an update on pricing legislation - mediscor update on pricing... · south africa lowest in basket...
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An UPDATE on Pricing
LegislationNM Mpanza
Director:Pharmaceutical Economic EvaluationsNational Department of Health
11 August 2010
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Pricing Legislation Section 22 G :
Transparency
Pricing CommitteeSingle Exit PriceWholesale FeeDispensing Fees
Pricing Regulations :International BenchmarkingAnnual Price IncreasePharmacoeconomic EvaluationLogistics FeeSEP on the medicine container
Other Related Issues
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Draft Dispensing Fee PHSEP <R75 Fee : R6 + 46% x SEP Where the single exit price of a medicine or scheduled substance
is less than seventy five rand, the dispensing fee shall not exceed R6 plus 46 % of the single exit price in respect of that medicine or scheduled substance;
SEP>R75 and <R200 Fee:R15 + 33% x SEP Where the single exit price of a medicine or scheduled substance
is greater than or equal to seventy five rand but less than two hundred rand, the dispensing fee shall not exceed R15 plus 33 % of the single exit price in respect of that medicine or scheduled substance;
SEP >200 and < 700 Fee :R51 + 15% x SEP Where the single exit price of a medicine or scheduled substance
is greater than or equal to two hundred rand but less than seven hundred rand, the dispensing fee shall not exceed R51 plus 15 % of the single exit price in respect of that medicine or scheduled substance;
SEP>700 Fee: R121 + 5% x SEP Where the single exit price of a medicine or scheduled substance
is greater than or equal to seven hundred rand, the dispensing fee shall not exceed R121 plus 5% of the single exit price in respect of that medicine or scheduled substance.
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Draft dispensing Fee for PH
The dispensing fee shall be reviewed after all registered pharmacies supply the following information in accordance with guidelines out lined by the Director-General:
Audited financial statements (income and expenditure statements and balance sheets);
Number of medicines dispensed in the pharmacy and the single exit price for such medicines;
Structure of the dispensary relative to the pharmacy size; The turnover of the pharmacy; The location of the pharmacy in relation to other
pharmacies in the area;
The services that are offered by the pharmacy; and notice displayed clearly in the dispensary, inform
patients of the dispensing fee structure to be charged
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International Benchmarking
Canada,New Zealand,Spain,Australia and South Africa
Lowest in basket
Other options suggested
Average of the bottom three
Average of all prices in the basket
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Dispensing Fee for Other
dispensers
The Fee is inflation based : CPI
Dispensed items (SEPs) inflated
Cap increased to R75 based on dispensed items.
Fee : 30% up to R22.50
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Annual Price Increase
Factors that influence the price increase:
The average Consumer Price Index excluding interest rates on mortgage bonds (CPIx) for the preceding year;
The average Producer Price Index (PPI) for the preceding year;
Changes in the rates of foreign exchange (forex) and Purchasing Power Parity (PPP);
Comments received from interested persons; and
The need to ensure the availability, affordability and quality of medicines and scheduled substances in the Republic.
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Annual Price Increase
API Formula
70% CPI (historical) +15% (Rand/Dollar variance)+15% (Rand/Euro variance).
