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The South African Market for Medical Devices. 1

The South African Market for Medical Devices.Opportunities & Challenges for Swiss Companies.

Publisher:Medtech SwitzerlandWankdorffeldstr. 102P.O. Box 2613000 Bern 22+41 31 335 62 [email protected]

Authors:Mark BrandOwner and CEOHEALTHCARE TECHNOLOGY CONSULTING [email protected]

Project MAnAgeMent:Max BertschmannHead Swiss Business Hub South [email protected]

Sarah Moyle (Medtech Switzerland)Dr. Patrick Dümmler (Medtech Switzerland)

While this report is intended to provide an overview of this specific market and its opportunities at the time of its edition, each individual manufacturer, exporter or company may have to conduct their own analysis to get a better understanding of the possibilities and opportunities available to them. You are encouraged to explore and develop your opportunities based on research and in-depth analysis.

Readers should take note that Medtech Switzerland does not guarantee the accuracy of any of the information contained in this report, nor does it necessarily endorse the organizations, associations, companies and individuals listed herein. Readers of this report should verify the accuracy and reliability of the information contained herein before making a business decision.

© Medtech Switzerland 2012

Table of Contents

Glossary

Table of Figures

Executive Summary

1 . Health Care Environment

1.1 Population Demographics and Economic Indicators

1.2 Health Care Budget Priorities

1.3 Public Sector

1.4 Private Sector

1.4.1 Medical Scheme (Insurance) Industry

1.4.2 Private Hospital Sector

1.4.3 Medical Practitioners

1.4.4 Pharmaceutical and Medical Devices Industry

2. Market Access Processes

2.1. Product Registration

2.2 . Public Sector

2.3 . Private Sector

2.3.1. NAPPI Code

2.3.2. Product Introduction Notification (PIN) Process

2.3.3 . Health Technology Assessment (HTA)

2.3.4 . Reference Price List (RPL)

2.3.5 . Private Hospital Vendor Registration and New Technology Introduction

3 . Dynamics Shaping Market Access Processes

3.1.1. National Health Insurance

3.1.2 . Managed Health Care

3.1.3 . Prescribed Minimum Benefits (PMB’s)

3.1.4 . Reference Price List

3.1.5 . Office of Health Standards and Compliance (OHSC)

3.1.6 . Centre for Clinical Excellence in Health and Health Care

4 . Conclusion

5 . Bibliography

6 . Appendices

6.1. Medikredit Supplier Registration Form

6.2 . Medikredit NAPPI Application Form

6.3 . Discovery PIN Form

6.4 . Discovery HTA Policy

6.5 . SAMED Reimbursement Application Template

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4 The South African Market for Medical Devices.

Glossary

APL Approved products list

BAC Benefits advisory committee

BHF Board of Healthcare Funders

CME Continuing medical education

CMS Council for Medical Schemes

COID Commissioner for Occupational Injuries on Duty

CPA Consumer protection act

CPU Clinical Policy Unit

GDP Gross Domestic Product

GMP Good manufacturing practice

HASA Hospital Association of South Africa

HTA Health Technology Assessment

ICN Item Control Number

IMSA Innovative Medicines of South Africa

IPA Independent practitioners association

ISEM In-hospital surgical and ethical management

ISPOR International Society for Pharmacoeconomics and Outcomes Research

MCC Medicines Control Council

MFP Minimum floor price

MHC Managed Health Care

NAPPI National Pharmaceutical Price Index

NDoH National Department of Health

NHI National Health Insurance

OSC Office of standards and compliance

PBM Pharmaceutical benefit management

PIASA Pharmaceutical Industry Association of South Africa

PIN Product Information Notification

PMB Prescribed minimum benefit

RAF Road Accident Fund

RPL Reference price list

SAMA South African Medical Association

SAMCC South African managed Care Consortium

SAMED South African Medical Devices Association

SAPPF South African private practitioners’ forum

SAPPF South African Private Practitioners Forum

SGFP Society for General and Family Practitioners


Table of Figures

Figure 1: South African Healthcare Environment

Figure 2: Sources of Funding as per Actual Data from 2008/2009

Figure 3: Funding Industry of South Africa

Figure 4: Administrator market share

Figure 5: Hospital Sector Demographics

Figure 6: Market Access Processes

Figure 7: Public Sector Buying Process

Figure 8: Discovery New Product Introduction Notification (PIN Process)

Figure 9: Discovery Health HTA by the Clinical Policies Unit

Figure 10: Discovery Grading System for New Technologies

Figure 11: Dynamics Shaping Market Access Processes

Figure 12: National Health Roadmap 10 Point Plan

Figure 13: Price Determination Framework

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This chapter describes the structure of the South African (SA) health care industry, demographics, relevant economic indicators, relationships between sectors and relevant stakeholders, and common issues and dynamics facing the health care industry in South African today (Figure 1). Each sector will be described with respect to its own relevance and role.

This report describes the process of market access for medical devices including how to bring new products to market, and the factors influencing reimbursement in South Africa. This report does not include guidance and information on establishing a business in South Africa.

Understanding the ins and outs of accessing the S. African medtech market involves an understanding of both the industry players and the dynamics of the regional markets as these set the context for how to bring a new technology to the market. This report focuses on the reimbursement environment as it is relevant to health technologies and medical devices for suppliers.

Chapter 1 describes the structure of the South African healthcare environment, population demographics, available health care services, key economic indicators, sources of health care funding and budget priorities, the key industry sectors and players and their respective roles. The terms insurance companies, funders and medical schemes may be used interchangeably. The report covers concepts relevant mostly to the medical devices sector though some of the information could also be applied to the pharmaceutical sector specifically with regards to market access requirements.

Chapter 2 gives details on the process of market access when introducing new technologies into the South African public and private sectors beginning with important product registration and listing requirements. Private sector reimbursement requirements are generally more stringent though this is expected to change as public insurance is projected

to undergo an overhaul which would upgrade its standards and allow for increased public access. New technologies which make their way into the market will experience different reimbursement requirements. These inconsistencies are dependent on the perceived value of the product and the internal ability to allocate government or hospital resources towards its purchase. The Health Technology Assessment and other regulations related to this have emerged in local practice and have become a key feature of the South African reimbursement decision making process.

Chapter 3 describes the ongoing political and regulatory dynamics that are shaping the market access environment and the way reimbursement for new technologies is achieved. These include the implementation of a National Health Insurance system, development of managed health care and risk management programs, the determination of health care pricing as charged by service providers, and the definition of benefits under the mandatory Prescribed Minimum Benefits which include information on what technologies are included or excluded. All of the components of the Health Technology Assessment harmonize to produce an outline of the intellectual capital required to execute these plans while achieving transparency and consistency in the decision making process.

Health technology suppliers are advised to be proactive in leaning about these dynamics to be able to make informed strategic decisions. Market access strategy is inextricably linked to business strategy and failure to consider and address market access hurdles will impact business strategy.

1. Health Care Environment

Executive Summary


1.1 PoPulAtion DeMogrAPhics AnD econoMic inDicAtors The South African (SA) two tiered healthcare system (private and public sectors) continues to provide significantly divergent standards of healthcare, with the public sector unable to provide sufficient quality care to the broader population. The population of 49.30 million, with a 48 per cent to 52 per cent respective male to female gender ratio across 9 provinces may be categorized into 3 healthcare insurance groups: 1. Unemployed and using state services (+/- 26M), 2. Employed but uninsured, using both state and private sector services (+/- 15M), and 3. Employed with insurance (medical aid) using private sector services (+/-8.3M). 8.8 per cent of GDP is spent on health care (i.e. R202 billion of R2283 billion) with a per capita spend of R4122 (USD 589). By international standards, total expenditures appear reasonable

but closer with closer inspection of these values disparities emerge:• 42 per cent of total health spending and 3.7

per cent of GDP represents a total government health spending on 83 per cent of the uninsured population or R2048 (USD 292) per capita.

• Private health spending includes medical insurance contributions, out of pocket payments, employer contributions and top up insurance which accounts for R113 billion or 58 per cent of total health spending and 4.9 per cent of GDP for only 17 percent of the privately insured population costing R14 125 (USD 2017) per capita.

Medical schemes collected R84.8 billion in 2009 in gross contribution income, with approximately 76.3 billion (85 per cent) paid out to healthcare claims. South Africa experienced a significant slowing of growth in 2009 and 2010 recovering to 2.6 per cent in the last quarter of 2010. Figure 2 reflects sources of health care funding across the industry.

