Gavin Steel
Gavin Steel

THE Department of Health will be paying the lowest prices in the world in its next HIV/AIDS drug tender, despite not pushing prices down as far as it had hoped, it said on Monday.

The tender will run for three years from April 1 and is worth an estimated R14bn, according to local generic drugs maker Aspen Pharmacare.

Before the department called for bids last year, it published a reference price list detailing how much it was prepared to pay for various HIV/AIDS drugs. However, many of the prices it has negotiated with drug firms are considerably higher than those on the list.

For example, the generic version of the fixed-dose combination (FDC) pill Atripla, which combines tenofovir, emtricitabine and efavirenz, was originally pegged at R73.78 for a 28-day pack, but the contracts awarded to drug companies are for prices ranging between R101.89 and R109.44 a pack.

These FDCs form the backbone of the government’s treatment programme, as they are logistically simpler to manage than providing patients with three separate sets of pills.

When asked why the health department had agreed to pay prices so much higher than those on its reference prices list, its head of sector-wide procurement, Gavin Steel, said: "We built up the reference price list from fundamentals such as APIs (active pharmaceutical ingredients). The exchange rate went south after we calculated the reference price(s). Our prices are still the lowest in the world," he said.

The breakdown of the prices and volumes awarded to pharmaceutical firms is detailed in a document to be published on the department’s website later today.

Aspen Pharmacare’s head of strategic trade, Stavros Nicolaou, agreed that South African HIV/AIDS drug prices were low. He said manufacturers’ margins had been squeezed in the current tender, which expires at the end of March, as the depreciation in the rand had made imported APIs more costly.

APIs can account for up to 70% of the cost of HIV/AIDS drugs, according to the health department.

The next tender has new provisions that allow the health department to adjust prices every six months to take into account exchange-rate fluctuations, measures that are expected to help ensure that drug manufacturers remain viable. Last year, Aspen said the sharp depreciation in the rand led to its selling some of its HIV/AIDS drugs at a loss.

Aspen emerged as one of the winners in the 2015 HIV/AIDS drug tender, as it secured a quarter (24%) of the crucial FDC contract. The rest of this contract was split between Sonke (30%), Mylan (28%) and Cipla Medpro (18%). Local drug maker Adcock Ingram failed to win a share of this key contract, though it did get a share of several smaller ones.

Sonke is a joint venture between Indian generic drugs maker Ranbaxy and Community Investment Holdings. It does not currently have local manufacturing capacity.

Cipla Medpro CEO Paul Miller said his company had a track record of supplying close to 1-million packs of HIV/AIDS drugs a month.