Regulation of medicine dispensing fee in pharmacies

Genesis has worked extensively with the Pharmacy Stakeholders Forum of South Africa (PSF) in its protracted litigation with the Department of Health regarding price regulation of the dispensing fee for medicines sold through pharmacies. The central question was whether the dispensing fees prescribed by the Department of Health were sufficient to provide a reasonable revenue stream to community pharmacies so as ensure the viability of the businesses.

Price regulation, by its very nature, raises intricate questions that require one to protect the interests of consumers while preserving the impetus for investment and operational sustainability of the regulated firm. This was particularly complex in the case of community pharmacies, which comprise a large number of widely diverse individual businesses with differing operating models and levels of financial vulnerability. Against this backdrop, Genesis was able to provide input to the key economic principles that would be important to ensure appropriate forms of price regulation that not only achieved the objectives of the Department of Health, but also safeguarded the sustainability community pharmacies. Genesis also provided an economic assessment of the impact that the proposed dispensing fees would have on a sample of 142 pharmacies, for which detailed operational and financial information had been collected.

Based on this analysis, Genesis found that the proposed dispensing fees, in their existing form, threatened to undermine the viability of a large number of community pharmacies. This economic analysis proved instrumental in a settlement between PSF and the Department of Health which led to the suspension of the proposed dispensing fees in their original form.