Healthcare, Regulatory and Reimbursement Landscape - South Africa, New Report Launched

The healthcare market in South Africa is growing due to high prevalence of chronic indications, regulatory reforms and new healthcare policies. However, the pricing policies that promote the dispensing of low cost drugs are hindering the growth of the pharmaceutical market.

In 2013, the population was approximately 53 million, having grown at a Compound Annual Growth Rate (CAGR) of 1.7% from 2008. Due to improvements in healthcare facilities, the elderly population has been increasing and as of 2013 comprised 5.2% of the entire population (STATSSA, 2008; STATSSA, 2009; STATSSA, 2010; STATSSA, 2011; STATSSA, 2014g).

Infectious diseases such as HIV/AIDS and Tuberculosis (TB) have high prevalence rates in South Africa. In 2011, approximately 11.2% of the total population was infected with HIV. In 2009, the TB incidence rate was 971 per 100,000 population, and the prevalence of non-communicable diseases such as cardiovascular, renal and respiratory diseases has increased due to changes in lifestyle (HST, 2011). These are the driving factors for the growth in the pharmaceutical market.

In 2006, the government introduced the Free Healthcare for All policy, under which free healthcare will be provided to all South Africans in all public healthcare facilities (Harrison, 2009). This has increased the usage of healthcare facilities, which has in turn increased pharmaceutical consumption. In 2013, the government proposed revisions to its intellectual property rights policy to both enforce patent protection and increase the accessibility of medicines, which is currently under review (Médecins Sans Frontières, 2014). The government also introduced National Health Insurance (NHI) in 2011, which is expected to further promote the use of healthcare facilities.

In South Africa, the price that a manufacturer can charge for a drug is based on a Single Exit Price (SEP), which is the price decided by the government after selecting the lowest price of the drug in Australia, Canada, New Zealand, and Spain. The pharmacies get the drug at the SEP and the pharmacists add a markup. The pharmacists are allowed to charge the highest markups on the medicines with the lowest cost. This promotes the dispensing of low cost generics over branded drugs, hindering the growth of pharmaceutical market.

In 2013, the pharmaceutical market was worth approximately $3.4 billion. It is set to grow at a CAGR of 7.0% from 2014 to $5.6 billion in 2020 (WESGRO, 2014).

In 2008, the medical device market was valued at $1.6 billion and grew at a CAGR of 4.3% to $1.9 billion in 2013. It is estimated to reach a value of $2.6 billion by 2020. The major market segments in medical device market were ophthalmic devices, orthopedic devices, In Vitro Diagnostics (IVD), cardiovascular devices and, nephrology and urology devices. The major players in the medical device market include Siemens Healthcare, Essilor, B.Braun, Roche and Covidien. In 2008, the diagnostic market was valued at $1 billion and grew at a CAGR of 4.5% to $1.2 billion in 2013.

Universal healthcare services are hindered by a significant shortage of healthcare professionals in the public sector, delays in the full implementation of NHI and an uneven distribution of healthcare resources.

Around 84% of the population relies on public healthcare. These high numbers have overburdened the public healthcare sector leading to a reduction in the quality of care along with increased scarcity of healthcare personnel (DoH, 2011a).

The government is trying to overcome this shortage through the introduction of NHI, which will make both public and private sector facilities available to all. NHI was introduced in 2011 and will be implemented in three phases spanning 14 years. The third and final phase of NHI implementation will end in 2025 by which time, the government hopes that the entire South African population will be covered. NHI is currently in its first phase of implementation and the government is testing it on a pilot scale. Since the NHI is being implemented over such a long period, it will not contribute to the immediate improvement of the healthcare system.

In 2013, there were 370 doctors per 100,000 population in South Africa (HST, 2011). This is higher than the 336 doctors per 100,000 population available on average in the EU and the 178 doctors per 100,000 population available on average in upper-middle-income countries. Although the doctor to population ratio is higher in South Africa than the EU average, the accessibility of healthcare is limited. This is due to the uneven distribution of healthcare personnel as most doctors work in the private sector. Most doctors also prefer working in developed urban areas to rural areas due to the superior infrastructure and economic environment. Since the majority of the population lives in these rural areas, a large section of population does not have access to healthcare facilities.

The South African government is planning to overcome the problem of delayed drug approvals through the establishment of new regulatory bodies.

The Medicines Control Council (MCC) regulates the pharmaceutical market in South Africa. On average, the organization requires three to four years for the drug approval process, in comparison to developed countries, which usually take only a year to approve a drug, which is very low. To overcome this problem the government is replacing the MCC with a new regulatory body called South Africa Health Products Regulatory Authority (SAHPRA). SAHPRA is expected to speed up the drug approval process and reduce timelines while maintaining the highest standards of quality (Khan, 2014).

Although, the political environment is stable, a continual growth in the economy is essential for the overall growth of South Africa.

The political stability in South Africa is not reflected in the economic sustenance. Although the government’s primary goal is to achieve economic equality, South Africa is still ranked among the top 10 countries in the world for income disparity. This is a result of the lingering effects of apartheid, with black South Africans making up the majority of the low-income population still living on basic amenities only (CIA, 2014a; World Bank, 2014a).

South Africa also has a very high unemployment rate, estimated at 24.9% in 2013 (STATSSA, 2013f). In 2013, the Gross Domestic Product (GDP) per capita was $6,621 and is expected to reach $8,471 in 2020 at a CAGR of 4.3% (IMF, 2014a). Gross National Income (GNI) per capita was estimated at $7,190 in 2013 (World Bank, 2014d). This increase in GDP and GNI per capita represents the improving economic condition of the country.

South Africa hopes that promoting entrepreneurship and industrialization combined with employment equity policies that focus on improving job opportunities for black South Africans will solve the problem of high unemployment rate.

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