1. Pharmaceutical Industry Funding Challenges
Val Beaumont
July 07

2. Medicine Expenditure Trend Declining Back To 1990’s Levels
True Cost Reflection Of Medicines As A Component Of Healthcare Expenditure
Total Meds
Incl. Disp Fee
R bn.
Total Meds
Excl Disp. Fee
CMS Annual Report
Disp Fee = +50%-30%
Disp Fee =
Max 26%
Medicine Expenditure Trend Declining Back To 1990’s Levels

3. Regulatory And Managed Care Impact On Medicine Expenditure – 1997 To 2005
R 16 bn.
Managed Care
Interventions
Drug Utilization Review/Clinical Entry Criteria
Regulatory
Interventions
Medical
Schemes
Act
PMB’s
Solvency
Requirements
Single
Exit Price
PMB
CDL
IBP
Medicines
Expenditure
Unregulated
Regulated
1997
1998
1999
2000
2001
2002
2003
2004
2005
SA Spend On Medicines In Line With International Benchmarks
& OECD Benchmarks
Medicines No Long A Cost Driver In Private Sector

4. SA Spend On Medicines In Line With OECD Benchmarks
Benchmarking Medicines As A Percentage Of Healthcare Spend. (2004 OECD Data) *
Including Dispensing Fees
Sources: OECD Health Report 2006 (Data 2004), *South Africa CMS Annual Report Figure 12, Pg 50 (Includes Dispensing Fees), ** South Africa CMS Annual Report Pg 88,89,90 Annexure I, Pg 99 Annexure K (Includes Dispensing Fees)
SA Spend On Medicines In Line With OECD Benchmarks

5. Medicine Expenditure Benchmarked Against Other Healthcare Expenditure Components
If We Include Non Healthcare Expenses In
The Healthcare Pie For 2005
**( CMS = 15.70%)
CMS Annual Report
Non Healthcare Costs Consume More Than Medcines

6. Complexity Of Member Access To Medicines - Influencers Of Patient Medicine Choices
381
Plan
Options
139 Medical Schemes
Each With Different
Benefits & Rules
Formulary’s
Co-Pays
Clinical
Entry Criteria
DSP’s
Chronic Application Forms
Clinical
Motivation
Forms
Do These Member Access Barriers Lead To Healthier Members?

7. Key Challenge For Entire Healthcare Sector - Focus On Cost Versus Clinical Value
SEP
Provider Tariffs
Per Diems
More Co-pays for members
Patient Outcomes
Healthcare Outcomes
Healthcare Quality
Pharmaco
- economics
Who provides
The Balance
For
Members?
Does Competing On Cost Alone Lead To Healthier Members?
* Footnote
Source: Source

8. Interests Should be Aligned For The Benefit Of Healthy Members
Provider
Managed Care
Scheme
Patient
Can We All Do A Better Job In Ensuring Members Are Experiencing Value
from Our Products And Services?

9. Conclusions: A More Member Focused Approach
Medicines No Longer A Cost
Driver In SA Market
Due To Regulatory And
Managed Care Interventions
Medicines Costs In Line
With International Benchmarks
Members Access To Life
Saving Medicines A Complex
Process Which Might Not
Be Incorporating The
True Value Of The Medicine
New Innovative Medicines Have
Been Proven Not To Drive
Total Medicines Costs For
Schemes
Balancing Cost With Clinical
Value For Members Best Interest
Should Be The Focus Area For
All Stakeholders