Pharmaceutical manufacturers welcomed Minister Motsoaledi’s announcement of a 3.78 percent SEP increase for 2019, compared with 1.2 percent in 2018. Photo: Simphiwe Mbokazi/African News Agency (ANA)

CAPE TOWN – The words “I Dr A Motsoaledi, the Minister of Health, have determined on the recommendation of the Pricing Committee … that the single exit price (SEP) of medicines and scheduled substances may be adjusted to a maximum of 3.78 percent of the SEP of medicines and their related pack sizes that were available as at December 21” were just what the doctor ordered for pharmaceutical manufacturers.

Pharmaceutical manufacturers welcomed Minister Motsoaledi’s announcement of a 3.78  percent SEP increase for 2019, compared with a 1.2 percent in 2018.

Chairperson of the Pharmaceutical Task Group (PTG) Stavros Nicolau said the 1.2 percent SEP increase the pharmaceutical industry was granted in January of 2018 was materially lower than the increase in operating expenses that industry experienced, during a difficult trading environment. 

“The industry welcomes the 3.78 percent upward adjustment, as this is more closely aligned to inflation which is the biggest driver of operating expense increases,” Nicolau. 

PTG represents more than 90 percent of the pharmaceutical industry in South Africa.

Nicolau said: “In addition the PTG is encouraged by its discussions with the National Department of Health and the pricing committee where a more streamlined process of both price increase submission and implementation is applied, as in some years there have been delays which have added to a difficult trading environment.”

“This year’s 2019 adjustment of 3.78 percent is more closely aligned to trading conditions and its more timeous implementation will assist the difficult environment and also reduce administrative burden in the sector, per the president’s call to reduce red tape and reduce the cost of doing business in our country. 

Nicolau said medicine prices had come down significantly in the country since the inception of SEP. In 2003 medicines constituted about 24 percent of private health spend, this was now down to about 16 percent, according to council for medical schemes data.

The implementation of SEP has always been a controversial matter as, while it allows pharmaceutical manufacturers determine the launch price of their drugs, they may not raise their prices beyond the SEP set by the Minister of Health.

It effectively meant that the private pharmaceutical sector had to adjust from a free to a regulated market, where prices had to be cut and discounts discarded, according to Daleen Pretorius’ findings contained in a research report.

The pricing structure changed to a transparent structure. These price ceilings resulted into a decrease in gross profit margins within independent, group and hospital pharmacies in the private healthcare sector.