Data source – OANDA / Reserve Bank
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Annual Price Increase (2)
5.2% (2005,6/2007), 6.5% (2007/2008), 13.2% (2008/2009)
7.4% (2009/2010)
Duration: January 2010 – 30 September 2010
Applications Closing Date - August 2010
Accurate Price Communication - PEE
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Annual Price Increases Future increases and suggestions
SEP increase should not exceed the CPIX
CPIX is no longer published by Statistics South Africa (StatsSA) and consequently only the CPI is used when calculating the domestic component
Its appropriate to replace CPI and exchange rate adjustment with the PPI in future. This is because the PPI truly reflects the input cost price changes, including human resource costs, reflected by producers in South Africa
Producer Price Index (PPI) -the basket of pharmaceutical goods currently used in calculating the PPI is inadequate (a fact acknowledged by Stats SA)
Purchasing Power Parity (PPP) - the percentage change in the exchange rate in a year would offset the difference in inflation rates in the two countries in that year
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Logistics Fees (Wholesale Fee)
Capping of the Fee – 2010
Increased Vertical Integration
Increased number of wholesalers
Increased logistics fees
Shifting of ex- manufacturer price vs logistics fee
High SEPs
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Total No of Line Items in LF Range
0
10000000
20000000
30000000
40000000
50000000
60000000
< 0
0-2
2 to 4
4 to 6
6 to 8
8 to 10
10 to
12
12 to 14
14 to
16
16 to
18
18 to
20
20 to
30
30 to
40
40 to
50
50 to
60
60 to
70
70 to
80
80 to
100
> 10
0
Logistics Fee Ranges (%)
Num
ber o
f Lin
e Ite
ms
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Median Logistics Fee (%) of Generic and Innovatormanufacturers
0.01-4
.99
5.00-9
.99
10.00-1
4.99
15.0-1
9.99
>20.00
0
5
10
15
20
25
30
35
40
45
50
4
23
13
3
48
Median Logistics Fee (%) Ranges
Num
ber
of M
anuf
actu
rers
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Logistics Fee
Logistics Fee range %
Number of Items
CUMMULATIVE (%) Average SEP
Average SEP (%) Total No of Items
Volume of Items (%)
< 0 3301 7.12% 716.3 1.72% 711039 0.34%
0-2 4674 17.21% 1714.75 4.13% 5271976 2.52%
2 to 4 4702 27.36% 3744.86 9.01% 39191600 18.71%
4 to 6 8127 44.90% 3858.42 9.29% 56555988 27.00%
6 to 8 6835 59.65% 1653.51 3.98% 22831982 10.90%
8 to 10 7279 75.35% 1790.924 4.31% 38198020 18.24%
10 to 12 5339 86.87% 1112.18 2.68% 25083638 11.98%
12 to 14 2553 92.38% 2129.99 5.13% 10604591 5.06%
14 to 16 1850 96.38% 1007.72 2.43% 8378531 4.00%
16 to 18 606 97.68% 9430.41 22.70% 1590566 0.76%
18 to 20 213 98.14% 1710.86 4.12% 283009 0.14%
20 to 30 725 99.71% 860.43 2.07% 724356 0.35%
30 to 40 83 99.89% 1282.36 3.09% 19022 0.01%
40 to 50 24 99.94% 346.08 0.83% 12939 0.01%
50 to 60 7 99.95% 68.17 0.16% 70 0.00%
60 to 70 8 99.97% 6590.15 15.86% 1147 0.00%
70 to 80 5 99.98% 3026.51 7.28% 538 0.00%
80 to 100 2 99.99% 440.24 1.06% 56 0.00%
> 100 6 100.00% 60.9 0.15% 187 0.00%
46,339.00 2,186.57 100.00% 209,459,255.00 100.00%
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NUMBER OF ITEMS DISTRIBUTED BY LSPs IN 2008
0
2,000
4,000
6,000
8,000
10,000
12,000
Number of Items Distributed in 2008
VOLUMES DISTRIBUTED BY DIFFERENT LSPs
APEC
APKZN
KEMCO
Helderbeg Medical
KAWARI
LE TANGS
NUPD
PHD
Transpharm
APWC
UTI
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Logistics Fee
Majority of items have logistics fees of between 4% - 6% of ex manufacturer price :(Single Exit Price)
More than 70% of items have logistics fees of less than 10% of
The SEP is not related to the % logistics fee it attract. – Indication of possible perversities.
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Pharmacoeconomic Evaluation
Focus is on Submissions
New vs existing items
Cost effectiveness
Criteria and required information
Principles and methods of assessment
Role of funders
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SEP Related Analysis
Temporary decreases
Permanent decreases
Regulation Nine applications
100% increase applications
Generic prices vs generic availability
Extent of applications by industry
Generic prices versus originator prices
New product registration
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Other DOH developments
Council for medical schemes
National Publication
National Health Insurance
Collaboration of procurement processes