Discovery takes aim at market inquiry
Investment company’s wide interests may be anticompetitive, says provisional health report
SA’s biggest medical scheme, Discovery Health, has asked the health-market inquiry to withdraw its assertion that Remgro’s extensive interests in the private health-care industry, which include several of those it does business with, might lead to anticompetitive behaviour.
SA’s biggest medical scheme, Discovery Health, has asked the health market inquiry to withdraw its assertion that Remgro’s extensive interests in the private health-care industry, which include several of those it does business with, might lead to anticompetitive behaviour.
Remgro is an investment company with health-care assets that include indirect stakes in Discovery Health and Metropolitan Health, a 42% direct interest in private hospital Mediclinic, and indirect stakes in managed health-care services, a primary provider network, pharmaceutical manufacturing, medical insurance organisations and a provider of mobile health services, the inquiry says.
Discovery Health is a subsidiary of JSE-listed insurer Discovery
“Concerns regarding Remgro’s indirect ownership in Discovery Limited are speculative and without foundation, and Discovery Health categorically denies that the indirect ownership by Remgro has ever influenced its decisions or actions in any way that harms competition or consumers,” Discovery Health said in its written submission to the inquiry’s provisional report.
“The inquiry has provided no evidence of any collusion or anticompetitive behaviour between these firms, nor of any harm to consumers,” it said.
The inquiry was established by the Competition Commission in 2013 to investigate the barriers to effective competition in the private health-care market and determine why medical inflation has risen faster than consumer price inflation.
In 2017 it published a research note warning that the size and breadth of Remgro and Afrocentric’s financial interests in the sector could hinder competition. It reiterated its concerns in its provisional report, published on July 5, saying common shareholding and cross-directorships might prevent competition. It called for submissions in response to its provisional report, which it published on its website earlier this week.
Afrocentric has interests in medical scheme administrator Medscheme, as well as pharmaceutical manufacturing, wholesaling and dispensing, and HIV/Aids management.
The small number of institutional investors in SA meant cross-shareholdings were found in most industries, said Discovery Health.
It said that the inquiry had failed to provide any evidence of collusion between it and Mediclinic, or of agreements that harmed medical schemes or their members.
The inquiry’s conclusion that there was a “significant commercial relationship” between the owners of Discovery, MMI (Metropolitan Health’s holding company) and Mediclinic was baseless and should be withdrawn, it said.
The inquiry received 67 submissions in response to its provisional report. Many of the submissions — including those from private hospital groups, doctor groups and Discovery Health — took issue with technical aspects of the inquiry’s methodology and analysis.
Private hospital group Netcare raised concerns about the inquiry’s procedural fairness.
Netcare said the inquiry should have disclosed that the report’s chapter on supplier-induced demand had been drafted by Neil Soderlund, who heads a joint venture between Discovery Health and Quantium, called Quantium Health Outcomes, because his involvement created a potential conflict of interest.
Discovery Health CEO Jonathan Broomberg said Soderlund was consulting to the inquiry before his business was acquired by Quantium Health Outcomes, and the transaction was declared immediately to the inquiry