were on hold, she said, as public submissions on its latest proposals for a benchmarking mechanism closed in August.

It would have been "common courtesy" for the department to have alerted Ipasa to the impending requirement to provide international prices, she said.

Dr Sebati said the 7.5% single exit price increase was in line with expectations.

Aspen Pharmacare’s head of strategic trade Stavros Nicolaou "welcomed" the 7.5% increase as the rand remained weak.