The Department of Health is planning a review of pharmacists’ dispensing fees to compensate for the envisaged loss in income from its proposed ban on payments from drug companies.
Pharmaceutical companies are currently exploiting legal loopholes in the Medicines and Related Substances Act to incentivise pharmacists to stock their products, which the department estimates might be worth as much as R3.8-billion a year.
In August it published draft regulations to section 18a of the act, which aim to stop these practices by banning rebates, bonuses and all other incentive schemes, including “data” fees (inflated payments for information on medicine sales).
Ending these practices would have an immediate effect on pharmacies’ finances, and the department intended to review its mechanism for determining the size of the dispensing fees, said head of sector-wide procurement Gavin Steel.
“These regulations close all the loopholes for behind-the-scenes deals to take place and thus achieve the purpose of the legislation (which was to introduce) a transparent pricing system. It may require an adjustment to keep service providers viable, but it would require pharmacies to come clean regarding how much they have been making and what is the shortfall,” said Steel.
The department sets a cap on the fees pharmacists may charge for medicine sales. It uses a tiered system, with four price bands that each have their own maximum permitted mark-up. However, many pharmacies charge less than this to attract customers who belong to medical schemes that use their market power to negotiate lower rates.
An increase in the dispensing fees is likely to be welcomed by pharmacies, which have consistently complained that the fees do not fully cover their costs.
“If the S18a regulations go through, our business would be completely unviable. It is totally impossible to run a dispensary on the dispensing fee alone,” said Dis-Chem chief executive Ivan Saltzman.
Dis-Chem is the largest independently owned pharmacy chain in the country, and expects to have 85 stores by the end of November, Saltzman said. Many pharmacy businesses, including Dis-Chem, supplemented their dispensary income with logistics fees, which the government also plans to limit, he said.
“The proposed cap on logistics fees is very low.”
Pharmaceutical Society of SA (PSSA) president Johann Kruger said the end of data fees would pose a challenge to the large pharmacy chains, which depended heavily on this income.
“We are in an extremely competitive business environment and those marketing fees and claw-backs are what the larger groups are using to lower their dispensing fees to patients,” he said.
SA’s biggest generic drug- maker Aspen Pharmacare said the department’s proposals for ending the incentives paid to pharmacies were well-intended but could have a detrimental effect on some pharmacies.
“The Gazette (containing the proposals) presents an opportunity to provide a new level of transparency in the pharmaceutical pricing chain,” Aspen head of strategic trade Stavros Nicolaou said.
Pharmacies’ fees under scrutiny
Pharmaceutical companies are currently exploiting legal loopholes in the Medicines and Related Substances Act to incentivise pharmacists to stock their products, which the department estimates might be worth as much as R3.8-billion a year.
In August it published draft regulations to section 18a of the act, which aim to stop these practices by banning rebates, bonuses and all other incentive schemes, including “data” fees (inflated payments for information on medicine sales).
Ending these practices would have an immediate effect on pharmacies’ finances, and the department intended to review its mechanism for determining the size of the dispensing fees, said head of sector-wide procurement Gavin Steel.
“These regulations close all the loopholes for behind-the-scenes deals to take place and thus achieve the purpose of the legislation (which was to introduce) a transparent pricing system. It may require an adjustment to keep service providers viable, but it would require pharmacies to come clean regarding how much they have been making and what is the shortfall,” said Steel.
The department sets a cap on the fees pharmacists may charge for medicine sales. It uses a tiered system, with four price bands that each have their own maximum permitted mark-up. However, many pharmacies charge less than this to attract customers who belong to medical schemes that use their market power to negotiate lower rates.
An increase in the dispensing fees is likely to be welcomed by pharmacies, which have consistently complained that the fees do not fully cover their costs.
“If the S18a regulations go through, our business would be completely unviable. It is totally impossible to run a dispensary on the dispensing fee alone,” said Dis-Chem chief executive Ivan Saltzman.
Dis-Chem is the largest independently owned pharmacy chain in the country, and expects to have 85 stores by the end of November, Saltzman said. Many pharmacy businesses, including Dis-Chem, supplemented their dispensary income with logistics fees, which the government also plans to limit, he said.
“The proposed cap on logistics fees is very low.”
Pharmaceutical Society of SA (PSSA) president Johann Kruger said the end of data fees would pose a challenge to the large pharmacy chains, which depended heavily on this income.
“We are in an extremely competitive business environment and those marketing fees and claw-backs are what the larger groups are using to lower their dispensing fees to patients,” he said.
SA’s biggest generic drug- maker Aspen Pharmacare said the department’s proposals for ending the incentives paid to pharmacies were well-intended but could have a detrimental effect on some pharmacies.
“The Gazette (containing the proposals) presents an opportunity to provide a new level of transparency in the pharmaceutical pricing chain,” Aspen head of strategic trade Stavros Nicolaou said.
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