Figure 1: south AFricAn heAlthcAre environMent

Unemployed (uninsured)Indigent 26Mil Lives

Employed and insured 8.3 Million

Formally/informally employedbut uninsured 15Mil Lives

Public Sector

86% of populationHealth spend - R84.5B(42%)

105 Schemes GCI 84.8B - 8 068 505 Members - 30 open / 75 closed - 332 options - 32.9% liquidity

PVT Sector - Health spend R142B (58%) 4.9% GDP

Administrators Discovery Medscheme Metropolitan MSO Allcare Status

••••••

MHCDiscoveryQualsaMedscheme MSOQA careMedihelpMHS

•••••••

HMOʼs

PBMʼs

RAF (0.8B)

WCA (1.4B)

Employers(1.1B)

Mil (2.1B)

Prov (75B)

South African Healthcare EnvironmentPopulation:- 49.32 Million (24.5% unemployed) GDP < R3 TrillionHealthcare Spend:- R263B 8.5% of GDP spent on Health

Primary Care Clinic

Community Hospitals

Regional Hospitals

Academic/TertiaryHospitals (399)

DoH

SAMA SAPPF

ISPOR

CMS

OOPP(35.5B)

Insurers (2.5B)

•• Liberty• Metropolitan• Sanlam• Discovery• Momentum

Pharmacy Dental

IPA s̓Pharmaceuticals

Devices/ConsNurses Doctorʼs

SAMED

PIASA

IMSA BHF HASA

Others 32%

Netcare 24%MediClinic 22%

Life Healthcare

23%(80)

6855 beds

(53 + 46)8713 beds

305 theatres

299 Hospitals28 600 beds

(51)6415 beds

215 theatres

(51)6415 beds

215 theatres

NHI - GEMS/LIMS - HR - PPPʼs - PMBʼs - ARMʼs - HIV/AIDS - IM- QM - B3E2

Mines (55)4500 beds


Figure 2: sources oF FunDing As Per FebruAry 2011 buDget review

1.2 heAlth cAre buDget PrioritiesThe 2011/12 budget placed healthcare as a priority equal to that of social security protections (SA Constitution, section 27). The NHI recognizes the imbalances between the public and private sectors and aims to eliminate these disparities. It is expected that issues such as price regulation, level of care quality and others concerns will continue to equalise in the two sectors with a push from the NHI. The following is an extract from the Budget Speech of February 2011:

“For workers, the Budget emphasises job creation and expenditure on the social wage, including access to health services, education, social security, transport and municipal infrastructure.”

For the business sector, the Budget expands investment in modernising infrastructure and transportation logistics, accelerating further education and skills, development and support of research and technology, and industrial investment. For the small business sector there are targeted financial and enterprise development programmes as well as tax relief measures.

A new community-based family health-care program is to be introduced as part of national health insurance in conjunction with consolidation of the social security program.

Several steps in implementing the ten-point plan

for reform of health services are addressed in this Budget. Total spending on public health services has increased strongly over the past three years from just over R60 billion in 2006/07 to over R115 billion projected for 2011/12. In addition to provisions for higher personnel expenditure over the next period, over R8 billion has been added to specific health service interventions thus laying the foundations for National Health Insurance. This includes:• R1.2 billion to introduce family health care

teams• R2.9 billion to improve quality in health

facilities, medical equipment and hospital systems

• R1.4 billion for improved district-based maternal and child health services

• A new Office of Standards Compliance to inspect and certify hospitals

• Funding for the Department of Health to lead the institutional and management reforms

• Revitalising health infrastructure including a new infrastructure grant for provinces

• Expanding capacity to train medical doctors and nurses

The phasing in of National Health Insurance will require substantial reforms to address imbalances across the public and private sectors and expand health professional training. The financial and organisational implications of these reforms are being jointly addressed by the Department of Health and the Treasury.

Table 7.10 Health expenditure in public and private sectors

R million

2006/07 2007/08

Outcome

2008/09 2009/10

Estimate

2010/11 2011/12

Forecast

2012/13

Public sector

National department of health1 3 136 3 829 4 755 5 134 5 301 5 604 5 826Provincial departments of health 51 938 60 645 72 444 87 598 93 465 101 435 107 833Defence 1 602 1 743 2 024 2 265 2 468 2 634 2 855Correctional services 234 261 282 300 318 338 359Police 234 298 463 405 577 721 787Local government (own revenue) 1 317 1 478 1 625 1 793 1 829 1 865 1 977Workmens compensation 1 416 1 287 1 415 1 629 1 651 1 718 1 921Road Accident fund 488 764 797 740 860 980 1 039Total public sector health 60 384 70 305 83 805 99 762 106 469 115 297 122 496Private sector

Medical scheme 58 349 65 468 74 089 81 128 88 754 96 653 105 255Out of pocket 26 596 31 183 34 270 36 498 38 833 41 125 43 551Medical insurance 2 056 2 179 2 452 2 660 2 870 3 126 3 404Employer private 982 1 041 1 172 1 271 1 372 1 494 1 627Total private sector health 87 983 99 871 111 983 121 557 131 829 142 398 153 837Donors or NGOs 2 503 3 835 5 212 6 319 5 787 5 308 5 574Total 150 850 174 011 201 000 227 638 244 085 263 003 281 907

1. Includes selected public entities.


The Minister of Finance in his midterm budget speech on October 25th announced that health care spending is set to increase by 7.4 per cent a year, from R113 billion this year to R140 billion in three years time. The plan additionally includes NHI pilot projects in ten districts focused on comprehensive primary health care.

Emphasis is placed on value for money and improving efficiency in the delivery of high-quality public services, particularly in health, with better management of medicines and other supplies in hospitals and clinics.

1.3 Public sector Annual expenditure for the year 2008/09 was 84 billion across all public sector health entities with the majority of funds allocated to the provinces for hospital operation costs and the funding of various grants. The remaining balance was scattered across other sectors (Figure 2). Government policy dictates that priority be given to primary care in an effort to provide quality healthcare access for all. Consequences of underfunding have resulted in the standard of care deteriorating due to poorly equipped and under resourced facilities. A shortage of skilled workers of over 64 000 throughout all specialties and across all sectors of healthcare remains a focus for change. Skilled workers have migrated to the private sector or abroad in search of improved working conditions and remuneration. The SA government is driving the implementation of NHI beginning with public health facility improvement, skills development and accreditation. Members of the uninsured public rely on treatment from this sector unless they are able to afford private health care.

The population in South Africa is heavily using the health care facilities that exist. Over 399 hospitals and 3000 clinics experience an average occupancy rate of 70 per cent. A public hospital revitalization program to combat facility degradation has been initiated with an Office of Standards and Compliance set up and empowered by law to address standards of health care delivery and facility accreditation across both sectors.

1.4 PrivAte sector1.4.1 MeDicAl scheMe (insurAnce) inDustry The private sector of over 8 million insured individuals has been experiencing consolidation since 1994 in both hospital and medical insurance sectors. A focus on improving inefficiencies to reduce medical and non-medical costs has been the aim. As of 2010 there are 100 medical insurance schemes which have decreased in number due to consolidation, with 332 different plan/benefit options. Over 60 per cent of individuals are represented by less than 10 insurance schemes. The schemes provide medical benefits to the market which the public may buy according to their needs and affordability. The industry is pursuing individuals who are employed but uninsured, focusing on emerging and low income markets to achieve growth. In order to attract new membership, insurance premiums need to be affordable though affordability can translate into coverage limitations.

The core of the insurance industry is the medical insurance scheme itself (Figure 3). Scheme providers are non-profit organizations that provide benefits to their members in a contribution dependent manner. The insurance scheme is managed by a board of trustees that ensures good governance of the scheme and monitors how member interests are best served.

Dep

artm

ent o

f Hea

lth

Cou

ncil

for

Med

ical

Sch

emes

MedicalServices

Boar

d of

Tru

stee

s

Premiums

Benefits

Claims

Reimbursements

Medical Schemes

Doctors andHospitals

Members andEmployers

Setshealthcare

policy

Regulatorof medicalschemes Delivery of Healthcare

Funding mechanism

Not for profit organisationgoverned by board of trustees

Medical Scheme Administrator / Managed Care Organisation

Administration fees Administration and managed care services

Figure 3: FunDing inDustry oF south AFricA


The Council for Medical Schemes (CMS) is the regulatory authority responsible for overseeing the medical insurance industry in SA, administering and enforcing the Medical Schemes Act 131 of 1998. The CMS is an autonomous public agency funded through levies and accountable to the minister. Members of the Council embody a variety of skills and backgrounds and include experts in law, finance, actuarial sciences, economics, medical sciences, corporate governance, and consumer affairs.

