18 to 22 October 2004
1.
Health services not in a downward spiral as suggested by the IFP
Many disadvantaged people, particularly in the rural areas, would not agree that health services have been
"in a downward spiral"
2.
Time for pharmacies to give facts
SA's health and social challenges can no longer afford the traditional holy cows
3.
Clicks’ pharmacy strategy backfires
If institutional investors vote with their feet, the retailer could find itself in trouble
4. Single solution, with side effects
Converting to a single government medical scheme will probably lead to further consolidation into fewer but bigger risk pools
5. Healthcare gets the worst rap in the complaints department
Price-fixing and abuse of dominance by firms in the health sector received considerable attention from the competition commission during its 2003/04 financial year
6.
Call for targets to lift number of black healthcare students
Some institutions still "insist on As for physical science and mathematics"
7.
Medical schemes' comments sought
At this stage, each medical scheme will have to make individual decisions on whether they will cover admin fees
8.
Costly drugs down, but new fees snare sick consumers
Pharmacists warned not to abuse fees
9.
Pfizer in the pink with 49% jump
Benefits of acquisitions have been worked off while new competition and the looming expiry

1 . Health services not in a downward spiral as suggested by the IFP
DR RUTH RABINOWITZ'S article "Medical services are deteriorating due to erratic central control" (September 29) leaves anyone who is at all aware of what is going on in healthcare in our country, and especially complementary healthcare, delighted that the IFP is not the dominant political party in South Africa. Her article is full of glaring inaccuracies, political manipulation and inappropriate opinions about healthcare.
Rabinowitz has taken it upon herself to be some sort of misguided champion of certain aspects of complementary healthcare over the years, without any real understanding of the issues involved.
During my six years as chairperson of what is now the Allied Health Professions Council, the council invited her on a number of occasions to meet with us - in vain.
One issue raised in her article has a certain validity. It concerns the draft regulations for Act 101, recently published for comment by the Department of Health, which are a cause for grave concern among users, practitioners and the industry connected with complementary and traditional medicines (CTM). The regulations, which affect all medicines, are a necessary element of the new version of Act 101.
The role players in CTM have since 1988 been involved with the Medicines Control Council (MCC) in attempting to formulate an appropriate way of regulating their manufacture and sale.
In 1996, because of an influx of CTM of dubious quality as a result of South Africa becoming part of global trade, our council requested urgent meetings with the MCC and the department in order to set up an appropriate regulatory system.
As a result a number of Broad-Based Reference Group (BBRG) meetings were held. Out of these arose technical committees for the 15 classes of CTM, which immediately started working on the best way of regulating their manufacture and sale.
This was co-ordinated by a newly elected Complementary Medicines Committee of the MCC. Many thousands of hours were put into the work of the BBRG technical committees and the CMC, resulting in a system for regulating and controlling CTM that was acknowledged by experts as being in advance of anything in the world.
This was accepted by the MCC as being an effective and appropriate way of regulating CTM in terms of safety, quality, efficacy and good manufacturing practice. It was included in the South African Medicine and
Medical Devices Regulatory Authority Act, together with a separate definition for CTM.
The act, of course, was challenged by narrow and selfish interests in the pharmaceutical industry, and never promulgated. As a consequence, no appropriate regulatory process has been established for CTM.
As a result, a small percentage of the CTM industry (about 6%) has taken advantage of this, and some dubious products, including sports supplements and slimming ads, have appeared, together with extremely misleading and inappropriate advertising.
The resultant pressure to deal with this seems to have prompted the department to override all the work put into creating the regulatory system devised so painstakingly by the expert CTM stakeholder group, and produce a set of regulations appropriate for dangerous pharmaceutical drugs, but totally inappropriate for
CTM.
If the regulations now out for comment are not changed accordingly, many high-quality CTM products will disappear from the shelves, CTM practitioners would be seriously affected, and an industry worth R2 to R3 billion a year will be decimated.
