A group of medical schemes representing more than half the industry has taken aim at SA’s three biggest private pathology laboratories over the price of Covid-19 tests and asked competition authorities to launch a fresh probe into their conduct.
If successful, they believe they could claw back an estimated R1bn previously paid out by the 35 schemes party to the complaint.
The Health Funders Association (HFA), which counts Discovery, Momentum, Profmed and Fedhealth among its members, lodged a complaint with the Competition Commission on Wednesday regarding the prices charged by Pathcare, Ampath and Lancet for Covid-19 polymerase chain reaction (PCR) tests in 2020 and 2021. It has been joined in its complaint by several non-member schemes, and they collectively represent 5.6-million of SA’s 8.9-million medical scheme beneficiaries.
“The aim is to understand the profits [made by the laboratories], and for that money to be returned to medical schemes to defray future expenses,” HFA director Craig Comrie said.
PCR tests have been considered the gold standard for Covid-19 testing since the outset of the pandemic in 2020, and initially cost up to R1,500 in the private sector. Shortly after the government declared a national state of disaster in response to the crisis in March 2020, the health sector was granted an exemption to the Competition Act’s restrictions on collective bargaining and private laboratories agreed to charge medical scheme members R850 a test.
At the time there was anin-principle agreement among stakeholders that the price of PCR tests should be on a cost-recovery basis for the duration of the pandemic, the HFA said.
These tests were conducted in large numbers, as they were not only used to diagnose Covid-19 but also to give people the all-clear for international travel and hospital admission for non-Covid-19 conditions.
SA’s three biggest laboratories subsequently dropped their price to R500 in December 2021, in line with voluntary settlements reached after the Competition Commission launched an investigation into allegations of excessive pricing.
That probe was triggered by a complaint laid by the Council for Medical Schemes in October 2021 after various medical schemes and administrators failed to negotiate lower prices.
The HFA said it was clear from the Competition Commission’s investigation in 2021 that the laboratories were not basing their prices on a cost recovery model for most of 2020 and 2021, and that medical scheme members had thus faced “substantial additional costs.
‘Excessive pricing’
“The HFA’s complaint, alongside several other medical schemes as co-complainants, aims to ensure that the excess costs associated with any excessive pricing of Covid-19 PCR tests is refunded to medical schemes for members’ benefits,” it said in a statement. The consent agreements reached between the competition authorities and the laboratories did not protect them from further complaints and investigations into the price of PCR tests, or the recoupment of damages if the prices were found to be excessive, or if the laboratories had agreed upon them as competitors, it said.
“These recoveries represent members’ funds and will accrue to the reserves of medical schemes. They have a direct bearing on the ability of schemes to pay claims and potentially on future contribution increases for members,” it said,
Pathcare CEO John Douglass said he was disappointed by the action taken by the HFA. The company had provided the Competition Commission with detailed information that “clearly showed we didn’t overcharge” and the two-year consent order required it to provide data on an ongoing basis. Input costs had fallen only for the high-volume instruments used in central locations such as Cape Town, but not for the smaller machines used in peripheral sites such as Bloemfontein.
Ampath chief strategy officer Samantha Swanepoel said the company was unaware of any complaint made to the competition authorities. “When we understand the nature of the complaint we will co-operate with the Competition Commission to understand any concerns raised,” she said.
Lancet CEO Manuel van Deventer said he was unable to comment, as the firm had yet to receive notification of the HFA’s complaint.
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