The role of the CMS is:

1. Protect the interests of medical insurance schemes and their members

2. Monitor the solvency and financial soundness of medical schemes

3. Control and co-ordinate the activity of schemes so they comply with national health policy

4. Investigate complaints and settle disputes in relation to schemes

5. Collect and disseminate information about private health care in South Africa

6. Make internal rules which comply with the Medical Schemes Act

7. Make recommendations to the Minister of Health on criteria for the measurement of quality and outcomes of the health services paid for by medical insurance schemes

The Board of Healthcare Funders (BHF) of South Africa is a representative organization which accounts for 95 per cent of the medical schemes throughout SA and relies on membership of all medical scheme providers to ensure that it is able to lobby stakeholders and influence policy on behalf of the industry. BHF has expanded its internal research capacity to ensure that it is favorably positioned to both analyze regulatory interventions and announce their findings. The benefit and risk department allows the organization to provide operational services its membership as well as to influence policy through effective lobbying on health policy issues.

Medical schemes are classified as either own (in house) or sub-contract (outsource) for the administration and managed health care service providers. The administrator typically manages contributions and claims processing as well as assists with the management of brokers. The managed healthcare organization performs clinical and financial risk analysis, manages authorizations, conducts prospective or retrospective utilization of services (including drugs and technology/devices), and develops clinical management based programs.

The managed care company has become a critical stakeholder to market access and an important hurdle in achieving reimbursement. They act on behalf of schemes to perform clinical and risk-based assessments of new interventions and technologies. A managed care company will also make funding recommendations based on the practice of evidence based medicine which takes into account cost effectiveness and affordability of treatments. Evidence based medicine includes a set of formal techniques to monitor device use, evaluate clinical necessity, efficacy, appropriateness, efficiency of services, procedures, and settings.

Consolidation of administration and managed care services for medical schemes means suppliers need to engage only a handful or organizations for reimbursement decisions rather than 100 individual schemes, as the managed care company responsible for developing reimbursement policies will make recommendations to their clients on what benefits to provide to members (Figure 4). Having said this, the individual medical scheme which may employ their own medical advisors and actuaries may have the final decision on which benefits to include in the respective plans. This implies that benefits may be rationed according the level of coverage with higher plans (at a higher premium) obtaining better benefits. Lower plans are affordable but are limited in benefits.

Figure 4: ADMinistrAtor MArket shAre

A merger between Metropolitan Health Group and Momentum was concluded in 2011 making the conglomerate the largest administrator in South Africa with over 33 per cent of market share.

10.4% Other 3.4% V Med Administrators (Pty) Ltd

6.0% Momentum Medical Scheme Administrators (Pty) Ltd

9.8% Self-administered

DiscoveryHealth(Pty) Ltd 28.9%

MetropolitanHealthCorporate(Pty) Ltd 27.0%

MedschemeHoldings(Pty) Ltd 14.6%


Figure 5: hosPitAl sector DeMogrAPhics

MeDicAl scheMe PerForMAnce AnD key inDicAtors 2009/10The following represents the distribution of health care expenditures in the private sector across service providers and includes financial performance

1.4.2 PrivAte hosPitAl sector There are 222 private hospitals with 187 distributed across the dominant 3 hospital groups which absorb 80 per cent of the market share (Netcare, Mediclinic, and Life Healthcare). The sector has recently seen growth in day wards, ICU, neonatal ICU, surgical ICU, and surgical wards. Admissions have increased by 105 per cent in the last five years with most hospitals running at over 85 per cent occupancy. Projections indicate a bed shortage in the next five years highlighting the need for additional staffing. Hospital demographics are reflected in Figure 5.

1.4.3 MeDicAl PrActitioners Healthcare practitioners are either employed by the state in the public sector or work in the private sector in independent practice, group practice and/or in private hospitals but may not be employed by private hospitals as service providers. Professional groupings under the South African Medical Association (SAMA), Pharmacy Council, and/or Nursing Councils, are organized by medical specialty to negotiate reimbursement for services. These groups are also increasing their involvement in assessment and appraisals of new health technologies.

Medical practitioners in private practice were formally organized into Independent Practitioner Associations (IPA’s) regionally and nationally. General and Family practitioners are mostly represented by the South African Managed Care Coalition (SAMCC – www.samcc.co.za), under the Association of South African Independent

% over prior year# Medical Schemes (2010) 100 -4.8# Options (plans) (2010) 332 -6.3# Principle members 3,612,062 3.6# Principle members 4,703,656 3.6# Total beneficiaries 8,315,718 3.1Av. gross contribution income increase per family (2010) 13%Average monthly contribution per family (2010) R991Gross contribution income (GCI) R96.5 B 13.7Medical expenditure (claims ) R84.7 B 11Medicine (retail pharmacy) R14 B 5.6Specialists R18.8 B 12.2General Practitioners R6.2 B 9Hospital expenditure R31.1 B 10Ward R12.7 B 6.9Theatre R6.7 B 17.4Consumables R1.5 B -19.3Medicines R3.6 B 3.4Managed Care Patients R6.3 33.9Non-medical expenditure R10.8 B 11.1Administration R7.8 B 4.4Managed Care R2.3 B 16.2Brokers R1.3 B 8.9Net Healthcare Deficit R459.6 B >500%Net surplus (with investments) R2.9 B 20Net Assets R32.6 B 10.7Reserves R30.9 B 10.4Solvency 31.6% 4

Source: CMS Annual Report 2010/11

Hospitals Clinics Theatres BedsPrivate 222 187 1237 33336Public 399 3057 2000 110143


Practitioner Associations (ASAIPA – www.asaipa.co.za).

The South African Society of General and Family Practitioners (SGFP – www.sgfp.co.za) functions as an autonomous special interest group of the SAMA. The SGFP endeavors to protect the interests and promote the image of general practitioners nationally, and ensures that GPs have a voice in the governing councils and committees of important decision-making bodies (e.g. Department of Health, the South African Medical and Dental Council, the Council for Medical Schemes, the SAMA, etc).

The SAPPF (www.sappf.co.za) was formed separately from the SAMA and was established: 1. Protect, preserve, promote and expand private

medical practice 2. Support the private healthcare sector in

accordance with the constitutional imperative

to progressively improve access to healthcare services for all South Africans

3. Protect and defend the role of private sector specialists.

It acknowledges the inequities and disparities that currently exist in the two tier system of healthcare and focuses on finding workable solutions to funding a future healthcare system in which quality healthcare services are made accessible to all. The SAPPF cooperates with other stakeholders including the State to develop a pragmatic, appropriately funded and resourced healthcare service, best able to utilize, incentivize and retain healthcare workers for the ultimate good of all South Africans.

Detailed demographic information of medical practitioners and other service providers may be found on www.medpages.co.za .

tAble 7 MeDicAl PrActitioner DeMogrAPhics

South AfricaMedical Practitioners 18 147 3.7Medical Specialists 9 637 1.96Pharmacologists, pathologists and related professionals* 47 0.01Nursing Assistants 56 039 11.42Professional Nurses 93 094 18.97Staff Nurses and Pupil Niurses 31 395 6.4Dental Practitioners 5 345 1.09Dental Specialists* 127 0.03Dental Technicians* 33 0.01Dental Therapists* 648 0.13Emergency Medical Services* 12 789 2.61Pharmaceutical Assistants* 1 059 0.22Pharmacists 11 425 2.33Radiographers 7 500 1.53Supplementary Diagnostic Radiographers* 170 0.03Community Development Workers* 101 0.02Dieticians and Nutritionists* 763 0.16Environmental Health Practitioners 3 172 0.65Health Science Professionals* 6 330 1.29Medical Researchers and Related Professionals* 75 0.02Medical Technicians / Technologists* 397 0.08Occupational Therapists* 3 779 0.77Optometrists and Opticians* 126 0.03Oral Hygienists* 194 0.04Physiotherapists 5 850 1.19Psychologists and Vocational Councillors 6 718 1.37Speech Therapy and Audiology 396 0.08TOTAL 273 098 55.67

* Public sector data only


1.4.4 PhArMAceuticAl AnD MeDicAl Devices inDustry The healthcare market includes both pharmaceutical and device suppliers which supply both private and public sectors. The market is valued at approximately R35 billion. This report will focus on the devices sector. Further information on the pharmaceutical suppliers industry can be found at the Pharmaceutical Industry Association of South Africa (PIASA) and Innovative Medicines of South Africa (IMSA) websites www.piasa.com and www.imsa.org.za respectively.

The South African medical equipment and devices market is extremely diverse with over 600 suppliers ranging from large multinational subsidiaries, distributors and agents for disposable medical devices to major equipment and has an estimated value of R10 billion. As an indication of the variability in size of suppliers, the South African Medical Devices Association (SAMED) membership of approximately 140 companies represents 80 per cent of this turnover.

Background and further information on the activities of the medical devices industry may be found at the SAMED website www.samed.org.za

Figure 6 MArket Access Processes

This chapter describes the hurdles that must be overcome in order to gain market access and reimbursement in the South African public and private health care environment.

