Pharmaceutical and MedTech market access will look vastly different under a South African national health insurance system.
A national health insurance system would result in an integrated healthcare system founded on the principles of solidarity and redistribution of healthcare resources. Every South African would contribute to funding the national health insurance system and in return receive “free” healthcare services when needed.
How will the national health insurance system impact a patient’s access to innovations from a Pharma and MedTech market access perspective? The question is so fundamental because pharmaceuticals and medical devices are one of the most important interventions to reduce mortality and morbidity in healthcare systems. Access to innovations has over the decades been a major driver in reducing the burden of disease and prolonging life. How likely will new healthcare technologies be bought for the national health insurance system?
An indicator may help us predict the ability of the South African government to increase pharmaceutical and medical device market access. The Global Competitiveness Report 2018 by the World Economic Forum measured the “future orientation of government” in 140 countries and South Africa ranked 102.
There were four questions in this category:
The questions are unrelated to pharmaceutical or medical device market access under a South African national health insurance system. However, they provide an important clue on how the government will consider innovative technologies, the policy framework and its flexibility, and the extent the government can think ahead.
South Africa’s low ranking on the Global Competitiveness Report suggests an uncertain future for government funding of new healthcare technologies. It ranked slightly better than Haiti and Zimbabwe but worse than Mali and Burkina Faso. As a result, patients covered by the national health insurance system are unlikely to benefit from new medicines and medical devices available in the private and international market.
Current growth in the medical device market remains subdued due to the economic recession, which the COVID-19 pandemic has exacerbated. Planned upgrades of public health facilities and systems as part of their NHI implementation program may catalyze some growth in this sector. However, the recent significant budgetary shortfalls and the pandemic fallout will negatively impact government spending. Private sector investment will also continue, albeit at a cautious pace, as many increasingly are coming under considerable cost pressures.
The implementation of the National Health Insurance plan may see a rising demand for prescription generic drugs, improved healthcare infrastructure and access, as well as increased local pharmaceutical production of generics. Demand and spend as it relates to high value medicines, will be tempered, or entirely impeded by the economic recession, and COVID-19 pandemic. The treatment of HIV/AIDS and TB remains a focus, but over the long-term, effort will also shift towards rising chronic disease burden, such as diabetes, cardiovascular disease, hypertension, and cancer treatments.
The success of NHI depends on the final national health insurance model and how national health insurance will work in practical terms. It also depends on how national health insurance policy will impact the health needs of a very diverse patient population.
For instance, national health insurance for senior citizens, for families, for government employees, and regulating national health insurance for foreigners. It also depends on the ability of pharma market access staff and their companies to address the advantages and disadvantages of a South African national health insurance system
We’ve compiled a list of the advantages and disadvantages related to national health insurance. The list is not exhaustive, there’s a lot more that we could add, but the purpose is to encourage a balanced and critical approach.
Achievement of universal healthcare through the NHI was intended for implementation by 2025. However, several challenges are hindering the process. The National Planning Commission has stated that full implementation of the scheme could take up to 25 years.
Some challenges for implementation include:
The implementation of the SEP regulation initially had a positive impact on the price of originator and generic medicine pricing in South Africa. However, the increase of medical scheme fees, along with an increase in food and non-alcoholic beverage prices, has significantly contributed to the rise in the consumer price index (CPI). In February 2020, Stats SA measured the cost of medical schemes and fees charged by private sector medical practitioners and hospitals, and found that these costs, plus the costs of medicines contributed to overall consumer and medical inflation.
The SEP regulatory system does have issues, as higher logistics fees from manufacturers may incentivize wholesalers and distributors to stock their brands and thereby push those products down the value chain. A better logistics fee structure has a direct lever in creating a preference for certain medicine brands being stocked and distributed in the market. It is a strategic area of negotiation between manufacturers, wholesalers, and distributors; and a percentage of the SEP that varies between 7.4% and 12.5% (avg. 6%). The SEP should not impact the integrity of the supply chain, and there is room for improvements in the system for better pricing regulation.
The state tender system is being negatively affected by the failure of suppliers to bid due to lack of supply of raw materials and active pharmaceutical ingredients (APIs). This forces the state into direct buyouts from pharmaceutical companies, and at times, having to pay the SEP. This makes it difficult to determine the net effect on total pharmaceutical expenditure. It is likely that some prices currently paid by the state will not be attainable under the NHI.
Solidarity and redistribution of healthcare resources under a South African national health insurance system is an important objective. However, so is a patient’s access to innovations and reducing morbidity and mortality.
The future of government funding new healthcare technologies is uncertain. Patients covered by the national health insurance system are unlikely to benefit from new medicines and medical devices available in the private and international market.
We analyze the impact on Pharma and MedTech market access of national health insurance systems, among other changing health policies.
International Trade Administration. South Africa Country Commercial Guide. Healthcare: Medical Devices and Pharmaceuticals. 2021. Available at:https://www.trade.gov/country-commercial-guides/south-africa-healthcare-medical-devices-and-pharmaceuticals. Accessed 28 September 2022.
Deloitte. Enabling Innovation in the NHI. 2021. Available at: https://www2.deloitte.com/content/dam/Deloitte/za/Documents/life-sciences-health-care/za-GS-Enabling-Innovation-in-the-NHI-Conversation-Summary.pdf. Accessed on: 28 September 2022.
Mashile D. National Health Insurance: Its impact on Pharmaceutical Pricing and the Operational Costs of Drug Manufacturers. 2020. Inclusive Society Institute: Cape Town. Available from: https://www.inclusivesociety.org.za/post/nhi-its-impact-on-pharmaceutical-pricing-and-the-operational-costs-of-drug-manufacturers Accessed on 28th September 2022.
Parliamentary Monitoring Group. National Health Insurance (NHI) Bill: public hearings day 10. 2021. Available at: https://pmg.org.za/page/National%20Health%20Insurance%20(NHI)%20Bill:%20public%20hearings%20day%2010. Accessed on 28 September 2022.
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