Fair Pricing Forum
In April South Africa played host to the second Fair Pricing Forum where healthcare activists once again lobbied government to “Fix the Patent Laws” in a misguided attempt to improve access to medicines. For over a decade, healthcare activists have argued that patents act as a major barrier to access to medicines. However, nothing could be further from the truth.
Over 95 percent of the drugs on the World Health Organisation’s essential medicines list – the medicines experts consider most important to improving global health for the world’s poorest – are off-patent. The problem is not the patent system but rather access to quality healthcare. Indeed, SA’s leading killers — TB, influenza, pneumonia, and intestinal infectious diseases — can readily be treated with cheap, off-patent medicines; yet patients continue to die from these diseases because of numerous failures that exist throughout the complex continuum of healthcare.
Consider the recent announcement by the United States government to cut its support of SA’s HIV/AIDS programme. As the US government discovered, the problem in SA is not the price of drugs, which are provided to patients free of charge, but rather the extremely poor performance of the public healthcare sector to retain patients who had started the treatment programme.
The US government’s global AIDS coordinator, Deborah Birx, described the programme as “grossly sub-optimal and insufficient to reach epidemic control”. She pointed out that more people stopped treatment than had started in 2018. US health attaché to SA, Steve Smith, said, “We all recognise the urgency of the need to get epidemic control and the need for resources, but we also need to make sure those resources are effectively spent”.
SA has also experienced some well-documented stock-outs of essential medicines in public clinics. These stock-outs have nothing whatsoever to do with patents but are due instead to numerous failures that exist throughout SA’s government-run healthcare system. “Fixing patent laws” in SA will do nothing to increase access to life-saving drugs when we know that patients at government-run establishments cannot even access cheap, off-patent medicines.
Healthcare activists also overlook the fact that the SA government regulates the price of medicines sold in the private sector through the Single Exit Price (SEP) mechanism. The SEP compels all manufacturers and importers to sell their products at the same price to all their private sector customers, regardless of the size of the order, and prohibits them from offering any discounts or donating medicines.
Not subject to the SEP constraints is the National Department of Health (NDoH), which has a pricing committee that, by using a formula it determines, stipulates what the annual increase for the private sector should be. Government also has the freedom to enter negotiations with manufacturers. State tender prices reveal that some medicines are available to government at about one-tenth of the cost to the private sector.
The private sector thus already effectively subsidises the public sector as medical schemes and their members pay higher prices for the same products. In the absence of this cross-subsidy, government would not be able to secure the same very low levels obtained through the current public sector tender prices. It will also be impossible for government to force pharmaceutical companies to supply their products at prices below that which is commercially viable. SA accounts for a tiny proportion of global sales for most pharmaceutical companies operating in this country. They are more likely to simply exit the market rather than be forced into selling their products at below commercially viable prices.
There are several easily achievable steps that will increase access to medicines. These include, but are not limited to, the removal of value added tax (VAT) levied on drugs sold in the private sector (the public sector is not subject to VAT on medicines). It makes no sense to tax the sickest and most vulnerable members of society.
Government should remove the restrictions it has imposed on private sector organisations that prohibit private parties from entering negotiations with the manufacturers of drugs and from receiving donated drugs.
An urgent reform would be the overhaul of the process of registering a medicine. SA’s drug regulator can take more than five years to approve a drug that oftentimes has already been approved by an advanced country drug regulator. Not only do these delays reduce revenues and increase costs to drug makers, they deny and retard patients’ timely access to the medicines. The approval process could be greatly improved by simply recognising the work performed by other rigorous regulatory authorities.
More must be done to improve access to medicines but to blame the drug companies and the patent system ignores the realities on the ground. We all want improved access to quality healthcare for everyone, but activists would achieve these laudable goals were they to focus their attentions on the real barriers hampering access to medicines and pressuring the SA government to improve its regulatory environment rather than trying to tear down the patent system that has successfully delivered lifesaving medicines that have allowed people the world over to live longer, healthier, and happier lives.