Market access is currently defined by price and demand (utilization) and is largely restricted by managed health care interventions (technology assessment) employed by insurance companies and private hospitals. Figure 6 describes the various processes of market access in South Africa between the public and private sectors.

2.1 ProDuct registrAtion Unlike many other health care systems around the globe, medical products in South Africa which do not have a pharmaceutical component to not need to be registered. Medical devices which encompass a combination devices (may include a drug component) are subject to the same registration process as “scheduled substances” by the Medicines Control Council (MCC) under the Medicines and Related Substances Act 101 of 1965. Electro-medical

equipment with direct application to the body is regulated for safety and efficacy under the Hazardous Substances Act 15 of 1973 by the Department of Radiation Control.

Substances and combination devices

Under current law all manufacturers and suppliers drugs including combination devices need to obtain a pharmacy license from the Pharmacy Council

2. Market Access Processes

Mar

ket

TechnologyPipeline

PublicSector ICN

Procedure

Equipment

APL Formulary

RPLReg

istra

tion

PIN HTANAPPI

PrivateSector


in order to trade in South Africa. The process of licensing a business through DoH, MCC and SA Pharmacy Council is timely. Additionally, the required documentation and quality management systems for GMP related to pharmaceuticals is complex. This process may take up to 2 years and requires the company to employ a pharmacist.

Once licensed, the company may proceed to the application for a Section 36 Exemption- an exclusion of any drug from the operation of the technology in the application (i.e. a request for an exemption on the basis that the technology is a medical device). This can be a simpler method for achieving approval than going the traditional rout intended for drugs and substances.

The Council members in the Minister will work together to come to a decision on the application and may subject the applicant to unique manufacturing or control conditions they deem appropriate. After Council evaluation an application is submitted to the Registrar of Medicines and in most cases approval will be issued with conditions (e.g. labelling for physician use / sale ONLY). Problems with this step include the loss of applications and unwillingness by the MCC to accept responsibility for rejections and problems with the review process. Problems can often occur when a medical device seeking approval is beyond the scope of expertise at MCC. Alternatively, and if the above application is denied, the product will have to go through the full registration process. If the devise will be used for a clinical study a special provision may apply which will speed approval. Using a Section 21 application the product may be brought to market under “controlled and named patient circumstances”, such as if it is used in a clinical study. This process requires that the device owner follow all rules regarding the device registration and must report outcomes to the MCC, but it allows clinical testing to be done in parallel to the registration process.

The Pharmacy Act governs the pharmacy profession, the Medicines Act, GMP licensing of the company and the registration of the medicine.

Summary

For all other medical devices there is currently no regulatory control over which products enter the South African market with respect to meeting minimum standards regarding safety and efficacy. Having said this, new medical device regulations were published in mid 2011. With the advent of these

new regulaions emphasis will be made on allowing market access based on proven safety, quality and efficacy, international standards, and an aim to restrict the import of unsafe health technology. This will become an entry level requirement to the next level of regulation which includes health technology assessment.

2.2 Public sector Demand for medical devices (especially the high-tech and expensive technologies) in the public sector is driven by the physicians and departmental heads in the tertiary and academic hospitals. Depending on the nature of the device and whether or not it is listed and on tender, standard ordering procedures apply. As the device becomes more unique, specialized, and expensive it becomes more difficult for the device to enter into the public sector market.

All consumable medical devices require an inventory control number (ICN) that can be obtained from the respective provincial medical depots. This number is used to identify and list the item for ordering purposes. Devices, especially new devices, which are not desirable in large quantities but which require publishing a tender for purchase may often be purchased on an ad hoc basis requiring 3 price quotes before purchasing can be done. Tenders may run for up to a maximum of 3 years for consumables.

All equipment (including electro medical devices) are made through a tender procedure with price being the key factor.

The buying process of the Gauteng Shared Services Centre – GSSC - (the largest provincial buying authority in SA) is described in Figure 7. It is important to note that the other 8 provinces operate in a similar fashion:

1. The hospital needing the item will submit a request to GSSC

2. GSSC will check if the item is on tender or not3. If on tender it will send an official order to the

supplier4. If not it will first request that the supplier

provide a quote and then issue an order5. The order also specifies where the item must be

delivered6. The invoice and delivery note (proof of delivery)

are handed to the hospital7. The hospital processes the documents on

the central computer system for GSSC reimbursement

8. If GSSC is satisfied that the documentation is correct it is processed for payment


Figure 7: Public sector buying Process

2.3 PrivAte sector Service providers (medical practitioners and hospitals) may buy directly from suppliers or from wholesalers, pharmacies and/or associated hospitals with the hospitals being the distribution channel. Service providers are unlikely to purchase items which do not offer reimbursement.

In the hospital environment, the pharmacy will usually purchase a back stock of all consumable products used in the hospital departments; these purchases are only approved once by the central procurement offices of the respective hospital groups. The costs of some items used in hospital may be recovered via a specific ward or theatre tariff while others are recovered as fee for services or as part of a global (fixed) fee.

Any service provider that is considering the purchase of any medical device needs to be assured they will receive reimbursement which is typically acquired from insurance companies who are representing the patient or even from the patient themselves.

When it comes to specialized expensive equipment, the provider purchasing the device will need to be convinced with sufficient clinical evidence that the technology should be adopted and that there will be a return on their investment.

Medical device costs which are not normally recovered as part of any existing hospital and/or service provide tariff will be listing with Medikredit and given a NAPPI code. This does not guarantee automatic payment as there are a number of mechanisms in place at both the level of the funder and the hospital that have to meet certain requirements before these are funded in the private sector. This is particularly the case for high tech/high risk devices that are expensively priced.

2.3.1 nAPPi coDe The National Pharmaceutical Product/Pricing Index (NAPPI) code is entrenched in the South African private sector and aims to create standards for reimbursement of medicines and surgical products. NAPPI is a registered trade mark of MediKredit and allocates unique

NAPPI codes to identify surgical and consumable products used by pharmacists, doctors and hospitals. Product information received from manufacturers and suppliers is incorporated onto the MediKredit product file database which contains the recommended wholesale prices of the respective products and is available to stakeholders in the healthcare industry. Suppliers are required to first register with Medikredit, (Appendix 1), sign a memorandum of agreement to receive the surgical classification file (a onetime requirement), and use specific templates for code applications (Appendix 2).

The full procedure and templates are available on the MediKredit website www.medikredit.co.za as well as the Consolidated NAPPI Product File excluding the recommended wholesale prices of all products, and is available for use by any interested party free of charge. Once allocated, the NAPPI Product File with codes and list prices is distributed to medical schemes and hospitals which will use it as a claims and pricing reference.

2.3.2 ProDuct introDuction notiFicAtion (Pin) Process Some medical insurance schemes via their administrators and managed care companies have introduced an internal system for medical device classification. In this system insurance companies are notified of new products from suppliers and devices are classified internally according to function. This system provides a reference pricing tool that compares new product price with the average price of similar products within the respective classification. This system is also used as a decision tool to determine whether a new product is escalated to HTA.

Products that typically move to HTA are:• any product with a new active ingredient/

molecule/function• an existing product with a new indication/new

use/function• a product with no existing comparator on the

market• a product that makes an improved clinical or

efficacy claim

Hospital

Supplier

Payment Point

Invoice and Deliver

Order

Payment

Pape

rwor

k

Req

uest


Discovery Health and Medscheme Health Risk Solutions both use this system (Figure 8). The Metropolitan Group are expected to introduce same system in 2012.

Due to market dominance, procurement officers at hospitals insist that unless a product has been approved by Discovery via this process they will not purchase it.

Upon receipt of a NAPPI code from Medikredit, suppliers need to inform Discovery of the new codes and list price through their Pharmaceutical Benefit Management Department (PBM). The PBM will classify the product according to their system ([email protected]). Suppliers will be requested to assist with the placement of their new product to the correct category to ensure correct comparisons.

The in-hospital surgical and ethical management team (ISEM) will then conduct a price benchmarking exercise to analyze variations in pricing between products in that category. If the price is less than or equal to the average net acquisition cost (NAC - based on claims data for all products in that category), the product will be auto approved. If the price is greater than NAC, approval will be withheld and the supplier of the new product will be requested to complete a PIN form which includes information on:

1. Whether the product is a line extension of an existing brand

2. Whether the product is new but within and existing category or whether it requires a new category of product technology altogether

3. The net acquisition cost of the new product 4. Information on a comparators product 5. Clinical information

The electronic PIN template will be sent to the supplier for completion. If not submitted within 6

weeks, the new product will be declined. If ISEM are satisfied with the information submitted then the product will be approved.

