SMALL PHARMACIES WIN
For years, medical aids have forced patients to use ‘designated service providers’. But when a group of independent pharmacies wanted to change this, it faced a dozy regulator asleep at the wheel
t has taken a group of independent pharmacists eight years of unrelenting persistence to force the medical aid regulator to do its job — and stop medical aids from charging patients “excessive” penalties for using the pharmacies of their choice.
Until now, medical aid members were often forced to pay an extortionate fee if they wanted to use a different provider — including doctors, dentists and pharmacies — instead of the “designated service provider” (DSP) preferred by the medical aid.
But last month the regulator, the Council for Medical Schemes (CMS), published a notice in the Government Gazette declaring it an “undesirable business practice” for any medical aid to charge an “excessive” extra fee for not using its DSPs. (Members could still be charged the real difference between a DSP and their chosen provider, however.)
It’s a major victory for the Independent Community Pharmacy Association (ICPA),
Iwhich has been fighting this case since 2013. The pharmacies, which were often excluded from being named DSPs, say this gives consumers more freedom to pick their own providers.
It might seem a small tweak, but people on lower-cost medical aid plans were not only told to use specific doctors, they often had to pay hefty fines unless they used particular couriers — known as “delivery pharmacies” — to get their medicines.
The medical aids argued that by doing this, they can keep medical aid fees down, as they negotiate a “bulk discount” with DSPs. In practice, the outcome wasn’t always in the patient’s interest.
For example, there were cases where a person with diabetes would need an emergency change to their insulin, but would be told they had to get it through a “delivery pharmacy”, which could take up to seven
Katharine Child
days to deliver. If that patient went to a different pharmacy, they’d have to pay a penalty of up to 40%.
“It is a very sad day when service level agreements override patient care,” says ICPA CEO Jackie Maimin.
Maimin says the biggest offender was Medscheme, an administrator owned by JSElisted health group AfroCentric.
As it happens, AfroCentric owns a courier pharmacy chain known as Pharmacy Direct, as well as a medicine wholesaler — and so would have benefited from the previous arrangement.
Medscheme, says Maimin, wouldn’t budge over this DSP arrangement. And, since it administers the medical aid Bonitas, it would often force members to use Pharmacy Direct.
(Medscheme declined to comment when contacted by the FM.)
But if you think it was a simple case where the regulator, the CMS, saw something wasn’t working and fixed it, that would be wrong.
After the ICPA got nowhere with Medscheme, the pharmacists approached the CMS in 2015 and asked it to declare the excessive penalties an “undesirable business practice”.
For months, the regulator sat on its hands — so the pharmacists went to the CMS appeal board.
In 2016, the appeal board chair, judge Bernard Ngoepe, ruled that the regulator had to halt the practice. He had harsh words for the CMS, saying it had tried to “strenuously frustrate the process,” raising “nonmeritorious if not frivolous” points.
Quite why the regulator had been so reluctant to do its job is unclear. But if you thought Ngoepe’s criticism spurred the CMS into action, you’d be wrong again.
It continued doing nothing for another year. By 2017, the ICPA had had enough: it gave the CMS seven days to comply with Ngoepe’s order, or face a lawsuit.
So the CMS opened the issue for “comment”, which bought it more time. In 2018, the CMS said it wouldn’t implement Ngoepe’s ruling, since it was expecting legal changes to the Medical Schemes Act.
By June 2020, when the ICPA approached Ngoepe again, the judge was fuming. He described the CMS’s resistance to fixing this issue as “incomprehensible” and its attitude as “inexplicable”. And he said there was simply no legal basis to ignore his earlier ruling.
Finally in April, after almost a decade, the CMS abided by the ruling, which is apparently set to take effect in September — though it still has to issue guidelines on how the new arrangement will work.
While some hoped this ordeal would bring an end to medical aids fining members for not using their DSPs, it turns out that this won’t be happening immediately.
In a press release late on Monday, CMS CEO Sipho Kabane said the practice of using DSPs would remain — and only “excessive co-payments” would be halted.
“CMS [is seeking] to ensure that DSPs are selected in a fair and transparent manner, and that co-payments that are still applicable are not excessive,” he said.
Kabane said the CMS was working on guidelines to ensure that the DSPs selected by medical aids are chosen “in the patient’s best interests”.
Wits University professor Alex van den Heever believes the entire practice of medical aids having DSPs is flawed.
“The idea behind a DSP is that the scheme obtains a volume-based discount. These discounts are quite marginal in reality and there may be significant conflicts of interest in the chosen DSP,” he says.
(This appeared to be the case with Medscheme, for example, which designated its own pharmacy courier company a DSP.)
Van den Heever says that when medical aid administrators own the DSP, it becomes “nothing more than blatant self-dealing”.
But given the regulator’s unwillingness to even get this far, it remains to be seen if the CMS has the stomach to monitor these “conflicts of interests” or check if providers are chosen “in the patient’s best interest”.
It will also need to ensure there is greater transparency, so that medical aid members can discern if they’re being charged the “real difference” in cost between a DSP and their provider.
These discounts are quite marginal in reality and there may be significant conflicts of interest in the chosen DSP
Alex van den Heever
Already, the CMS is sending mixed messages about when the new rule will come into force. First, the ICPA was told by the CMS’s lawyers that the change is immediate, but Kabane’s statement suggests it’ll happen only in September.
Given this confusion, it’s no wonder that many medical aids haven’t changed anything yet.
“My guess is that many schemes are waiting until the guidelines come out before making changes,” says lawyer Elsabé Klinck.
One scheme contacted by the FM, Bestmed, said as much.
“On the restricted network options, there are penalties in place. On these options, members get a reduced monthly contribution in return for giving up freedom of choice of providers,” says a spokesperson. “Providers are only able to provide a lower price in return for increased utilisation, which is the principle on which these options were developed.”
The independent pharmacies, however, believe that the focus should be on putting the patient first, and giving them the choice (even if they have to pay an extra fee) — not protecting the medical aid. As much as this case has shone a spotlight on the CMS’s shoddy practices, it was a victory for the independent pharmacies.
“We received many complaints from patients who are forced to utilise courier services when they would actually prefer to use their local pharmacy to collect their chronic medicines,” Maimin says. “It has been these cries for help that kept us going during this marathon dispute with CMS and the schemes.”
With luck, it won’t be forced to call in the lawyers again to force the CMS to do its job.