Recent reports in the media about 'exorbitant fees' to be added to the price of medicines are largely unfounded. When the facts are examined, it becomes clear that the recently published draft regulations do in fact introduce transparency and fairness to the dispensing fee that may be charged by pharmacists.
Ivan Kotzé, joint co-ordinator of the Pharmacy Stakeholders Forum (PSF) explains that until now, there has been no statutory control over the dispensing fee charged by pharmacists. Traditionally, pharmacists charged a dispensing fee that was roughly 50% of the cost price of the medicine, which varied according to quantities bought. Many then discounted the fee, so that consumers were frequently uncertain about the actual fee that they had paid.
Cost price of medicine regulated
In 2004, the introduction of the Single Exit Price (SEP) regulated the cost price of medicine, so that all pharmacists paid the same price for medicines, and no discounting was permitted. In effect, the SEP reduced the cost price of medicine significantly, and brought transparency to the price that could be charged by manufacturers and wholesalers.
Simultaneously, there was an attempt to introduce a dispensing fee in terms of the Medicines and Related Substances Act, Act 101 of 1965. This however did not come into operation as it was challenged in Court.
The Constitutional Court ruled in 2005 that the dispensing fee, which was to have been 26% of the Single Exit Price, but capped at a maximum of R26 per item, was inappropriate. "The income from this fee would not have covered the cost of running a pharmacy," said Kotzé. "This is why the Constitutional Court instructed the Pricing Committee to re-examine the dispensing fee and to come up with a realistic fee."
No evidence of pharmacists charging excessive fees
The situation since 2005 has therefore been that pharmacists have been permitted to set their own dispensing fee in accordance to the expenses that they incur in their business. According to Sham Moodley, joint co-ordinator of the PSF, there has been no evidence of pharmacists charging excessive fees.
He went on to say, "While the fee may have varied from pharmacy to pharmacy, this has been influenced by the fee that medical schemes have been prepared to pay to pharmacists. In many cases, this amount has been very low and consumers have needed to pay the difference out of their own pockets."
Moodley cautions that the perception that the price of medicine will increase has to a large extent been created by the fact that many medical schemes have not been prepared to pay more than the fee ruled to have been inappropriate.
"Some schemes have clearly failed to anticipate the probable introduction of an appropriate dispensing fee, and have not even accommodated an inflation-linked fee," he says. "If the ill-fated R26/26% fee was adjusted for inflation from 2004 to 2010, this amount would be in reserve as most medical schemes have not paid it to pharmacy. Those schemes that supported and understood the business models will feel much less of an impact."
Contributions to medical schemes increased
The Medical Schemes Council annual reports reflect that the contribution to medical schemes by members increased over a period from 2001 to 2008 by 110%, despite the fact that the number of members remained relatively constant. Kotzé explains that consumers are therefore now paying more than twice the amount that they paid for medical scheme cover ten years ago.
In addition, the reports show that over the same period, the non-healthcare expenditure for administrative processes of medical schemes rose by 83%. In 2008 it was R 9.7 billion.
During this period, medicine expenditure increased by 55.5%. This expenditure is a composite of the manufacturer’s price, the wholesaler’s fee and a small portion represents the pharmacist’s fee. In 2004, the pharmacist’s dispensing fee was effectively decreased and since 2005 it has remained at the same level, without even an inflationary increase.
Introduction of a maximum fee that may be charged will ensure that the process of fee determination is transparent.
"Consumers will know that pharmacists must calculate and reflect the dispensing fee according to the published procedure," says Kotzé. "They will also have legal protection from overcharging. In effect the only change introduced with the proposed dispensing fee is that there is a cap on the maximum fee that may be charged by pharmacists."
(Pharmacy Stakeholders Forum, September 2010)