SA’s competition authority is scrutinising the price of Covid PCR tests, which it says have failed to come down despite falling input costs and the economies of scale enjoyed by the biggest laboratories.
Polymerase chain reaction (PCR) tests are considered the gold standard for Covid-19 testing and are required for international travel and hospital procedures, posing a burden on travellers, patients and medical schemes alike.
"We don’t understand why the price hasn’t come down. Action from our side is likely to be imminent," said the Competition Commission’s chief economist, James Hodge.
He noted that testing volumes are expected to ramp up as SA enters the next wave of coronavirus infections.
Demand for testing is modest at present because new cases are at their lowest ebb since May 2020, but experts expect a fourth wave in December, driving up demand for tests.
Laboratories charged R1,000 to R1,500 per test at the start of the coronavirus pandemic, but the price fell to R850 after the health sector was granted a block exemption to the Competition Act’s restrictions on collective bargaining in March 2020.
SA’s three biggest players — Ampath, Lancet and PathCare — charge R850 a test at present.
By contrast the government’s National Health Laboratory Service (NHLS) bills provinces at R507 a test and charges private sector patients R650 a test.
"Our expectation is that firms would compete to draw testing. It’s strange that they are not," said Hodge. The price of imported test kits has fallen from $15-$20 to $8-$10, according to the World Health Organization, suggesting that laboratories are benefiting from a potential saving of R150 a test, he said.
SA has spent an estimated R9bn on Covid-19 tests since the pandemic began, Hodge said.
The health department’s acting director-general, Nicholas Crisp, said the government was concerned about the cost of Covid-19 tests and officials were working closely with the Competition Commission.
"Because the market is so small, we need to proactively manage the prices.
"The laboratories themselves have been keen to push the prices down and came to us for guidance," he said.
PathCare CEO John Douglass said the company was reviewing its prices. "Last year we had a very unstable situation with supply chains. Prices were incredibly variable and did not stabilise until this year after investigations were conducted into price gouging.
"All the cost inputs were all over the show," he said.
Bringing down costs
The NHLS is also looking at ways to bring down the cost of testing, said CEO Kamy Chetty.
"I don’t think anyone could have predicted we would have been doing this number of tests," she said.
More than 18.3-million tests have been conducted in SA since the pandemic began, 8.46-million of them in the public sector and 9.88-million in the private sector, according to the National Institute for Communicable Diseases.
Medical scheme administrator Discovery Health said it was pushing hard to bring down the price of tests. "We have been in a perpetual conversation with the pathology labs about this. They guarantee the price is not contributing significant profits and is very closely aligned to their costs," said Discovery Health CEO Ryan Noach.
"We proposed there be an audit to guarantee this, but it hasn’t come to anything."
The Board of Healthcare Funders (BHF), an industry association for medical schemes and administrators, said it believed there was scope for prices to fall because imported input costs had fallen in the past year and there had been a significant
increase in testing volumes.
"When new technology comes in the throughput is low and the cost is relatively high. But when you start getting the kind of volume coming in you should see progressive price fall[s]," said BHF head of benefits and risk Rajesh Patel.
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