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Health Funders Association (HFA) oppose increase to single exit price (SEP) adjustment for medicines for 2018.

SEP adjustment for medicines

14 February 2018 The Health Funders Association (HFA) strongly supports the proclamation by the Pricing Committee and Honourable Minister of Health, Dr Aaron Motsoaledi, on the single exit price adjustment (SEPA) of 1.26% for 2018.

“It is concerning that pharmaceutical companies are lobbying the National Department of Health for a further increase in the single exit price (SEP), specifically for private sector sales. We categorically oppose any changes to the approved single exist price adjustment communicated in the Government Gazette No. 41362 of 29 December 2017”, says Chairman of the Health Funders Association, Teddy Mosomothane. “The Health Funders Association (HFA) appeals to the National Department of Health to maintain the originally approved single exit price adjustment of 1.26%, as gazetted on 29 December 2017,” adds Mosomothane. As an association our understanding is that the formula used by the National Department of Health to determine the SEPA is not just a guide, but rather a regulatory instrument that has come to be accepted as a reasonable and scientific standard by which the healthcare industry forecasts and plans for future pharmaceutical costs. Over the period October 2016 – September 2017, Consumer Price Inflation (CPI) has been on a downward trend, while the Rand has strengthened against both the US Dollar and the Euro – a trend that has carried through into 2018 so far. These trends, affecting two of the dominant input components of the SEPA formula, have been notably favourable for pharmaceutical companies, and provide a strong rationale for maintaining the gazetted SEP increase of 1.26% for 2018. It has to be noted that in addition to medicine pricing, increased medicine utilisation (volume growth) is a significant contributor to overall medicine cost inflation. Data from HFA member schemes illustrate the escalating inflationary impact of volume growth, which compounds annual price increases. The quantum of this impact is particularly evident when looking at medical aid schemes’ overall medicine cost inflation experience of 2011, when medicine costs inflated by as much as 2-3% despite the National Department of Health having approved a 0% SEP increase for that particular year. Maintaining a robust and viable private healthcare industry remains an integral focus of our association. To this end, the HFA is committed to making quality healthcare cover more accessible and keeping the cost of private healthcare as affordable as possible for ordinary South Africans. “Medical schemes already face substantial claims inflation every year, mainly due to increasing claims volumes. This means that medical aid premiums have to increase around 3-4% above CPI every year, putting huge pressure on medical scheme members. Over and above this, a higher SEP increase will also worsen the exposure of healthcare consumers to higher medicine co-payments during the course of 2018,” says Mosomothane.  The recent SEP announcement will be helpful to medical schemes in this context and will benefit their members through lower medicines claims in 2018. The average South African is already experiencing enormous financial pressure, and it is absolutely critical for our government not to place consumers under any additional pressure in this regard. We would therefore like to urge the Department of Health to maintain the SEP increase as originally published, in the interest of healthcare consumers, considering that even a slight increase in the SEP would potentially translate into hundreds of millions of Rand that consumers ultimately pay for from their pockets,” says Mosomothane. In summary, HFA vehemently opposes any changes to the approved SEPA and trust that the National Department of Health and other stakeholders share this same view. Keeping the increase as is will no doubt benefit consumers and assist them in dealing with rising medical inflation.