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Will the pharma sector be on the receiving or losing end of NHI?

Jul 23, 2018
Will the pharma sector be on the receiving or losing end of NHI?

The recent approval of the National Health Insurance (NHI) Bill, shocked many in and out of the healthcare industry, but pharmaceutical organisations committed to increased pricing transparency will have a competitive edge as government pushes ahead with its plans of expanding affordable healthcare to the masses.

So says Erik Roos, CEO of leading generics pharmaceutical firm, Pharma Dynamics.

“Healthcare reform challenges all of us that operate in the sector to keep and expand our place at the table. In its current form, the proposed NHI is by no means perfect and there remains a lot of uncertainty around funding, medical skills shortages, the role medical aids will play and how infrastructural problems, wastage and corruption in the public sector will be tackled. It is becoming increasingly clear, however, that NHI is here to stay, which makes it imperative for pharmaceutical companies to get involved in the debate at the highest level in order to help shape a sustainable and effective healthcare system for South Africa.

“Health firms need to ready themselves for the influx of tens of millions new consumers – mostly of low income and how they are going to care for them on a sustainable basis emphasising wellness prevention and disease management as opposed to constant crisis management. Already more than 40% of deaths in our country are associated with non-communicable diseases (NCDs), also known as diseases of lifestyle, such as cardiovascular disease, hypertension, diabetes and cancer. About 80% of these diseases can be prevented if interventions are put in place to curb unhealthy lifestyle behaviours early on.

“Access to affordable care for patients is the most important component that needs to be considered in any health reform legislation, therefore a great deal of focus will be placed on the price of medication, devices and services. Providers operating in the sector need to become resilient by connecting on a large scale to the culturally diverse communities they serve while remaining cost effective,” says Roos.

The dilemma for hospitals is finding a way to provide more access while simultaneously lowering costs. Doctors are likely to get caught up in rapid industry consolidation and must adapt to new payment models, changing traditional practices. As more people gain access to medicines via NHI, generics are sure to grab a generous share of the pie, but the challenge for pharmaceutical companies will be to stay competitive by providing more cost-effective products, linked to other value-added benefits.

However, Roos warns that if government continues to award tenders solely based on price under the NHI regime, that medicine shortages and stock-outs – already a concern – could worsen.  

“This will place tremendous pressure on pharmaceutical firms, particularly suppliers of generic medication, who have already dropped their prices significantly in an environment where annual increases are highly regulated. Foreign investment is also likely to decline as multinationals withdraw from the market and as a result patients’ needs will be compromised. Shortages and supply chain breakdowns could also quickly spiral into outbreaks of disease. To counter this, government could expand tax rebates for pharmaceutical companies which will not only allow more patients to have access to affordable medication, but also ensures the sustainability of the SA pharma sector.”

The local pharmaceutical industry employs more than 9 625 full-time staff and contributes about 1.58% to the SA GDP. It also spends significantly on local socio-economic development initiatives and training medical reps and healthcare practitioners on new pharmaceutical molecules to ensure that medicines are appropriately administered. Continued pressure placed on the price of generics under NHI, could over time degrade the industry and lead to a lack of knowledge around the safe administration of treatments, putting patients at risk. 

Roos says it is imperative that the industry skilfully navigates through the NHI conundrum, while managing the expectations of the public at large.

“This seismic shift in healthcare won’t happen overnight. Globally, National Health Insurance schemes, such as those in Europe, have taken many years to implement and in SA it could take up to 14 years before the NHI is fully rolled out, even though government is pushing for a 2026 deadline.

“Universal health coverage is a global priority and more countries are adopting an NHI-type approach. Virtually all of Europe has either publicly sponsored and regulated universal healthcare or publicly provided universal healthcare. Yet, it is important to note that universal healthcare doesn’t imply government-only healthcare, since many countries continue to have both public and private insurance and medical providers. No flawless model exists, but SA must attempt to augment its existing health system to accommodate all of its residents by ensuring accessible and affordable quality care, whilst buoying the healthcare industry as a whole.

“As a company, Pharma Dynamics is committed to being an active partner with government in the expansion of universal healthcare in the country and will continue to look at ways to serve more people, operating more efficiently and streamlining costs in order to best support the NHI programme. However, much more debate is needed on how to implement the NHI policy effectively.

“Government’s obligation to provide universal healthcare can be complemented by leveraging the expertise of the private sector and optimising business models to bring in more patients and reduce overall system costs. There is a great need for medicine availability, skilled medical human resources and quality care. A comprehensive approach should be taken in which the quality of the healthcare system is improved simultaneously with the rollout of the NHI, in order to benefit every South African,” concludes Roos.