Weak rand expected to push up prices of medicine

Since almost 90% of the active ingredients that go into the production of effective medicines are being imported, industry insiders say the weakened economy will soon have a negative effect on prices of medication.

SA has a high incidence of noncommunicable diseases, and an increase in the prices of medicines could result in higher mortality rates.

Ratings agencies S&P Global Ratings and Fitch have downgraded SA’s rating to junk status, with Fitch cutting the foreign and local currency ratings.

CEO of the Innovative Pharmaceutical Association SA Dr Konji Sebati said the volatile and weak exchange rate, which was inflating the cost of imported raw materials, was of particular concern. “All pharmaceutical manufacturers are significantly affected by the deteriorating value of the rand, with a resultant increase in the cost of raw materials, Other local cost increases, such as wages and utilities, are also ahead of [the consumer price index] and causing great pressure on the cost of manufacture.”

Private sector medicines are subject to the single exit price, which is set every year by the Department of Health and is determined by combining inflation and the depreciation or appreciation of the rand.

But an analyst at BPI Africa, Kate Turner-Smith, said tenders in the public sector could be renegotiated once a quarter, based on how the rand performed. “If junk status results in excessive inflation, then that would have an impact on the single exit price,” she said.

Econex director Mariné Erasmus said the exchange rate directly affected import prices for production and retail. “The exchange rate devaluations limit the profitability of the sector and it does not make it worthwhile to deliver medicines if the margins do not make sense.”