How medicine pricing works in SA and how it might change in future

South Africa’s medicine pricing policies are recognised internationally for their commitment to transparency, but the reality may be different from what exists on paper.

Medicine pricing is a good example of the deficiencies in the National Drug Policy, which has never been revised since it was first issued in 1996. The original policy document proposed the establishment of a Pricing Committee and committed to “total transparency in the pricing structure of pharmaceutical manufacturers, wholesalers, providers of services, such as dispensers of drugs, as well as private clinics and hospitals”.

Two key proposals were that “the wholesale and retail percentage mark-up system will be replaced with a pricing system based on a fixed professional fee” and “price increases will be regulated”. There was also a commitment to monitoring prices in comparison with those charged in other countries. Finally, there was this statement: “Where the state deems that the retail prices of certain pharmaceuticals are unacceptable and that these pharmaceuticals are essential to the wellbeing of any sector of the population, the state will make them available to the private sector at acquisition cost plus the transaction costs involved.”

Few policies survive an encounter with reality, and opposition, and this document is no exception.

Never the twain shall meet

A cardinal feature of SA’s medicine pricing system is the clear separation between the public and private sectors.

In the public sector, the prices paid by the provinces, military and prison services are the result of a tender process. Only medicines registered by the South African Health Products Regulatory Authority may be offered in response to a tender call. The national Department of Health makes all tenders publicly accessible and also publishes the resultant tender awards, as well as the Master Health Products List, updated whenever any listing changes. The prices paid therefore reflect the downward influence of the buying power of the state. The tenders include a quantification of anticipated demand over the tender period (usually three years). Prices are also influenced by the number of potential suppliers, and therefore the extent of competition in the market.

For some critical, high-volume medicines, such as the first-line antiretrovirals, the tender is split among multiple suppliers, at slightly different prices. Split tenders are intended to ensure security of supply if a contracted supplier is unable to meet demand.

Where the state accounts for most of the quantity sold in the country, it is usually able to attract bids at lower prices than are charged in the private sector. However, in some cases, tenders attract no bids and the state is forced to purchase on quotation. Where a registered medicine is only available from a single supplier, the price paid by the state may be closer to that paid in the private sector. In November 2025, the Director-General of Health published a statement of concern about bid prices exceeding the private sector single exit price, urging manufacturers to “reflect on their pricing practices”.

Although there are some limited agreements to provide state stock, such as childhood vaccines, to private healthcare providers, the two distribution chains and their pricing remain separate. The private sector cannot access medicines at the same price as the state.

Private sector — not entirely transparent

The Medicines and Related Substances Control Amendment Act, 1997, sought to put in place at least some of what was proposed in the 1996 National Drug Policy. After the multinational pharmaceutical industry withdrew a court challenge to the act in 2001, and after another amendment act, the changes came into effect in 2003, but with the pricing portion delayed until 2004.

Further delay followed, with court challenges brought by community and hospital pharmacy groups, leading to an eventual Constitutional Court judgment in 2005. While the basic construct remained in place, the government had to revise the dispensing fee.

The basic construct of the pricing provision, which has been inserted into the Medicines and Related Substances Act, 1965, but is not the responsibility of the Health Products Regulatory Authority, relies on what is called the single exit price. The single exit price is defined as “the only price at which manufacturers shall sell medicines and scheduled substances to any person other than the state”. In other words, the “exit” refers to the price that is charged by the manufacturer to the final seller, such as a pharmacy, hospital or healthcare provider. This is a little different from the more commonly used term of a “factory gate price”, which then allows additions to be made at each step in the distribution chain.

The single exit price is the price that the final seller charges to the patient or medical scheme. Final sellers are, however, entitled to a dispensing fee, which is set as a maximum each year and differs between pharmacists and licensed dispensing practitioners. Wholesalers do not add a mark-up to the single exit price charged by the manufacturer, but are paid a logistics fee by the manufacturer, as a portion of the exit price.

Crucially, the “single” component refers to the intention that the same price would be paid by all buyers, regardless of the volume of medicine procured. In other words, the private sector cannot use its buying power to exert any pressure on manufacturers’ prices.

The act is prescriptive in this regard: “No person shall supply any medicine, medical device or IVD according to a bonus system, rebate system or any other incentive scheme.” While the application of this section to Schedule 0 medicines, medical devices and in vitro diagnostics has been paused, it still applies to other medicines.

Annually, the Pricing Committee asks for input on two elements: the dispensing fees for pharmacists and dispensing practitioners, and the single exit price adjustment. The latter is a maximum percentage increase that manufacturers can apply to the single exit prices on an annual basis. In some years, exceptional additional single exit price adjustments have been allowed, but they have generally mirrored the consumer price index. The single exit price adjustment allowed for 2026 was set at a maximum of 1.47%, compared with 5.25% in 2025. The single exit price adjustment mechanism has protected SA against the large pharmaceutical price increases that have been seen in other countries. However, the initial launch single exit price remains unregulated.

