The original article from Business Day looks at various technical, economics, ideological and common sense problems with the Bill. I however think of the Medical Device Industry and to a lesser extent the supply of pharmaceuticals in the South African Market, and wonder how they will be impacted.
Mention is made in the bill of “central procurement” and appears to lump medical device importers and manufacturers into “suppliers”. The question then arrises if the Bill actually suggests that the NHI fund will procure medical devices to supply to healthcare providers to then use? What about their (the hospitals and doctors) having to manage costs as reimbursement will be via DRGs?
Procurement for public sector hospitals, currently a provincial competency, often results in stock shortages and irrational procurement practices which leave capital equipment fallow due to the lack of associated consumable devices being available.
DRS or Diagnosis Related Groups is a reimbursement methodology which calculates the value of reimbursement on a “Global Fee” basis ie for a broken leg a certain amount will be paid, irrespective of the actual costs associated with the treatment of that event.
Surely medical devices used in the treatment of this broken leg and the costs thereof should be managed by the provider responsible for providing the treatment?
Then we consider the provision for pricing regulations – through a previously mentioned pricing committee or the expansion of Single Exit Prices to Medical Devices. That too is unclear. In the previous iteration of the Pricing Committee, healthcare providers (hospitals and doctor groups) will enter into a negotiation with the Department of Health Pricing Committee to set prices – no provision is made for representation of Medical Devices or Pharmaceutical industry in that committee although it is quite reasonable to think that prices of devices and medicines (perhaps not medicines due to Single Exit Pricing) will be included in the cost of service provision and therefore into DRG reimbursement amounts.
There is already a major inequity in the relative power of hospital groups, funders as opposed to the fragmented Medical Device Industry. The only representative bodies are SAMED and MDMSA – this this is a voluntary association which represents a very small number of suppliers in the South African Market – albeit high in the overall value of imports as most of the large multinationals are members of SAMED. Competition law also prevents groups of medical device companies either independently or through SAMED from negotiating prices.
The majority of Medical Device companies in South Africa are micro enterprises.
Moreover, Medical Device regulations and amendment to the Medicines and Related Substances Control Act 101 of 1965 makes provisions for international tendering. This opens the potential for the NHI to procure medical devices on the international market, thereby sidelining the local medical device industry.
Industry representatives that I have spoken to generally speaking are sceptical of what will happen and when. All are of the opinion that they have been squeezed by hospitals and funders for so long, that this is nothing much new. There is however also a possitivity around the potential for extending healthcare services into underserviced markets, which will theoretically present an opportunity for the sector.
Time will tell.