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Legal confrontation gives way to dialogue
January 28, 2009

By Tom Robbins

Cape Town: Health minister Barbara Hogan is moving rapidly to undo the unfortunate legacy of her predecessor, Manto Tshabalala-Msimang. This week she agreed to talk with struggling independent pharmacists rather than fight them in court.

Hogan and the Pharmaceutical Society of SA (PSSA) agreed on Monday to call off their impending court battle over the government’s moves to limit pharmacists’ drug dispensing fees, the PSSA confirmed yesterday.

The PSSA had agreed to call off its court case against the minister following a meeting with Hogan, said the society’s executive director, Ivan Kotzé.

“Following a meeting with the minister on Monday, we are optimistic the matter will be resolved and both parties have agreed to withdraw the matter from the [court] roll,” said Kotzé. He was speaking as a spokesperson for the Pharmacy Stakeholders Forum.

Kotzé was positive that a more generous dispensing fee regime for pharmacists would be reached, allowing for the continuation of a sustainable independent pharmacy sector.

Initial moves to limit drug selling prices by Tshabalala-Msimang resulted in the closure of some neighbourhood pharmacies, forcing consumers to travel further for healthcare.

Since her appointment last September, Hogan has been acting swiftly to undo the work of Tshabalala-Msimang, who was famed for suggesting that a beetroot concoction was a means for people living with HIV to maintain their health.

Earlier this month, Hogan reached an out-of-court settlement with the National Convention on Dispensing by agreeing in principle that the dispensing fee for doctors should be raised to 30 percent.

Hogan has also pledged to fast-track the roll-out of anti-retroviral drugs, which her predecessor was accused of being slow to distribute.

The applicants against Hogan before yesterday’s détente included other members of the stakeholder forum, such as the SA Progressive Pharmacists Association, which represents black pharmacists, and the PSSA.

Initial regulations introduced by Tshabalala-Msimang limited the mark-ups that pharmacists could charge for dispensing drugs, known as the 26-26 model. Pharmacists were allowed to charge a dispensing fee of 26 percent on drugs, capped at a maximum of R26. The fee was set at 26 percent of the drug price for amounts less than R100, but on sales more than R100 it was limited to R26.

Listed retailer New Clicks successfully appealed against the 26-26 model before the constitutional court in 2005.

In 2006 a new model with a “slight” increase in the fee for pharmacists was due to be introduced in January 2007, according to Kotzé.

But in December 2006, the PSSA successfully opposed the revised model in the high court. The court ruled that the revised model would not become operational in January 2007 and set the matter down for a trial, which had been due to start next month.

Fidel Hadebe, a ministry of health spokesperson, was unable to confirm the agreement between Hogan and the independent pharmacists to withdraw from legal confrontation.

But Hadebe said the minister’s approach was to avoid court action in disputes and to “exhaust all other avenues first, as had been the case with the dispensing doctors”.

With both of the government’s previous dispensing fee structures thrown out of court, a pricing vacuum was created, allowing pharmacists to charge what they wished.

Ironically, New Clicks, which owns the Clicks discount chain, has still been applying the 26-26 model it successfully challenged in court.

Evan Walker, a retail analyst at RMB Asset Management, said the main reason Clicks had chosen to support the 26-26 model was because Dis-Chem, its biggest competitor, was doing so.

New Clicks chief executive David Kneale said it was his view that all parties would reach an out-of-court settlement on dispensing fees.

Kneale said New Clicks supported the government’s intention to allow the biggest dispensing mark-ups on the lowest-priced drugs, as this would encourage pharmacists to sell consumers the cheapest equivalent drugs – generics.

He said the retailer supported a maximum dispensing fee, “which gives us the freedom to discount, which we will probably do”. page 18