1. National Health Insurance - UHC 29 SEPTEMBER 2014 Anban Pillay Deputy Director General National Department of Health South Africa pillaa@health.gov.za Designing and Managing Medicines Benefits

2. Outline of presentation Why NHI for South Africa Designing the benefit Selection of the medicine Procurement design Market Intelligence Cost estimates Drug supply management Reimbursement of dispensers Copayments

3. WHY NATIONAL HEALTH INSURANCE FOR SOUTH AFRICA

4. LIST OF GINI-COEFFIECIENTS FOR DIFFERENCT COUNTRIES, LATEST WORLD BANK DATABASE 2000 to 2009 South AfricaSouth Africa (2006)672006 SeychellesSeychelles (2007)662007 Comoros IslandsComoros (2004)642004 Micronesia, Fed. Sts.Micronesia, Fed. Sts. (2000)612000 HaitiHaiti (2001)602001 AngolaAngola (2000)592000 HondurasHonduras (2007)582007 ColombiaColombia (2006)582006 BoliviaBolivia (2007)572007 Central African RepublicCentral African Republic (2008)562008 GuatemalaGuatemala (2006)542006 BrazilBrazil (2009)542009 RwandaRwanda (2005)532005 LesothoLesotho (2003)532003 NicaraguaNicaragua (2005)522005 MexicoMexico (2008)522008 ChileChile (2009)522009 PanamaPanama (2009)522009

5. Health Status of South Africans 5

6. Distribution of health care resources between public and private sectors Item Private sector Public sector Population per general doctor (243) 588* 4,193 Population per specialist 47010,811 Population per nurse 102616 Population per pharmacist (765) 1,852* 22,879 Population per hospital bed 194399

8. Results – strong preference for medicines

9. Flow of NHI Funds 9 National Treasury SARS

10. Designing the benefit Defined list of conditions funded through UHC if positive list. Standard treatment guidelines for defined list of conditions/ common conditions. Guidelines should define disease severity and the levels at which this should be managed. Medicines should be linked to this clinical guideline - formulary Clear eligibility criteria for access to restricted medicines

11. Selection of Medicines Burden of Disease Effectiveness Safety Quality Appropriateness

12. Strategy for medicines not on formulary Establish a central fund that manages access to restricted medicines. These may be high cost medicines or restricted use in public health interest. Clear criteria for access to such medicines through a transparent evaluation process.

13. Procurement design Options – tender process vs prequalified list of products. There are pros and cons to both approaches. Tenders – – Pros: likely to achieve a much lower price than pre qual given price vol arrangement. – Cons: lock out other competitors for a period which may be detrimental to competition, where a supplier is unable to deliver then no alternative supplier immediately available – supply interruptions

14. Procurement design Prequalification list – pros: greater likelihood of maintaining competition between suppliers; greater patient choice – usually more than 1 item per category. – Cons: prices are usually higher since no exclusivity; risk of lower priced medicine being dispensed and higher priced item billed to fund

15. Market Intelligence How many suppliers are registered to sell a medicine in the market? Where are they sourcing the product from? Same source of base chemicals, API, formulation? What is the production capacity of the supplier? Importers – T/Cs of agreement with supplier.

16. Cost estimates Estimate likely medicine consumption over the period. Explore price volume arrangements with suppliers in the face of volume uncertainty Manage the risk of currency fluctuation and changes in the input costs that may affect suppliers

17. Drug supply management Drug availability at facility level is as important as procurement. Procurement strategy must appreciate the risk of stockouts and mitigate against this risk. An early warning system regarding medicine non availability should be linked to the procurement system. Integration between supplier procurement agreement and dispensing agreement. Rebates and discounts to wholesalers and dispensers may lead to inappropriate dispensing and higher costs.

18. Reimbursement of dispensers Options available: FFS, case based reimbursement or capitation FFS- risk of overservicing, no incentive not to dispense medicine, rewards process rather than outcomes Case based – less incentive to overservice, no incentive not to dispense, some opportunity to reward outcomes. Capitation – no incentive to overservice, risk of under servicing, can reward outcomes rather than process

19. Copayments Difference in cost between reimbursed price vs. product price. Reimbursed price is usually a maximum. Reimbursed price must be related to lowest prices in the market. Why should manufacturer price be lower than the maximum reimbursed price? Where the patient elects to take the originator when a lower priced generic exists – does the patient pay a copay for the orginator? What is the impact of this on the generic?

20. THANK YOU Designing and Managing Medicines Benefits