In what was described by the Competition Commission of South Africa as a “ground-breaking agreement” between themselves and SA’s two largest private pathology laboratories, Ampath and Lancet Laboratories, an out-of-court settlement was reached where the two labs agreed to reduce the price of Covid-19 polymerase chain reaction (PCR) tests from R850 to R500 (including VAT) per test with immediate effect.  

This follows a complaint lodged by the Council for Medical Schemes with the commission in October, alleging the price of PCR tests was “unfairly inflated”, “exorbitant” and “unjustifiable”. The prices of PCR tests have remained persistently high despite private laboratories experiencing substantial cost reductions in conducting the tests.  

The commission launched an investigation in October, and on Sunday the Competition Commissioner, Tembinkosi Bonakele, revealed that private laboratories had “exploit[ed] consumers by earning excessive profits on essential products or services”. 

Competition Commission Chief Economist James Hodge said the commission had asked all the respondents for the financial statements and detailed costing of their Covid tests. 

“That costing we did then further interrogate in order to strip out what we saw was potentially padding in the costing and unrelated costs… and on the basis of that we came to the figure of R500.” 

Bonakele said: “We also did see an abnormal profitability by these companies.” 

The commission investigated South Africa’s three largest private pathology laboratories, Ampath, Lancet and PathCare, but so far only Ampath and Lancet have agreed to the settlement.  

The commission’s spokesperson, Siyabulela Makunga, explained that as the agreement was made on the basis of “without prejudice”, no administrative penalty would be imposed on Ampath and Lancet. 

“Pathcare might also settle, failing which, the commission intends bringing an urgent application in the tribunal against Pathcare,” he said. 

Makunga said that without a settlement, litigation would continue against PathCare, and: “If they were found guilty by the Competition Tribunal, they may then be fined up to 10% of the annual turnover in administrative penalties, taking into consideration revenue that was unduly generated during the course of a contravention.” 

Why the companies aren’t being fined 

The settlement agreement does not include financial consequences or fines for laboratories’ past actions.  

“We could have decided to pursue these companies in order to level a fight against them – that was one of the options on the table,” said Bonakele. “We felt that what was more important was an immediate reduction in prices.”

Bonakele explained that a full investigation, rare in competition law and difficult to prosecute, would have been very expensive and taken a long time. 

“It is always encouraged for companies to voluntarily consider reducing prices, especially… where the public is detrimentally affected by the pricing, as to avoid protracted litigation, because they can take longer, they can take even beyond six to 12 months, depending on the nature of allegations being investigated.

“But for us to get… these price levels took some compromises. And one of those was this issue of a fine. So we decided to forgo a fine for an immediate and deep price decrease… I would say about 42%,” said Bonakele.  

Why did it take so long? 

When asked why bringing the laboratories to book had taken so long, Bonakele said, “… we have always been watching. And we think that we intervened at the right time.”  

Makunga told Daily Maverick: “Following the publishing of block exemptions in the health sector, which saw a substantial reduction of Covid-19 PCR tests to R850, this is a second intervention in the health sector. So we don’t agree that the commission took long to act. We have, in this period, made two interventions in one sector, which in our view is record-breaking.” 

What should you do if you’re charged R850 or more? 

This is a settlement that should take place with immediate effect, and the commissioner said that they expect all laboratories to follow suit and for medical aid groups to pass on the message to their members.  

“We expect that everybody will fall in line just because of the domino effect of this agreement,” said Bonakele. “But if this is not the case, we would like to know… when there are instances where they feel that they have been overcharged for these tests.” 

Bonakele said the commission is aware that there are many small laboratories that are not a part of this litigation at this stage and that they had received reports that on Saturday laboratories were charging up to R1,000 for PCR tests. 

“We call upon all laboratory services to comply [charge R500]. We will be monitoring this and, where necessary, we will take stern action.” 

Ongoing monitoring

Chief Economist Hodge emphasised that as the settlement is a consent agreement, it requires that pathologists provide the commission with changes in costs every three months, which will allow the commission to assess whether or not a further reduction is required.  

“So it will now be an ongoing monitoring process,” said Hodge.  

The commission said that Omicron test prices are next on their list. DM

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