Sona has provided nothing but a damp squib for S Africa’s pharmaceutical manufacturers

BARELY singed by load shedding because of extensive investment in power back-up systems, pharmaceutical manufacturers said there were only a few take aways from President Cyril Ramaphosa’s address on Thursday, which failed to deal with the less than inflation price increases granted in December.

In an interview, chairperson of the Pharmaceutival Task Group Dr Stavros Nicolaou said the industry was left questioning the government’s capacity to deliver on making the manufacture of essential medicines conducive.

“We have a mixed reaction to the State of the Nation address (Sona). Though we have not extensively been affected by load shedding because of back up measures, which have pushed up the cost of production, the 3.28% increase granted to the industry places the future supply of medicines into question. We are facing very high inflation and the below inflation increase makes it difficult to be sustainable,” Nicolaou said.

He said the industry was barely compensated for the input into the manufacture of medicines, and the knock on effects of load shedding left very little to give confidence to sustainability.

“We would like to be at least at inflation levels, we have the same costs, even higher now with measures to help in load shedding. We haven’t had such levels of high inflation before,” he said.

Nicolaou said while the President touched on pertinent issues and addressed some concerns, there was still a wide gap, and the industry had to dig deep to make business sustainable.

The industry last month said it was set to challenge the 3.28% single entry price for 2023 increase granted by Health Minister Joe Phaahla which it said was disappointing as it was lower than the consumer price index (CPI) (at about 7%), but was also far lower than an increase granted to Medical Aid schemes of between 8% and 9%. The single exit price is the price of medicines at the factory gate and includes a logistics fee to cover the cost of transporting the goods to retail outlets.

Nicolaou said the Pharmacautical Task Group, which represents 80% of industry, would consider its options, but would not rule out making an application for a special determination to challenge the increase and hopefully bring it closer to the CPI related rate as have previous adjustments.

“We are concerned about the sustainability of supply. In these circumstances where the inflation rate is increasing and the exchange rate remains weak, it is not sustainable for the industry. Like all business, we are affected by inflation and then to get half of that makes you wonder what methodology was used by the Pricing Committee, it is out of kilter with the reality,” he said.

He said the adjustment should strike a balance between providing access to the medicines for patients on one hand and providing for a sustainable industry on the other.

“Disruption of industry does not augur well for long-term medicine supply,” he said.

Nicolaou said countries like the United Kingdom had higher inflation at 12% while the Brazil Russia India China and South Africa (BRICS) block had an about 21% inflation level, South Africa, at below 7% inflation, had enough leg room to grant the industry margin to cover its costs, he said. “We have to question the capacity of government to deliver on its promises to the industry, it is highly questionable how the industry can be sustained,” he said.