To return to Rabinowitz's article. Many disadvantaged people, particularly in the rural areas, would not agree with her that health services have been "in a downward spiral".
And what does she mean by "the creation of a politically influenced Heath Professions Council and the
MCC"? What happened was that previously all-white bodies were replaced by bodies more demographically representative of our population.
The establishment of the Allied Health Professions Council was anything but a disaster. It was hailed by a high-level World Health Organisation delegation as "groundbreaking" and "a world first".
The council is legally obliged to hear the case of any new health profession applying for registration, and to judge whether they meet appropriate criteria in terms of the maturity of the profession, its structure and ethical norms, and education and training criteria.
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In reality, in 1996 there were only two active professions, homeopathy and chiropractic. The council considered, among others, osteopathy, naturopathy, Chinese medicine and acupuncture, therapeutic massage therapy and therapeutic aromatherapy. These were included in the Health Professions Bill in 2000.
The council would like to be enlightened by Rabinowitz as to which of these professions are "based on as little as six-week courses". The shortest courses for massage, aromatherapy and refloxogy are intensive two-year courses.
The registrars of the various statutory health councils must also be bemused by Rabinowitz's idiosyncratic and gratuitous restructuring of their bodies.
A gross misunderstanding on her part is to forget that these are health councils, not medicine councils. If it were simple ignorance, her statements could perhaps be tolerated. But when these statements come from voluntary lack of knowledge from the health spokesperson of a major political party, it is indefensible.
Michael O'Brien was chairperson of the Allied Health Professions Council for six years; Michael
O'Brien: The Cape Times 13 October 2004
2. Time for pharmacies to give facts
GOVERNMENT's challenge to pharmacies and dispensing doctors is to provide financial evidence of the inadequacy of regulated dispensing fees and tariffs. Instead, most have reacted with court cases, idle threats and opportunistic fixed "administration fees" which medical aids do not pay (nor does government encourage them to do so).
Considering how lightly pharmaceutical manufacturers and distributors came off in government's attempts to reduce exorbitant medicine prices, there is a great deal of public sympathy with the apparently harsh treatment dealt out to pharmacists and doctors in the multibillion-rand healthcare industry.
But, in spite of much heat and bluster, the National Convention on Dispensing and pharmacies have yet to publicly shed meaningful light on their claimed financial doom, and are quiet about what they consider an acceptable level of remuneration. Doctors may charge what they like, but the reality is that medical aid payments to them are based on the government's National Health Reference Price List. Medical aid payments for medicines are likewise based on the single exit price, with regulated dispensing fees. Is it asking too much for medical professionals to admit what medical aids pay and what they want in addition out of the client's pocket?
Currently the national health tariff guideline for a general practitioner consultation is R117,20, and anyone who cares to visit the website of the Council for Medical Schemes will see proposals for each medical discipline in 2005. It's believed that for next year, the guideline for consultations may be tiered by the amount of time spent with patients.
While some doctors do accept payment at tariff - and there are pharmacies surviving quite comfortably on the regulated dispensing fees - the public is not always clearly informed which providers will accept their medical aid payments as sufficient, or whether extra payment is expected of them personally. It's sad to see pensioners paying R100 or more in "admin fees" for their monthly chronic medicines, in addition to the regulated dispensing fees claimed. Chronicare and Dis-Chem are among the wholesale pharmacies that are not charging these fees, and the public is advised to shop around to get value for their money.
Medical aid schemes and their managed health partners are not blameless, confusing an already bad situation with formulas, reference price limits, maximum medical aid prices and other rules.
Schemes are owned by their members and most make meagre underwriting profits - although members could take a far greater interest in electing trustees, and in the amount of their contributions paid to administrators, managed care providers and other third parties.
Profitability for private hospitals and drug companies continues to grow seemingly unabated, leaving consumers confused as to who is to blame for the mess the healthcare market seems to be in, and whether government intervention is helping or hurting them.