If the incremental benefits do not equal the incremental price or if the device is considered a new technology (i.e. without a comparator), it must undergo a full technology assessment by the Clinical Policy Unit (CPU). Clinical evidence supporting the technology will then be carefully reviewed, taking into account its cost effectiveness and affordability to medical schemes.

Once the device obtains final approval, the new product will be published on the Discovery Approved Products List (APL) where it will be used as a formulary listing.

Medscheme Health Risk Solutions require suppliers to complete a new technology introduction form which outlines basic product and pricing information. The form will be reviewed and assessed based on the definition of new technology, and the supplier will be informed of the need for HTA.

2.3.3 heAlth technology AssessMent (htA) New products that are introduced at a premium price and truly represent a new category of technology but which are not considered to have a significantly improved cost/benefit ratio when compared to existing technologies will be sent to HTA by medical insurance schemes. Medical

Figure 8: Discovery new ProDuct introDuction notiFicAtion (Pin Process)

Process Owner

Supplier

PBM

ISEM

CPU

Activity

New NAPPI code and list price

Product classification(supplier assisted mapping)

Approved productslist (APL)

Price benchmarking

Pended

RequestPIN Form

Priceaccepted

Incr. benefit# incr. price

EvidenceReview

AutoApprovedDeclined

>NAC

=/<NAC


schemes are empowered by the Medical Schemes Act 131, and through their managed care partners, develop reimbursement policies for new technologies.

The administrators and managed care organizations mentioned in the above paragraph have processes in place to carry out these tasks effectively, formally and with transparency. Discovery Health is the only organization with a well documented process and a systematic approach that can take a minimum of 3 months to a maximum of 2 years (a longer timeframe in the event that extensive economic modeling is required) (Figure 9).

QUALSA, the managed care organization within the Metropolitan Health Group (MHG), follow with a well organized department and similar processes, but without the same emphasis on health economics. QUALSA is known for a good pragmatic process that may be more objective and practical when it comes to reviewing medical devices. In early 2011 MHG acquired Momentum Medical Scheme Administrators (MMSA) and consolidation of

managed care functions and risk management is expected to be concluded mid-year.

Medscheme and their Health Risk Management Division which are responsible for managed care and risk management, follow as a distant third in organization. Medscheme limits its review to clinical evidence alone. For the rest of the organizations however, none of the processes are documented or shared.

Collectively, these three organizations represent approximately 75-80% of the entire insured market.

The South African Medical Device Industry Association (SAMED www.samed.org.za) has created a template and guideline for industry to use in the application for reimbursement that meets the needs of medical schemes (Appendix 4). This document was created in the interests of achieving consistency in these applications and is based on various application forms used by medical schemes.The typical process is as follows:

Figure 9: Discovery heAlth htA by the clinicAl Policies unit

Data collection:• An evidence-based systematic literature review approach is followed • International standards for identifying and summarizing evidence are used.• Clinical knowledge bases used include but are not limited to: - HAYES – literature review of procedures, devices and drugs - Cochrane – literature review on diseases and conditions - Micromedex – intensive literature review on new and existing drugs - Medical Journals– New England Journal of Medicine, Lancet, Medline, etc.

Clinical Evidence Filtering and Rating:• Evidence-based literature, the opinion of local and international leaders and current treatment guidelines

are used to ensure that the health technology is safe, ethical, clinically effective and cost-effective.• These factors are considered in the framework of the type of patient receiving the treatment, the type of

healthcare professional delivering the care and the level and frequency of care.• A rating is applied (Figure 10) which reflects the strength of the evidence – the safety and efficacy of

health technology, indications for use, patient selection criteria, and medical consensus internationally.


Figure 10: Discovery grADing systeM For new technologies

Financial Filter:• The filter is used to ensure that the proposed

health technology is responsibly funded, taking the following into account:

- Incidence and prevalence of a condition - Historical and projected costs - Member and health care professional expectation - Competitor positioning - Adverse selection - Contribution impact - Ability to manage cost and quality

If the clinical filter is not passed the evaluation of the new technology will not proceed to the financial filter.

Health Economics:• Health Economic evaluation is done to

determine if the benefit of the new technology is worth the proposed cost of the technology.

• Health Economic models are used to: - Approve or decline technology outright - Determine caps or limits - Determine the risk pool – MSA or Hospital Benefit - Determine alternative re-imbursement items - Negotiate reduced prices from suppliers• Ensures the development of new healthcare

technology funding policies in a credible and consistent manner.

• Based on the principles of cost-effectiveness rather than simply on the cost of the new technology.

• Empowers Discovery Health to negotiate prices with manufacturers.

• Not all Health Technology Assessments will be taken through a formal health economic assessment.

• Cost of new technology evaluated with respect to the clinical benefit it provides our members

Health Technology Documentation:• Clinical Information summary Page - Summary of all literature that was reviewed. - Includes the clinical rating and funding decision of the technology. - Available to manufacturers, pharmaceutical companies and health care providers.• Clinical protocol - Drafted for internal use only. - A version controlled document that displays the most up-to-date information. - Details the processes and codes applicable to the specific technology. - Includes a brief description of technology, funding decisions and clinical entry criteria if applicable.

Clinical Sign-off Process:• The Discovery clinical panel that is allocated

to endorse the funding policy of the healthcare technology under review consists of a General Practitioner, Specialists, PhDs, Pharmacists and Nurses.

• The information summary page is presented to the panel twice a month for review and sign-off.

• Developed policies and protocols are signed-off clinically and by the Benefits Committee.

Communication:• Funding decisions are communicated to

suppliers and/or providers.• Funding decisions are communicated internally

to all call centers.• Training takes place in advance of new policy or

protocol that is developed.• Implementation of new policy will take place

after training.• Communication of information also occurs

between other interested parties and health care professions (upon request).


2.3.4 reFerence Price list (rPl) The RPL refers to a set of codes, descriptors and tariffs required by service providers (defined as medical practitioners, allied health workers and private hospitals) allowing them to charge for the delivery of services, including the use of equipment.

Formerly the National Health Reference Price List (NHRPL) was published by the Department of Health (DoH) on the department website and was easily accessible by service providers and patients. The RPL is now non-existent and the DoH is in the process of developing a new pricing determination process to create a new set of billing codes and tariffs. The last published RPL of 2008 may still be used however by funders as a reference for their service rates as it is adjusted annually. Despite this it is generally the case that providers and funders may charge and reimburse as they deem appropriate. This is explained in greater detail under the chapter on dynamics shaping market access processes in South Africa.

New technologies, including devices with a NAPPI code, may be approved for reimbursement by funders. However, unless there is a RPL code that is relevant to the procedure which corresponds to an equitable tariff (fee) payable to the relevant service provider, market access may be restricted.

A RPL code is required under the following circumstances:

• When the technology is associated with a new procedure it may be that a new code and tariff will be required for the medical practitioners providing the service. Not having a new code can be a disincentive to adopt the new procedure and use of the technology.

• Medical equipment may require a tariff code that hospitals can use to recover their investment in the new technology. Few new equipment tariff codes have been published since 2004 with the responsibility now often falling on hospital groups to negotiate their own terms for codes and tariffs with individual medical insurance schemes. This has posed a challenge for suppliers as reimbursement may be denied in the absence of a code.

Suppliers are advised to check for the availability of an appropriate code on the existing RPL to assess whether there is a need to make a new application or simply “piggy back” on an existing code. Suppliers should also explore whether hospitals already have a code for the category of equipment; Mediclinic are the only hospital group that have a reference price list of their own in the public domain.

Guidelines formerly published by the DoH on how to complete an application for new codes and tariffs included the following:

9. new technology

9.1.1 Requests for new technology codes may be subject to a health technology assessment (HTA) process by the Department of Health, Directorate Health Technology Unit. And their inclusion in the RPL may be suspended pending the outcome of such process.

9.1.2 HTA reviews may be facilitated by the provision of comprehensive information relating to HTA assessments conducted internationally and locally, including but not limited to scientific literature on the new technology. Information relating to the need for the introduction of such technology and the projected utilisation in South Africa is required.

Individual suppliers may not make an application for new codes and must instead acquire a code through the respective provider group with whom they are working with (e.g. can be a medical group or hospital depending on whether the technology is equipment-based or whether its adoption/use is contingent on the technologies use in a new procedure). Individual hospitals and not the HASA will make the application for new codes either via DoH or directly with insurance companies. The process typically follows a cycle of one year with new submissions made in the first quarter of each year to allow sufficient review and consultation time with publication in the following year’s RPL and/or medical scheme benefits.

