The Impact of the Implementation of Single Exit Pricing for Pharmaceuticals in South Africa

Topics: Pricing, Pharmacy, Price floor Pages: 45 (11843 words) Published: August 1, 2013
The impact of the implementation of single exit pricing for pharmaceuticals in South Africa

Daleen Pretorius

A research report submitted to the Faculty of Commerce, Law and Management, University of the Witwatersrand, in partial fulfilment of the requirements for the degree of Master of Business Administration

Johannesburg, 2011

ABSTRACT
Pricing regulations have been implemented within the pharmaceutical industry in South Africa to ensure improved access to healthcare. The implementation of the Single Exit Price (SEP) effectively meant that the private pharmaceutical sector had to adjust from a free to a regulated market, where prices had to be cut and discounts discarded. The pricing structure changed to a transparent structure. These price ceilings resulted into a decrease in gross profit margins within independent, group and hospital pharmacies in the private healthcare sector. The aim of this research was to explore the impact of the implementation of SEP for pharmaceuticals in the private sector in South Africa through considering consistent pricing benefits to the patients as well as the changes in the business environment for retail pharmacies. A mixed methodology approach was pursued, using both quantitative and qualitative data analysis. A specific and actual price was obtained for certain medicines from 50 pharmacies to determine if consistent pricing benefits were experienced by patients through the introduction of SEP. This construed the quantitative data. In addition to this, 22 semi-structured interviews were conducted with pharmacy managers from independent, group and hospital pharmacies to determine the changes in the business environment following the introduction of SEP. thematic perspective. Key findings from the research were that consistent pricing benefits were not realised to patients following the introduction of pricing regulations, and specifically SEP. Changes in the business environment of private retail pharmacies, following the introduction of SEP included: strategic changes, survival tactics and day to day changes as well as restructuring. Pricing regulation may initially seem to only have a positive impact on all stakeholders involved. However upon closer investigation the true impact of interference may be more harmful to all stakeholders in the long run. ii

The qualitative data obtained was analysed from a

DECLARATION

I, Johanna Magdalena Pretorius, declare that this research report is my own work except as indicated in the references and acknowledgements. It is submitted in partial fulfilment of the requirements for the degree of Master of Business Administration in the University of the Witwatersrand, Johannesburg. It has not been submitted before for any degree or examination in this or any other university.

------------------------------------------------------------Johanna Magdalena Pretorius

Signed at Centurion

On the …………………………….. day of ………………………… 2011

iii

DEDICATION
A dream sets out as an idea and becomes a reality through action. The

process and completion of the MBA degree proved to be a life changing event for me. This was a confirmation that absolutely anything can be done through setting the goal, creating a solid support system and daily deliberate action.

I would like to make this dedication with respect to some incredible individuals who were instrumental to realising the goals in my life:

My incredible and supportive mother, who taught me that absolutely anything can be done providing that you believe in yourself. I am eternally grateful for your incredible love and support, Mom.

Sunél, for your continuous support and belief, even when the emotions ran high. You are an amazing solid person. I am honoured to have you in my life.

Dr. Jeanette Lotter for the motivation, guidance, encouragement and support regarding this research.

Prof. Bick for your direction, time and continuous support as supervisor and lecturer....

References: Table1:
Regulated Dispensing Fees for Pharmacies in the Private Health Care Sector (Motsoaledi 2010).........................................................14
Table 2: Table 3:
Quantitative, Mixed and Qualitative Methods (Creswell 2009) .......26 Demographic Data Including Functional Roles Reported by Respondents ....................................................................................34
2
Factors influencing the increase in medicine expenditure include an increase in the utilisation of member benefits, changes in medicine mix used by the population as well as more expensive therapies (Bester 2009)
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