The dispensing fees include a flat amount and a percentage of the single exit price, varying across four price bands. As the price of the medicine increases, the percentage component decreases. For example, the September 2025 version states that where the single exit price of a medicine exceeds R1,530.73, the dispensing fee charged by a pharmacist shall not exceed R270.54 + 5% of the single exit price.

A spreadsheet showing all declared single exit prices (for registered medicines in Schedules 1 to 6) is publicly accessible on the health department’s website. That site also provides access to various single exit price adjustment documents. All final sellers are required to disclose to a buyer what the single exit price for a medicine is, and then indicate the dispensing fee charged, which cannot exceed the maximum gazetted each year.

So, what’s not transparent?

The first problem lies with the logistics fee paid to wholesalers by manufacturers. Although there is a column in the single exit price spreadsheet that shows a logistics fee, the actual amount paid is known to vary considerably. Importantly, where a final seller, such as a large pharmacy chain, owns its own wholesaler, it can gain additional income from the logistics fee. That component is not disclosed to buyers (patients or medical schemes) – but may influence the seller’s ability to charge less than the maximum dispensing fee.

The act enables the minister of health, in consultation with the Pricing Committee, to “prescribe acceptable and prohibited acts” in relation to bonus systems, rebate systems or other incentive schemes. Despite being published for comment on two occasions, in 2014 and in 2017, no final regulations have been issued. The extent to which co-marketing fees, data fees, shelf fees, formulary listing fees, patient assistance programmes, off-invoice rebates and bonus systems have crept back into the private sector is therefore unknown, as is the quantum of such potentially perverse incentives. Certainly, such revenue streams are not transparent to patients and caregivers.

The enforcement capacity of the health department and Pricing Committee is also questionable. SA’s much-vaunted transparent medicine pricing system may conceal many unsavoury elements.

New concerns — failure to declare a single exit price

Once the Health Products Regulatory Authority has registered a new medicine, the online database is updated. However, the authority does not concern itself with pricing. The holder of the certificate of registration can choose to sell the medicine only to the state. However, if the holder wishes to sell the medicine in the private sector, a single exit price has to be declared.

Some of the questions asked in the declaration form are interesting, but of dubious legal weight. For example, manufacturers are asked: “The methodology used to determine the single exit price and factors that influence the price at which the medicine will be sold.” Even though no external reference pricing system is in place, the prices in other countries are requested.

While it is reasonable to ask what the registered indications for the medicine are, as approved by the Health Products Regulatory Authority, to demand the “prevalence of the disease or condition as established by the applicant in South Africa” is less reasonable. To date, no single exit prices have been declared to be “unacceptable”, as was signalled in the National Drug Policy in 1996. Manufacturers thus have a relatively free hand to set their private sector launch prices.

However, two high-profile registrations of HIV drugs by the Health Products Regulatory Authority, of cabotegravir by GSK plc and of lenacapavir by Gilead, have not been followed by the declaration of a single exit price. One contributory reason may be a reluctance to make a price to be charged in an upper middle-income country such as South Africa transparent to the rest of the world.

Unregistered medicines imported in terms of section 21 (an application to access an unregistered medicine in circumstances where there is no suitable product registered in SA) are not subject to the single exit price. In the case of the cystic fibrosis treatments sold by the pharmaceutical company Vertex, a refusal to apply for registration by the Health Products Regulatory Authority, thus forcing medical schemes and patients to rely on section 21, has allowed the company to reach agreements with specific medical schemes at undisclosed prices. These medicines are not available to public sector patients.

The unknown unknown

Although the National Health Insurance fund is expected to be an “active purchaser”, using its buying power to exert downward pressure on prices, bolstered by health technology assessment processes, the exact manner in which the prices of medicines will be determined is unclear.

In particular, how the fund will contract with public and private sector providers to serve beneficiaries in a particular geographical area, given the current clear separation in pricing, has yet to be disclosed. Once NHI is fully implemented, the current tender system will not be tenable. A tender award to a single supplier would immediately make all competitors leave the market.

Instead, a reimbursement system, perhaps closer to the reference pricing applied in medical scheme formularies, will be needed. The complexity lies in the period of co-existence of the current public and private sectors and a nascent NHI.

Has the National Drug Policy 1996 been implemented?

Although a fixed dispensing fee proved impractical, some elements of the 1996 policy are discernible. Regulated price increases are in place, for instance. Other elements are less clearly implemented, and full transparency remains elusive. There is a need to revisit the entirety of the national medicines policy, not least in relation to how best to deliver access to affordable, quality-assured, essential medicines as part of universal health coverage. DM

Dr Andy Gray is a Senior Lecturer at the University of KwaZulu-Natal and Co-Director of the WHO Collaborating Centre on Pharmaceutical Policy and Evidence Based Practice. This is part of a series of columns he is writing for Spotlight.

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