2.3.5 PrivAte hosPitAl venDor registrAtion AnD new technology introDuction All hospital groups require formal vendor registration prior to the introduction of new products. Requirements are generally as follow:

• Typical Vendor Registration details*: - Company trading details - Legal entity registration number - VAT Registration number - Office Bearers - Contact person details - Banking details - Black empowerment (BEE) rating - Quality accreditation i.e. ISO13485 - Trading terms - Distribution arrangements

Suppliers are usually asked to wait for formal approval and the issuing of a vendor number before they are allowed to trade in these hospitals.

• Typical New Product Information Details: - Quality information i.e. ISO13485; CE Mark; FDA, etc. - Target market - New, line extension, or upgrade - Benefits in health care setting - Indications, contra indications and user related guidance and warnings


- Competitor information - Clinical information where necessary - Full product and price list - Letter of approval (e.g. APL) from medical schemes (payers) - Catalogues/brochures (paper and electronic)

Hospitals issue requests for proposals (RFP) on an annual basis for products that they wish to enter into commercial buying contracts with suppliers. These may be fixed period contracts and suppliers are asked to not sell into hospitals where there are contracts in place, but are invited to engage at head office procurement department to ensure the next RFP cycle includes all new suppliers.*Differs slightly between groups

Various dynamics exist within the South African healthcare environment today that will shape market access procedures for new technologies in the future. These are largely driven by a political agenda through the enactment of various pieces of legislation and initiatives that infer that Health Technology Assessment (HTA) will be used as part of continuously evolving processes that seek to ensure equity in the healthcare system.

3.1.1 nAtionAl heAlth insurAnce The South African Strategic Roadmap process of 2008, involving a wide range of stakeholders and facilitated by the Development Bank of south Africa (DBSA), highlighted just how far behind other comparable countries South Africa is when it comes to key health indicators and outcomes. Some of the findings of this process have led directly into the development of what is now known as the department of Health’s Ten-Point Plan (Figure 12). The Ten-Point Plan involves the following:

• Top 5 DALY disease burdens of which 10% constitute maternal, peri-natal and nutritional conditions - second only to HIV/AIDS at 28%.

• Shortfall in health care human resources of 64 000 based on current health needs.

• Quality assurance, highlighting concerns over safety, clinical governance and state of equipment as well as others.

• Rising private sector health costs.• Deteriorating public health facilities.• Reform of institutional management and policy.

3. Dynamics Shaping Market Access Processes

Figure 11: DynAMics shAPing MArket Access Processes

Mar

ket

TechnologyPipeline

PublicSector ICN

Procedure

Equipment

APL Formulary

RPLReg

istra

tion

PIN HTANAPPI

PrivateSector

MarketDynamics

NHI

MHC

PMB - BD Project

Price Determination Project

Office of standards and compliance (OSC)


Universal access to healthcare is a right enshrined in the South African constitution and has given rise to the proposed National Health Insurance (NHI) plan (point ii in the 10 point plan). The ANC government has committed itself to the establishment of the NHI system.

It is important for suppliers to note that a Benefits Advisory Committee (BAC) will be established as part of the NHI authority and is intended to be an independent statutory body under the National Health Act 2004 for the purpose of making recommendations and giving advice to the Minister of Health about which medical interventions, drugs and medicinal preparations should be made available as part of the comprehensive package of benefits to be covered by the NHI.

No new medical intervention, drug, or medicinal preparation may be made available as a healthcare benefit unless it has received recommendation by the Committee.

The Committee will be required by law to consider the cost benefit ratio of a proposed medical intervention, medical technology, and medical preparation with respect to existing technologies. The Committee will be staffed by personnel with relevant clinical experience, expertise in health economics, law, and health administration.

Committee functions will include giving recommendations and advice relating to:• Which medical items should be made available

to the population as part of a comprehensive benefits package that is funded by the NHI

• Safety, effectiveness and cost effectiveness• Which technologies will improve health

outcomes for patients by ensuring that they are supported by evidence of their safety, effectiveness and cost effectiveness

• Systematic reviews of available evidence on existing and new technologies

• Interim funding to enable data collection in

clearly indicated circumstances in order to establish an evidence base

• Regularly publishing information on all evaluations of evidence

The functions described above fall within the domain of HTA and it is expected that new technologies will undergo review either at the request of providers or upon submission by suppliers.

A list of pharmaceuticals, medical suppliers and devices will be linked to an “essential drugs list” (EDL) and updated on a regular basis by the BAC (frequency yet to be defined). There will also be a specific exclusions list with medically unnecessary services and expensive therapies that are considered to have little impact on health care. Periodic reviews will take place to evaluate the population’s epidemiology and demographic profiles and the emerging evidence of health treatments, interventions or technologies. A key message is that any technology on an exclusion list will not be accessible by patients in the NHI.

Recent Ministerial workshops with local and international stakeholders on NHI have revealed:1. A strong push for a single payer system 2. 5 cost-drivers identified by the MoH

which include human resources, equipment, pharmaceuticals, lab services, blood and blood products

3. Cost controls through price regulation and Diagnosis-related Groups (DRGs) as a reimbursement method for hospitals

4. Cost-saving and cost-cutting interventions with controls on health technology, implementation of performance-based payment systems, and capitation

5. “Universal coverage” used as a synonym for the Green Paper’s version of NHI

6. Plans to manage corruption in the public and private sectors

7. Inquiries into why R&D is producing cost increasing instead of cost-reducing interventions

Figure 12: nAtionAl heAlth roADMAP 10 Point PlAn

Following extensive consultation with key role players and stakeholders, the National Health System has adopted a Health Roadmap for the 2009/10 - 2011/12 planning cycle consisting of 10 key priorities (which is also referred to as the 10 Point Plan), which are as follows:

i. Provision of Strategic leadership and creation of a social compact for better health outcomes;ii. Implementation of a National Health Insurance Plan;iii. Improving Quality of Services;v. Improving Human Resources Managementiv. Overhauling the health care system and improve its managementvi. Revitalisation of physical infrastructure;vii. Accelerated implementation of HIV and AIDS Plan and reduction of mortality due to TB and associated diseases;viii. Mass mobisation for better health for the population;ix. Review of the Drug Policy;x. Strengthening Research and Development


3.1.2 MAnAgeD heAlth cAre Managed care within the context of South Africa is a term used to refer to a diverse range of healthcare organisational strategies aimed at controlling cost, improving access to care, and assuring higher levels of quality of care provided to those covered by medical schemes.

Managed health care as practised in South Africa is made up of four components, briefly described as follows:

• Utilisation review: - Monitors amount and appropriateness of services delivered - Pushes continuous improvement in quality of care through case management• Quality control: - Targets cost effectiveness of care through focus on improving quality - Evaluates programs and accreditation (quality assurance)• Outcomes measurement: - Focus on clinical outcomes - Seeks to improve patient quality of life - General management of complications, the use of drugs, re-admissions and re- interventions (theatre visits)• Risk Sharing: - Targets risk management both from a physical (patient) and financial (health insurance scheme) perspective - Develops alternative reimbursement models - Develops programs that reduce bad practices and promote wellness

Through their managed care partners both hospitals and medical insurance schemes have developed and implemented programs based on these core components. The implementation level of these core components however may vary across sectors and institutions.

Regulations promulgated in terms of the Medical Schemes Act of 1998, Act No 131, define managed care as: clinical and financial risk assessment, with the aim to facilitate appropriateness and cost-effectiveness of needed health care services within the constraints of what is affordable and allowable, and through the use of clinical management-based programs.

The regulations also define a managed care organisation as: a person who has a contract with a medical insurance scheme to provide a managed health care service (in the framework of regulation 15A). The regulations further require that managed care arrangements with medical insurance schemes be accredited by the Council for Medical Schemes (CMS)

Health Technology Assessment (HTA) is defined under Regulation 15D.

Regulation 15D (Standards for managed health care) covers both information on the Health Technology Assessment (HTA) and rules surrounding the standards for managed health care. According to this regulation, if any managed health care is undertaken by a medical scheme or by a managed health care organisation, the medical scheme must ensure that:

a. The managed health care program uses documented clinical review criteria which is based on evidence-based medicine and takes into account cost-effectiveness and affordability.

b. The managed health care program uses transparent and verifiable criteria for any other decision-making factor affecting funding decisions.

c. The managed health care programs are evaluated periodically to ensure relevance for funding decisions.

d. Qualified health care professionals administer the managed health care programmes and oversee funding decisions and that the appropriateness of such decisions are evaluated periodically by clinical peers.

e. Health care providers, any beneficiary of the relevant medical scheme, or any member of the public will be provided upon demand a document which lays out:

1. A clear and comprehensive description of the managed health care programs and procedures

2. The time limits for appealing a rejected procedure and a review of decisions which may adversely affect the rights or entitlements of a beneficiary

3. Any limitations on the beneficiary’s coverage rights or entitlements, including but not limited to restrictions on coverage for specific diseases, protocol requirements and formulary inclusions or exclusions.

