Prices of patented drugs set to decline

by Slindile Khanyile Durban Half of the originator medicines available in South Africa should be cheaper by February, which is the deadline for complying with interim international benchmarking prices. Anban Pillay, the head of pricing at the department of health, said yesterday that half of these drugs were more expensive locally than in Spain, New Zealand, Australia and Canada, the four countries against which South Africa is being benchmarked. Pillay said the four countries had been chosen because they had pricing systems that ensured the viability of pharmaceutical companies while offering their citizens affordable medicines. “They also have respect for intellectual property, which is important,” he said. Pillay said the differences in price ranged between 10 percent and 50 percent. The sums consumers could save would be known in about a month. The government has published a notice detailing the methodology to be used when benchmarking patented medicines. Interested parties have 30 days to comment. Pillay said not all drug prices would come down. “About half of the drugs sold in our market are more expensive than in those countries, so about half will be [affected].” Historical and projected foreign exchange data would be used to calculate the average price. The new prices will be phased in over three years. The affected companies will calculate the interim and final benchmark prices annually and provide these to the health department, which will review them on a regular basis. “During phase one the manufacturer will take the average of the three lowest prices in the first year. By the third year, it must be the lowest price in place, which is phase two. However, if the South African price is already lower then it will remain,” Pillay said. He said the gradual introduction of the new prices was necessary to protect the viability of the companies. The international benchmarking is for prices at which manufacturers sell the drugs to retail pharmacies. If prices at manufacturing level come down, consumers will benefit because the single exit price – the price the pharmacy pays – includes the manufacturing cost, logistics fees and value-added tax. Exemption from benchmarking would be granted if there was proof that applying it would cause the company to make a loss, which could discourage the production of the drugs. Companies would have to apply to the minister and submit proof, Pillay said. New medicines entering the local market after publication of the benchmarking methodology must comply immediately with the final benchmark. Benchmarking for generics would be done at a later stage. The pharmaceutical trade associations were still going through the notice yesterday and said they would formulate an industry response. The industry has previously opposed generics benchmarks. It is expected that, after reviewing the comments, the minister will publish the benchmarking methodology by the end of next month. Since single exit prices must comply with interim benchmarks from February applicants must submit full data on the application of the interim methodology to each of their products within two months of publication.