True partnerships - between consumers, providers, funders (the medical aid scheme) and government - are essential to navigating our way out of the impasse, and this demands more openness and transparency. As a benefit-consulting firm, we are willing to show good faith by publicly disclosing information on our slice of the pie. Now can providers and others please do the same?
For the interest of the reader and in reply to doctors' challenges, consumers will be relieved to know that broker's commissions were among the first to be regulated by government and are a maximum of 3%
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capped at about R50 a family a month. While some brokers may use the sale of added insurance and loyalty products to bolster income, we negotiate fees with our clients and offset commissions against them to deliver a range of services.
In addition, doctors will be pleased to know that we spend considerable amounts of time liaising with providers, members and schemes to ensure that claims are settled - it is common cause that schemes highhandedly implement managed care to control costs (in other word, refute claims) without providing much support. Most of our time is spent ensuring that providers and members are not short-changed.
We also do not hesitate to take complaints about medical aid schemes to the Council for Medical Schemes - the most common problem being non-payment of valid claims as reported in the council's latest annual report.
The time has come for providers who transgress to be held accountable. SA's health and social challenges can no longer afford the traditional holy cows of "dokters, dominees and onderwysers" to remain beyond reproach. Michael Stow is Hold Consulting principal. Michael Stow: Business Day, 15 October 2004
3. Clicks’ pharmacy strategy backfires
NEW Clicks has failed its shareholders on a number of counts. Considering the fact that retailers are riding the wave of a consumer spending spree, one would expect strong earnings when it reports results to end-
August later this week.
Instead, it issued a trading statement early last week indicating that its financial performance will be marred by a goodwill write-off. This relates to a strategic decision, some years ago, to pre-empt the deregulation of the pharmaceutical industry by ploughing hundreds of millions of rands into securing pole position in what it thought would be a massive scramble to buy pharmacies when the law changed.
By April last year, it had already spent R800-million on pharmacies and a major distributor. This shortsighted strategy saw it take its eye off its core retail businesses, which have performed below expectations in the second half.
Shareholders reacted to the statement by selling the share, which ended the week more than 10% down on the 845c it had been trading at.
The possibility that its small core of institutional investors, chief among them Allan Gray, will vote with their feet, cannot be discounted. Should this happen, the share has even more downside potential.
One cannot help but draw analogies with the troubled Boots in Britain, to which New Clicks has, in the past, looked for inspiration. This week Boots, which has produced worse-than-expected second-quarter sales, was slammed in Britain. One commentar y, quoted in The Week, said it “thinks it is a specialist retailer... but most of what it sells is now available cheaper in supermarkets”. The comment could have been referring to Clicks.
New Clicks announced on Monday that headline earnings for the year to August, which will be announced officially on Thursday, would be 12.5% to 17.5% higher than the previous year.
But its core retail trading brands “have underperformed management’s expectations in the second half of the year, impacted by an increasingly challenging FMCG (fast-moving consumer goods) retail market and the deflationary environment”.
More importantly, the group has written off goodwill of R273-million related to the acquisition of pharmacy group Purchase Milton & Associates. The write-off is a reflection of uncertainty surrounding the implementation of the medicine pricing regulations and single exit pricing, which New Clicks is challenging in court.
PM&A will be reflected in the financial results for the first time this year. The goodwill write-off will result in an attributable loss. According to the New Clicks statement: “The uncertainty in retail pharmacy has negatively impacted trading in PM&A, which has recorded a loss for the second sixmonth period.”
Evan Walker, analyst at Andisa Securities, says the goodwill write-off is significant, but the outlook is not entirely bleak. He believes Clicks has a viable model and that in the long term it will survive while many independent pharmacies will not.
However, Walker concedes that New C licks could have snapped up pharmacy licences now “at a tenth of the price it paid a few years ago”.
“There is no doubt that the New Clicks group, in waiting for its pharmacy licences, did not rejuvenate its
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fixtures or products,” Walker says.
“It will be a hard slog to get back the market share it has lost. In areas where it was a formidable player, like homeware, it must now rejuvenate in an overtraded market.”