Medical insurance schemes have been employing the HTA informed funding decisions for some time now. Unfortunately, there remains little overall harmonisation regarding their general processes and transparency as it relates to decision making criteria. Budget impact and/or affordability are more important that cost effectiveness and clinical evidence in the decision making process of how technologies and treatments will be implemented into the care plan. The final decision for any new treatment lies with the medical insurance scheme and will vary from region to region. This usually presents significant challenges to suppliers as a new technology may be evaluated against a different set of criteria across the industry, creating an extensive administrative burden.


3.1.3 PrescribeD MiniMuM beneFits (PMb’s) Prescribed Minimum Benefits (PMB) are a set of defined benefits which ensure that all medical scheme members have access to certain minimum health services, regardless of the benefit option they have selected. The aim is to provide people with continuous care to improve their health and well-being and to make healthcare more affordable. PMB’s were introduced to avoid incidents where individuals lose their medical scheme coverage in the event of serious illness and are put at grave financial risk due to unfunded utilization of medical services. They also aim to encourage improved efficiency in the allocation of private and public health care resources. The prescribed minimum benefits are paid for by a risk pool fund allocation where a principle of equity is upheld.

Members will receive a similar minimum package of care regardless of which option they belong to. Although the PMB package of care has been law since 2000, there remains significant variation of care associated with these conditions in any given scheme. The CMS has initiated a benefit definition project to inform scheme providers of PMB conditions and new changes. While it is feared that benefit definitions may increased cost, algorithms for chronic diseases may have actually contributed to a reduction in costs associated with those conditions. When benefits are defined care is standardized and costs may be contained. Since the proposed benefit definitions have well defined entry criteria, consumer demand may be reduced.

Medical schemes have to cover costs related to the diagnosis and treatment and care of:• any emergency medical condition• a limited set of 270 medical conditions as

defined in the Diagnosis Treatment Pairs• 25 chronic conditions as defined in the Chronic

Disease List

When deciding whether a condition fits a PMB criterion, the doctor is encouraged to only review the medical symptoms themselves and not take into consideration how the injury was incurred (diagnosis-based evaluation). Once the diagnosis has been made, the appropriate treatment and care is decided upon as well as where the patient should receive the treatment (at a hospital, as an outpatient or at a doctor’s rooms).

Currently in the works are the formation of the Clinical Advisory Committees (CACs) which will assist in PMB related decision making. CACs consist of multidisciplinary teams with individuals from relevant clinical disciplines, patient groups, funders, and manufacturers of medicines and devices.

Criteria guiding the development of PMB conditions will include:a) Evidence-based medicineb) Demonstrated cost-effectiveness of interventions where applicable

c) The specification of the most appropriate level and setting of cared) Administrative simplicitye) Appropriate clinical use in accordance with “medical and surgical management” regulations

Suppliers should participate in these discussions and prepare their technologies to comply with the HTA. Technologies which are not part of a treatment algorithm and resultantly appear on a negative list will have limited market access (see Benefits and Advisory Committees).

3.1.4 reFerence Price list - historyUnderstanding the history of the Reference Price List (RPL) offers insight into how and why the new DoH controlled process may impact the device industry in the future.

The NHRPL was formerly known as the RAMS or BHF “Recommended Scale of Benefits” or RSOB. It was composed of 2 parts, the Medical Practitioners RSOB (fee schedule) and the Private Hospital RSOB (equipment codes and tariffs)

Since medical insurance schemes became involved in the South African fee-for-service (FFS), tariffs have been predominantly negotiated between funders and private sector service providers (medical practitioners and private hospitals).

Previously the Representative Association of Medical Schemes (RAMS) would negotiate with service providers and set FFS tariffs which would be published in the Gazette each year. This system was abolished in 1994 with the advent of new regulations in the Medical Schemes Act. This change shifted RAMS from negotiating an actual set of FFS prices to negotiating reference prices. As a result, medical schemes were expected to negotiate their own prices separately but could use the reference prices as a guide.

During this time the South African Medical Association (SAMA) began publishing a competing reference price schedule that applied to medical practitioners (General Practitioners and Specialists). This additional tariff schedule resulted in fees that were typically higher than the RAMS reference prices.

To complicate matters, the Hospital Association of South Africa (HASA) received permission from the competition authorities to set its own reference pricing. The HASA and RAMS resultantly negotiated a common reference price list which all parties adhered.

In 2004, the Competition Commission (Commission) declared that the centralized reference tariff schedules produced by the Board of Health Funders (BHF – formerly RAMS), HASA and SAMA should be stopped as they resulted in anti-competitive outcomes. The commission reassigned


pricing responsibilities to both hospitals and medical schemes which resulted in further pricing and corrupt competition practices.

The Council for Medical Schemes was finally given power to assume responsibility of pricing and established a reference tariff schedule called the National Health Reference Price List (NHRPL). The NHRPL derived no commercial gain from establishing the tariff schedule and therefore fell outside the jurisdiction of the Competition Act.

The NHRPL was only able to achieve a limited set of objectives however. As a reference price schedule the values were not determined by negotiation but instead by cost analysis. In reality however, the medical service providers with market power (hospitals) were able to influence the cost analysis when it suited them and without any market penalty.

In the case of specialists, no firm pricing was set and medical schemes were forced to accept balance-billing practices. In addition schemes were required by the Medical Schemes Act to fund prescribed minimum benefits (PMBs) fully.

The NHRPL process was ultimately handed over to the Department and became referred to as the Reference Price List (RPL). While schemes used it as a benchmark for their tariffs, providers saw it as cost-based system of administered prices. The new problem with the RPL is that it permitted providers, with permission, to privately set prices and the code structures that would ultimately be charged as balance-billed amounts to patients.

The RPL process ultimately could not achieve a satisfactory outcome on final prices as cost analyses occurred without consideration of the budget constraints of medical schemes and medical scheme members. Schemes would strongly object to the publication of benchmark fees that would immediately translate into higher costs. Providers on the other hand objected to going through costly benchmarking exercises that ultimately did not lead to adjustments in the RPL.

Last year the NHRPL was scrapped by the High Court in a new policy for price determination in the private sector under a healthcare pricing authority. The HTA is expected to be included in the process.

The projected pricing authority will be a commission that can function independently to ensure that the trust of all stakeholders is achieved. The figure below identifies four potential functions of the new authority. The first job of the new authority will be to manage a negotiation chamber where healthcare prices can be negotiated on an annual basis.

Figure 13 outlines the possibility of an arbitration mechanism to ensure prices are determined in a timely manner. The figure additionally proposes a compliance function as well as research function which could perform technical analysis of prices and consider alternate remuneration mechanisms. The Commission aspect may incorporate the RPL activities as well as the current medicine pricing committee and may have the function of providing advice to the Minister of Health in respect to healthcare costs.

Figure 13: Price DeterMinAtion FrAMework

IndependentArbitration

Provide information to other agencies where appropriate

Commission

Research Arm

Courts(review butno appeal)

Managementof negotiation

chamber

ComplianceInvestigationsEnforcement

TechnicalReview of

PricesAdvice to Minister

Should be completely independent to achieve the trust of all stakeholders

Should considerthe role of the RPL & PricingCommitte e

3.1.5 oFFice oF heAlth stAnDArDs AnD coMPliAnce (ohsc) In the National Health Act of 2003, the Department of Health integrated the National Health Amendment Bill which empowers the Minister to establish an independent Office of Health Standards Compliance (OHSC). The OHSC will perform independent oversight on healthcare and report to the Minister. The Office includes 1) the Inspectorate – people trained by the Quality Care Commission in the United Kingdom; 2) Environment Healthcare Inspectors who would work under a CEO; and 3) the Ombud- a statutory office that would perform investigations and decide on accountability.


The MoH has repeatedly stated that National Health Insurance (NHI) in South Africa would not be successful without quality healthcare in the public sector. To achieve this, two preconditions for NHI have been identified: 1) A complete overhaul of the manner in which public hospitals are currently run, and 2) prices in private healthcare must be re-calculated.

The six basic Core Standards for quality healthcare enforced by the bill are: • cleanliness, safety and security of patients • attitude of health personnel towards patients• infection control• management of drug stocks • long waits to receive medical attention

3.1.6 centre For clinicAl excellence in heAlth AnD heAlth cAre The NDoH National Coordinating Centre for Clinical Excellence in Health and Health Care will be established. The operations of the Centre will be located in academic sites of excellence, the MRC, and at the NDoH central office. The central office will provide a coordinating function. It will bring together associations, professional groups, provincial departments of health, and the academic community to define and oversee quality health care. Associations and academic departments will be able to access resources from the Centre in order to work on

excellence and cost effectiveness standards in clinical care. A priority for the Centre will be to coordinate the development of health care standards, guidelines and protocols in health care.

