South Africa’s umbrella body for pharmaceutical manufacturers is pressuring the health department to explain how it determined this year’s controversial 1.47% price increase for private sector medicine sales, warning it will take legal action without full disclosure.
At issue is long-running tension over the calculations used by the health department’s medicine pricing committee to set the annual single exit price (SEP) adjustment, which caps the price increases manufacturers may impose on medicines sold in the private sector.
Industry players have regularly complained that the annual SEP increases fall below their expectations and that the pricing committee’s work is opaque.
With the war in the Middle East now adding fresh cost pressures to the drug manufacturing industry, the pharmaceutical task group has written to the health department asking for full disclosure of the pricing committee’s methodology for setting the 1.47% increase.
The task group says it has repeatedly asked for this information, to no avail, and that the lack of transparency is at odds with the Promotion of Administrative Justice Act.
The latest increase is markedly below consumer price inflation (3.6%), sectoral salary increases (6%) and the tariff increase guidance for 2026 issued by the Council for Medical Schemes (3.3%), the task group said.
In light of the geopolitical turmoil and weakening exchange rate, the task group has also asked for a 1.73 percentage point adjustment to the SEP, to take the total for 2026 to 3.2%. The rand has depreciated by almost 6% against the dollar since the start of the war.
“Sustainable and efficient medicine supply is the cornerstone of a well-functioning healthcare system. The task group has noted with concern the rising geopolitically related input costs, which, if left unaddressed, will place significant stress on sustainable medicine supply,” said task group chair Stavros Nicolaou.
“This concerning development has been further compounded by the fact that the department of health granted the industry a meagre 1.47% increase earlier this year, which was less than half of inflation at the time,” Nicolaou said.
“With inflation set to rise because of geopolitical tensions, we are appealing to the department of health to grant the industry an exceptional increase of a further 1.7%, which would take the aggregated increase to the inflation rate as it was prior to the rising input costs,” he said.
The pharmaceutical task group includes four industry associations: the Innovative Pharmaceutical Manufacturers Association of SA (Ipasa), Pharmaceuticals Made in SA, Generic and Biosimilar Medicines of Southern Africa, and the Self-Care Association of South Africa.
The knock-on effects of oil price increases and currency fluctuations were set to have a “huge” impact on medicine prices, said Ipasa CEO Jasvanti Bhana. “These factors need to be taken into consideration if you want to sustain supply and make sure that there is (continued) access to medicines,” she said.
Self Care Association CEO Nicola Brink said the war in the Middle East was driving up input costs for both prescription and over-the-counter medicines.
“Whether companies are importing finished products or manufacturing locally, costs are rising… Imported medicines are exposed to freight volatility and exchange rate fluctuations, while local manufacturers are contending with increases in electricity, labour, raw materials and logistics. A SEP increase of 1.47% does not adequately reflect these cost realities,” she said.
The health department had not responded to Business Day’s request for comment at the time of publication.
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