Walker says Clicks was correct in pursuing the strategy of going into pharmacies, and that it was unfortunate to be hit with new legislation that was both punitive and unfair. “My only criticism is that they bought
[pharmacies] too early.” Marcia Klein: The Business Times, 17 October 2004
4. Single solution, with side effects
THE proposed new Public Service Medical Aid Scheme will bring 1m new members into the medical scheme industry, bringing the number of insured lives in the private healthcare sector to 8m. But the plan could have widespread repercussions and take years to implement. Some schemes serving state employees could lose more than two thirds of their members. State employees are spread across about 35 schemes, including
Bonitas (668 000 members in 2003); Medihelp (205 000); Polmed (347 000); MuniMed (99 200);
Medshield (261 881). Discovery covers about 80 000 state employees. According to Medscheme CEO
Andre Meyer, converting to a single scheme will probably lead to further consolidation into fewer but bigger risk pools. The single state medical scheme is part of government's plan to establish a national health insurance system, in which everyone, except the poor, contributes to the cost of providing universal healthcare. This will make it compulsory for anyone employed to buy health cover. But government needs to focus on getting its own employees covered first. An integral part of the plan is the introduction of the Risk
Equalisation Fund, planned for 2005. This will ensure that medical schemes are not prejudiced if they lose good-risk members to the state fund. Since the state scheme will be twice the size of the biggest medical aid in SA, it should be able to sustain several benefit plans, suiting the needs of the highly paid as well as the previously uncovered. Medihelp CEO Anton Rijnen says that the upside is that government will be able control costs and expenses much better if there is only one scheme. However, the downside is that it will place huge financial pressure on those schemes that currently cover large numbers of public-sector employees. He says Medihelp could lose 50%-70% of its members. Discovery Health MD Barry Swartzberg said that government could use better models to achieve the same outcomes, as accrediting about four or five schemes would increase the choice for employees. He said that the state could retain control if it set prices and standardised product design centrally. It could also use its negotiating power with providers to keep prices down. He added that schemes would then compete for state employees based on the quality of their administration only. Empowerment is not yet a real driver in decision-making, but it is likely to become increasingly important. Most schemes are known to be scouting around for empowerment partners.
Schemes are also already introducing cheaper products. Discovery Health has introduced packages aimed at those earning R2 500-R5 000/month, costing about R313/month. This includes hospitalisation at certain private hospitals and coverage for chronic conditions. Swartzberg said that public-private partnerships were key to covering the 400 000 employed, but uninsured, market by using public hospitals for medical scheme patients, for example. He said that the health charter would play an important role in bringing healthcare players together to find solutions. Jacqui Pile: The Financial Mail, 22 October 2004
5. Healthcare gets the worst rap in the complaints department
PRICE-fixing and abuse of dominance by firms in the health sector received considerable attention from the competition commission during its 2003/04 financial year. For the second year running, the highest number of complaints received by the regulator related to the healthcare sector. The outcome of investigations into these complaints is expected to save South African consumers millions of rands each year, a result of the consequent reduction in the cost of drugs and medical treatment. The cases involved Boehringer Ingelheim and GlaxoSmithKline (Glaxo); International Health Distributors (IHD) and certain drug manufacturers; and the
South African Medical Association (Sama) and the Hospital Association of SA (Hasa). The commission's recently released report highlights the fact that its overall objective is the promotion and maintenance of competition in the economy. Competition commissioner Menzi Simelane noted that the goal of achieving a more just and vigorous economy was expected to, among other things, provide consumers with competitive prices and product choices. The case involving Boehringer and Glaxo was initiated by a complaint brought by a number of consumers. The investigation concluded that the two companies had abused their dominant positions in their respective antiretroviral markets. Simelane said that although Boehringer and Glaxo denied the alleged contraventions, both agreed between them to issue seven voluntary licences to generic manufacturers. This was expected to significantly reduce the cost of antiretroviral drugs through the introduction of more competition. In the case against IHD and certain drug manufacturers, the parties agreed to pay a R20 million settlement. Simelane said that the drug manufacturers further agreed to dispose of their interests in IHD in view of the commission's concerns that this was a forum where the drug manufacturers could fix prices and trading conditions. The commission concluded consent orders with Sama and Hasa, and believed that this would result in the opening up of the healthcare market by empowering hospitals and markets to negotiate their own individual rates. Ann Crotty: Business Report, 20 October 2004
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6. Call for targets to lift number of black healthcare students
THE registrar of the Health Professions Council of SA, Boyce Mkhize, has expressed concern about the low numbers of black healthcare professionals practising in SA. Mkhize said targets should be set for the proportion of black students enrolled at training organisations such as universities. He said some institutions had revised their admission requirements to be "much more accommodating" towards aspiring black doctors and nurses, but some institutions still "insisted on As for physical science and mathematics", he told
Parliament's portfolio committee on health. Mkhize conceded that setting enrolment targets was beyond the council's powers, saying that such a step should be considered by the health and education departments.