The Centre will:• Provide guidance on the use of new and existing

medicines, treatments and procedures• Make recommendations to the NDoH,

provincial departments of health, municipalities and other organizations in the public, private, voluntary and community sectors on how to improve people’s health and prevent illness and disease

• Advise on the cost-benefit analysis of medicines, procedures and interventions that will be offered in an NHI healthcare environment

• Provide evidence for suggested health care interventions and practice

• Develop and define the clinical standards that people can expect to receive from services which are part of the NHI package of health care delivery

• Provide guidance on standards for clinical treatment and give an indication of treatment effectiveness and safety

• Develop a clinical outcomes evaluation for primary care practitioners and primary health care NHI practice

Doing business in the South African health care system requires a comprehensive understanding of the changing laws and the government role-players and sectors they work in. Opportunities for suppliers should be seen in the context of increasing product volumes through an increasing market potential. Short to mid-term, private sector growth will come from increased consumerism in the formally employed but uninsured population, and the activity of service providers (namely hospitals), which will be competing for a large market share through the lower income market segment by offering value for money.

In the long term the public sector health institutions will improve their quality of service delivery such that it becomes close to that seen in private sector care. When this occurs, competition will increase even further with respect to delivery of cost-effective health care. Having said this, it is acknowledged that the public sector and NHI delivery will focus

on primary health care where the private sector will scale up on specialized medicine. Understanding these market segments will be strategically important.

To achieve the overall objectives of a new health care vision the government has been forced to make legislative changes underpinned by the constitution of the country. Today’s selling must ascend beyond the traditional sales pitch isolated to the traditional customers. By developing scientific knowledge, knowledge of business issues and perspectives, and a value proposition that meets all perspectives, probability of success is likely. To ensure technologies are included in future treatment algorithms, suppliers will need to ensure that evidence is produced that shows value of the technology. How companies allocate resources to the technology and whether it is a strategic priority will define the company’s success in the future South African market.

4. Conclusion


Information from this report has come from the following documents:

www.doh.gov.za Department of Health

www.treasury.gov.za Budgets and Expenditure Review 2005/06 – 2011/12 National Treasury

www.medicalschemes.com Council for Medical Schemes Annual Report 2009-2010

www.hasa.co.za Hospital Association of South Africa: Private Hospital Review 2009

www.medikredit.co.za Medikredit: NAPPI code registration and application

www.bhfglobal.com Board of Healthcare Funders

www.mccza.com Medicines Control Council

www.samed.org.za South African Medical Devices Association

www.imsa.org.za Innovative Medicines of South Africa

www.piasa.co.za Pharmaceutical Industries Association of South Africa

www.statssa.org.za Statistics South Africa

www.mediclinic.co.za Mediclinic Hospital Group: Reference Price List

www.wilbury.co.za Healthcare Review

5. Bibliography


6. Appendices

6.1 MeDikreDit suPPlier registrAtion ForM

6.2 MeDikreDit nAPPi APPlicAtion ForM


6.3 Discovery Pin ForM


6.4 Discovery htA Policy

Discovery welcomes the introduction of new technologies which are of proven clinical benefit for the South African market. There is a need to ensure that these technologies provide value-for-money for the members of medical insurance schemes which is managed by Discovery.

At Discovery Health, funding policies are based on a rigorous evaluation process which is applied to new pharmaceutical products, technology, and medical devices. This process is in line with international trends in that it is similar to regulations and rules adopted by various governments, reimbursement agencies and independent health insurers. Price is an important issue with new technologies coming to market and focus is placed on pharmaco-economic evaluation of new and costly technologies. Discovery Health has therefore revised its requirements for its reimbursement review process as described below:

In addition to the usual information required in the standard submission form (included for review), Discovery now also requires the following:1. Budget impact analysis which should contain the following: i. Understanding of local disease incidence and prevalence data of the condition which the intervention is intended ii. Market share of the comparator agent it is expected to replace or supplement the expected market share of the new product in year one of launch as per the manufacturer’s sales forecast2. Pharmaco-economics analysis (only for products where the treatment cost exceeds the current standard cost of treatment, defined by the comparator selected in 1. above): i. Health economics model which is reflective of South African medical practice ii. The model must reflect relevant local costs iii. The model can be submitted in hard copy but electronic versions are preferred3. Timing of submissions: i. It is imperative that Discovery Health is given sufficient notice of the launch of a new product. We would like to be notified of a product launch at latest by June of the year prior to launch in order to ensure that the impact of the product is considered during the budgeting cycle of the scheme. ii. If all the information requested is provided (i.e. clinical data, budget impact data and health economics data), a response on funding may be expected within a period of three to six months after receipt of the submission (dependent on the complexity of the product/intervention under review). iii. When all the requirements for an evaluation are not met, an extension of the time lines stated above can be expected. iv. Discovery Health has the right to perform its own research and pharmaco-economic model. v. Existing products (already launched) that have not undergone a review and which may be affected by a policy or protocol change at Discovery will undergo a similar process.


6.5 sAMeD reiMburseMent APPlicAtion teMPlAte

SAMED VALUE DOSSIER TEMPLATE

Executive Summary

1. Applicant Details

Name of manufacturing company or local distributor

Sole Supplier of Brand

Primary Contact Secondary Contact

Name

Title

Telephone

Cell Phone

E:Mail

Fax

Select one or more boxes that best describe your HT:

Medical / Surgical deviceCapital equipmentIn Vitro Diagnostic testScreening testPathology testProcedureDevice-drug combinationSingle-use itemRe-able item (number of limited re-uses:______)Re-uasble item (number of re-uses:_____)

Type of Submission (X Box)

Original application (a new application never previously submitted)Re-submission (submission of new information for an existing technology)

This application is comprised of: (X Box)

Paper onlyElectronic onlyPaper and electronic (preferred, e.g. dossier + CD ROM)

Date of submission:

Launch date in South Africa:


1. Technology Review

1. Description of Technology2. Sequence of Operation3. Mode of Action4. Registration Status (local; international)

Description Date and type of registration Registered indications for use

USA (FDA)

Conformité European (CE)

ISO 13485

Other

South African Registration(e.g. MCC) South African registration:

Yes No N/A

(N/A = not applicable) (X Box)

Date of Registration:

Registered indications for use:

2. Clinical Review

2.1. Indications for use2.2. Clinical trial program2.3. Contraindications for use2.4. Warnings and user related guidance2.5. Health care professionals who will use or administer the technology and in which setting.

Primary care (e.g. general practice)Hospital theatre or warsProcedure room or outpatient facilityHome CareOther

2.6. Clinical Evidence Summary

Author Title Publication Study Type Outcomes (vs. control)

2.7. Description of relevant training strategy and programs

2.8. Procedure and billing information/codes

Type of Code Code DescriptionNAPPI CodeRPL CodeCPT Code


3. Nature and Impact of Target Condition(s):

3.1 Disease and current treatment descriptionSequence of Operation3.2 Epidemiology: Incidence and prevalence (if available) Registration Status (local; international)

Please attach references/ evidence supporting incidence, prevalence or utilisation rate information.

4. Comparator Analysis

4.1 Technology that will be replaced or supplemented by this technology4.2 Evidence of head to head comparisons of new technology with current treatments4.3 Clinical flowchart or algorithm illustrating any differences in the clinical pathway linking the technology with patient outcomes with that of the comparator technology (if available).

5. Economic Analysis

5.1 Outcomes Summary of Test and Control

Group Description of Technology

# Patients treated

Outcomes Measure % ARR RRR NNT

New Technology TestComparator 1(control)Comparator 2 (control)

5.2. Device Costs (price) and related consumables

NAPPI Code Product Code Product Description Recommended Selling Price (incl)

5.3 Equipment ownership

LoanRentedOwned

5.4. Economic Evaluation (CMA; CEA; CUA):

Evaluation Type Reference (Y/N) Outcomes NotesCMA

CEA

CUA

5.5. Budget impact analysis

6. Legal, Ethical, Societal and Operational Considerations

7. Appendix (on CD)

8. References (other literature not included in evidence summary)

Partners:

Medtech SwitzerlandWankdorffeldstrasse 102Postfach 261CH-3000 Berne 22Phone +41 31 335 62 41Fax +41 31 335 62 [email protected]

Medtech Switzerland is an initiative of the Swissgovernment, Osec and the Medical Cluster to promotethe export of medical technology to key world markets.

the south african market for medical devices.€¦ · the south african market for medical devices....

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