The TAC and Sec­tion 27 do not sup­port the cur­rent sys­tem by which the ini­tial SEP is com­pletely dis­cre­tionary and un­trans­par­ent – and whereby prices can be set at lev­els un­af­ford­able to most of the pop­u­la­tion

CityPress - - Business - DEWALD VAN RENS­BURG dewald.vrens­burg@city­press.co.za

Just be­cause medicine prices are reg­u­lated, does not mean they are fair or com­pet­i­tive. The in­ves­ti­ga­tion into the pric­ing of cancer drugs, an­nounced by the Com­pe­ti­tion Com­mis­sion this week, has been met by an in­dus­try re­tort that drug prices are al­ready reg­u­lated un­der the sin­gle exit price (SEP) sys­tem, mean­ing in­dus­try play­ers can­not abuse pric­ing.

Speak­ing to City Press this week, Com­pe­ti­tion Com­mis­sion head Tem­binkosi Bon­akele dis­missed the ap­par­ent con­tra­dic­tion.

None of the three large phar­ma­ceu­ti­cals be­ing probed – Aspen, Swiss multi­na­tional Roche and US gi­ant Pfizer – is al­leged to have con­tra­vened the SEP sys­tem, but even a price lower than the reg­u­lated max­i­mum can be “ex­ces­sive” un­der com­pe­ti­tion law, he told City Press.

“We have in­ves­ti­gated other sec­tors be­fore, re­gard­less of price reg­u­la­tion, such as telecom­mu­ni­ca­tions,” he said.

All medicines mar­keted in South Africa are sub­jected to a na­tional max­i­mum price that gets ad­justed for in­fla­tion an­nu­ally by the depart­ment of health.

How­ever, ac­tivists and aca­demics have pointed out for a long time that this sys­tem has a weak­ness: the ini­tial price of a drug is set al­most en­tirely at the dis­cre­tion of the com­pany sell­ing it.

If a drug has no com­pe­ti­tion – thanks to pa­tent reg­u­la­tion or the minute size of the mar­ket for a rare treat­ment – a com­pany can set a reg­u­lated price as high as it wants.

“The ini­tial SEP is at the dis­cre­tion of the man­u­fac­turer or im­porter and is en­tirely based on their own com­mer­cial cal­cu­la­tion, rel­a­tive to pos­si­ble com­peti­tors,” said Andy Gray, se­nior lec­turer at the Univer­sity of KwaZulu-Na­tal’s School of Health Sci­ences and a re­search as­so­ciate at the Cen­tre for the Aids Pro­gramme of Re­search in SA.

“There is no ac­count­ing for any costs in­curred, whether in de­vel­op­ment, in man­u­fac­ture or in mar­ket­ing, and such costs are con­fi­den­tial,” said Gray.

The whole point of this sys­tem is to have only one price for pri­vate sec­tor buy­ers – not to have a costre­flec­tive or fair price.

Civil so­ci­ety groups such as the Treat­ment Ac­tion Cam­paign (TAC) and Sec­tion 27, which helped bring at least one of the three cancer drugs in question to the Com­pe­ti­tion Com­mis­sion’s at­ten­tion, have long doubted the SEP sys­tem.

“The TAC and Sec­tion 27 do not sup­port the cur­rent sys­tem by which the ini­tial SEP is com­pletely dis­cre­tionary and un­trans­par­ent – and whereby prices can be set at lev­els un­af­ford­able to most of the pop­u­la­tion,” Sec­tion 27 told City Press via email.

The groups have called for the SEP sys­tem to in­cor­po­rate ref­er­ence pric­ing. This en­tails com­par­ing the price set by com­pa­nies to prices in other coun­tries be­fore sanc­tion­ing it lo­cally.

Gray said a pro­posed sys­tem for this kind of in­ter­na­tional bench­mark­ing was pub­lished years ago, but went nowhere.

An­other op­tion is do­ing a “pharma eco­nomic anal­y­sis” of the price, which means com­par­ing the value of one phar­ma­ceu­ti­cal drug or drug therapy to an­other. South Africa has guide­lines for this, but it is vol­un­tary and has not yet been used to chal­lenge a medicine price, said Gray.


Com­pe­ti­tion law has been used to achieve mas­sive gains for health ac­tivists in the past.

In 2003, the TAC and the Aids Law Project – the pre­cur­sor to Sec­tion 27 – re­ported three over­priced an­tiretro­vi­ral medicines to the com­mis­sion. The case was re­ferred to the Com­pe­ti­tion Tri­bunal, which led to the phar­ma­ceu­ti­cals in­volved set­tling in a deal that saw generic man­u­fac­tur­ers re­ceive li­cences to pro­duce the drugs.

“The vol­un­tary li­cences led to generic com­pe­ti­tion and much re­duced prices which, in turn, helped fa­cil­i­tate the large-scale roll­out of an­tiretro­vi­rals in South Africa,” said Sec­tion 27.

De­spite this, the organisation “felt that fight­ing on a case-by-case ba­sis at the Com­pe­ti­tion Com­mis­sion was not sus­tain­able, given our limited re­sources”.

In­stead, it has be­come part of the Fix The Pa­tent Laws coali­tion, which is lob­by­ing for gener­ics-friendly re­form.

“As it stands, though, peo­ple are dy­ing be­cause they can­not af­ford cer­tain medicines, so we will use what­ever law is avail­able,” said Sec­tion 27.

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