The council sets training and disciplinary standards for the healthcare professions. Briefing the committee on the council's 2003-04 annual report, Mkhize emphasised the efforts made by the council to improve the representation of blacks within the organisation, which was historically dominated by whites. Mkhize's frank comments to the committee were played down by the council's president, Prof Nicky Padayachee, who said universities needed to do more to support students studying medicine and other healthcare disciplines. He said that matric results were not an accurate indicator of success. During the year under review, the council had launched a policy on undesirable business practices to counter fraud and malpractice, and had improved its turnaround time for prosecuting errant practitioners, said Mkhize. The council's legal department received 1 341 complaints, and referred only 122 cases to the South African Police Service for further action. It said there was a 27% increase in the number of complaints compared with 2002, which showed a greater public awareness of grievance procedures and the public's ability to exercise their rights.
Tamar Kahn: Business Day, 20 October 2004
7. Medical schemes' comments sought
MEDICAL schemes around the country are to receive communications from the Council for Medical
Schemes canvassing their opinions on fee guidelines published by the SA Pharmacy Council last week. Pat
Sidley, the spokesperson for the Council for Medical Schemes, said that the difficulty lay in the fact that most medical schemes had already finalised and even published their benefit schedules for 2005. She said that while some schemes had been paying the administration fees, which pharmacists were charging, this had been at cost to the medical aid. She added that she could foresee a large number of medical aid members having to pay out of their own pockets. Sidley said the Council for Medical Schemes had approached the
Pharmacy Council in June to request that medical schemes be consulted before the pharmacy fee guidelines were finalised, but this was not done. The director of pharmaceutical pricing in the health department, Anban
Pillay, said the department had met the Board of Healthcare Funders (BHF) to go through the codes and services in the fee guidelines. He said that at this stage, each scheme would have to make individual decisions on what and if they would cover those fees. Pillay said the Pharmacy Council had undertaken to launch an education campaign for pharmacists and consumers around the new pharmacy fees, but the interim period might be confusing for patients. With reference to the code, which allows a pharmacist to charge for a physical examination and diagnosis of the patient, Pillay said this was not open to the average pharmacist. He said that there were only about 80 pharmacists in the country qualified to carry out that type of examination. He said that over and above their professional qualification, they had to write a course with the Pharmacy Council and obtain a permit from the health department first. Discovery Health's head of health partner agreements, David Strauss, said the medical scheme was still examining the fee guidelines and hoped to reach a conclusive decision soon. He said that Discovery would be looking specifically at the fairness of the rates and determining what it wanted to cover as a benefit. Neesa Moodley: Business Report,
21 October 2004
8. Costly drugs down, but new fees snare sick consumers
THE health department has accused pharmacists of using the Pharmacy Council's new fees schedule to try to recover the losses they have incurred on drug sales since government introduced controlled medicine prices earlier this year. The council published guidelines last week that set out a list of "professional services" and fees that pharmacists may charge patients. The capped fees range from R6 for "record keeping" to R180 for face-to-face consultations with patients. Humphrey Zokufa, the Health Department's chief director for pharmacy and planning, said that the department's concern was that retail pharmacists might see the fees as an opportunity to claw