Gauteng Business News

Send  Share  RSS  Twitter  25 Aug 2010

HEALTH: Private Healthcare Medicine Expenditure Continues to Soar


Recent Gauteng Business News

Expenditure on medicines in the South African private healthcare industry continues to increase and is a significant contributor to the high costs of private healthcare in the country.

This is according to Christo Rademan, Managing Director of pharmaceutical benefit management (PBM) company, Mediscor PBM, who was commenting on the findings of the annual Mediscor Medicines Review.

The 2009 Mediscor Medicines Review (MMR) clearly indicates that expenditure on medicines increased by 17.6% between 2008 and 2009 compared to a 14.4% increase between 2007 and 2008. The Review examines and analyses the use of medicines among the medically insured section of the population of South Africa.

“From these figures it is evident that medicines continue to be an important driver of healthcare costs,” continued Rademan. “What is also interesting to note is that for the third year running the increase in expenditure was largely driven by an increase in the average item cost of medicines, rather than by other factors such as increased medicine usage by medical scheme members.”

“Against the background of an aging population, the high prevalence of chronic and multiple diseases is an increasingly important driver of medicine expenditure,” he suggested. “As is noted in the 2008 – 2009 Annual Report of the Council for Medical Schemes the expenditure on medicines dispensed by pharmacists and providers other than hospitals increased to R11.2 billion in 2008, an increase of 18.2%. This is supported by the 2009 MMR, which clearly indicates that medicine costs are continuing to be a key contributor in rising medical scheme expenditure. However, unlike most other costs this is one of few areas where cost savings are still attainable. A prime example of this is the encouraging growth in the use of generic medication within our country.”

Rademan believes that many analysts will be encouraged by the fact that the use of generics continues to climb year-on-year. The MMR indicates that the percentage of generic products used increased to 48.8% from 48.1% in 2007. There are a number of reasons for this increase including the fact that more generic alternatives continue to be made available as drugs lose their patent protection, and there is a greater awareness of their availability amongst doctors and the public. Furthermore their use is being encouraged by medical schemes using formularies, and indeed by Government.

According to the MMR, an increase in item cost was the main driver for the increase in expenditure. Existing medicines experienced an 11.7% increase in item cost between 2008 and 2009. New chemical entities, or medicines introduced to the market after 2004, contributed 1.2% to the 12.9% increase in item cost over this time.

The Single Exit Price (SEP) continued to be an important driver of medicine costs. The SEP increased on average year-on-year by 10.2% from 2008 to 2009 compared to 2.6% from 2007 to 2008.

The top 25 therapeutic groups for 2009 remained virtually unchanged from that of previous years and represent 73.1% of the overall expenditure and 67.2% of the total number of items paid in 2009. The top five therapeutic groups also remained the same representing 31.1% of total expenditure. They are anti-hypertensives, cytostatics, hypolipidaemic agents, anti-depressants and gastric acid reducers.

Therapeutic group % Of total expenditure
1. Anti-hypertensives (blood pressure lowering agents) 10.8
2. Cytostatics (oncology medicines) 6.1
3. Hypolipidaemic agents (cholesterol lowering agents) 5.2
4. Anti-depressants 4.7
5. Gastric acid reducers 4.3
6. Anti-diabetic agents 4.1
7. Beta-lactam antibiotics 3.3
8. Anti-viral agents 2.9
9. Sex hormones 2.8
10. Combination analgesics (painkillers) 2.8

“The largest increase in expenditure was on the oncology benefit,” explains Madelein Bester, Manager: Benefit Management of Mediscor. “Medicines used in the treatment of cancer patients was responsible for 8.7% of expenditure and 0.6% of item volume in 2009. The cost per beneficiary per annum spent on these medicines increased by 95.5% from 2007 to 2009 (from R112 to R219). This increase is attributed to an increase in the percentage of beneficiaries receiving cancer treatment coupled with an increase in the average cost per item claimed. Prevalence increased from 0.4% in 2007 to 0.7% in 2009,” she said.

The claims submitted that were used to conduct the MMR research were obtained from healthcare providers including pharmacies, general practitioners, medical specialists and others. Not surprisingly the majority of claims were submitted by retail pharmacies, which made up 79.7% of total item volume in 2009. This was an increase from 74.4% in 2007 to 77.4% in 2008. Courier pharmacies submitted 18.0% of claims, which is up from 16.2% in 2007. General practitioners submitted 11.4% of the total line items, and this follows the trend of decreasing claims received from dispending doctors from 16.7% in 2007 to 13.9% in 2008.

South Africa’s healthcare funders are increasingly faced with high-growth speciality drug classes of new, very expensive medicines for life threatening conditions such as cancer. Without doubt the entry of new drugs into the market will continue unabated. Bester adds that this is encouraging as it offers hope to those who are often in desperate need of such medicines. In certain instances such new entities can prove cost effective as they improve outcomes and shorten recovery times. “There are unfortunately instances where the benefits and outcomes will not justify the cost.”

“This is where tight management on the part of healthcare funders can bear fruit whilst affording much needed protection for consumers,” she continues. “A pharmacy and therapeutics committee, for example, can prove most effective in determining which drugs to reimburse and which drugs to include in formularies.”

According to Rademan it is indeed possible to contain medicine costs whilst doing what is right for the patient, but this is not for the fainthearted, as it will require great wisdom, careful management and meticulous attention to detail.

“We at Mediscor remain committed to tackling the challenges of keeping healthcare costs to a minimum while never losing sight of the importance of members of medical schemes and how we all exist because of them. We sincerely hope to continue doing this through identifying cost drivers through research, such as that presented in the MMR, and through actively working with our clients to stem the tide of runaway medicine costs in order to safeguard this industry and those that we serve,” concludes Rademan.

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