back what they regarded as losses in income since medicine price regulation was introduced. Zokufa said he was particularly concerned by the "record-keeping" fees, as these were an integral part of dispensing medicines. Remuneration for this service had been incorporated into the 26% "professional fee" recommended by the medicine-pricing committee when it determined the rates pharmacists could charge for dispensing medicines. Zofuka said the guidelines were not sufficiently detailed, and consumers, pharmacists and medical schemes were confused about how the fees should be implemented. The council's acting registrar, Amos Masango, conceded that the guidelines had already created uncertainty. He said the council had been "inundated" with queries from the public and pharmacists since the guidelines were published. Medical schemes are debating the extent to which they will cover these fees. The Board of Healthcare Funders, has written to its members advising them not to pay the fees until there was greater clarity on some codes listed in the guidelines. Masango said the guidelines had been under discussion since 2000, and were not a direct response to the medicine-pricing regulations on pharmacy businesses. Pharmaceutical Society of SA spokeswoman Lorraine Osman said the timing of the council's publication of its recommended fees was "unfortunate." She said that pharmacists did a lot more
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than just dish out medicines, so it was appropriate that they be given recognition and remuneration for this.
Tamar Kahn: Business Day, 21 October 2004; Neesa Moodley: Business Report, 21 October 2004
9. Pfizer in the pink with 49% jump
PFIZER, the world's largest medicines maker, has announced that its third-quarter earnings jumped 49% after merger expenses fell and sales of its medicines rose. Net income climbed to $3,34bn, or 44c a share, from $2,24bn, or 29c, a year earlier. Sales rose 4% to $12,8bn from $12,3bn, the New York-based company announced yesterday. Pfizer's revenue increase was the lowest in more than two years as CE Hank
McKinnell relied on demand for medicines, including Lipitor, rather than on acquisitions such as last year's
Pharmacia purchase, to spur growth. Pressure to lower medicine prices, patent expirations and competition to some of Pfizer's most profitable products will "temper revenue and income growth in 2005", McKinnell said. Pfizer also is bracing itself for patent expirations for the antibiotic Zithromax next year, the antidepressant Zoloft in 2006 and the blood-pressure treatment Norvasc in 2007. Excluding costs, such as
$229m to resolve claims against a subsidiary that sold products with asbestos in the 1970s, Pfizer said it would have earned 55c a share in the third quarter. Acquisition-related expenses fell to $633m from $1,44bn a year earlier. Pfizer's sales gains over the past eight quarters, which ranged from 10% to 56%, had been fuelled by the $58bn purchase of Pharmacia and the $120bn purchase of Warner-Lambert in 2000. Pfizer said sales of Lipitor rose 11% to $2,74bn in the recent quarter, while sales of Norvasc, its second-largest product, declined 6% to $1,03bn. Merck & Co and Schering-Plough introduced a competitor to Lipitor called
Vytorin during the quarter. Worldwide sales of Vytorin were expected to be $70m in the quarter, according to analyst Tim Anderson, who rated Pfizer "neutral weight." Sales of Celebrex and Bextra, another treatment for arthritis, surged in the quarter, with Celebrex rising 14% to $797m and Bextra climbing 37% to $324m. Sales of Viagra, the world's best-selling male impotence treatment, declined 15% to $403m. Pfizer is fighting to maintain Viagra's share of that market against Cialis, sold by Eli Lilly and Icos, and Levitra, sold by
GlaxoSmithKline and Bayer. Sales of Zoloft slipped 3% to $802m, while Effexor, a rival antidepressant made by Wyeth, rose 38% to $893m. Pfizer plans to spend about $7,5 billion on research and development this year, down from a July estimate of $7,6bn. Nicole Ostrow: Bloomberg via Business Day, 21 October 2004
Ends
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