South Africa is an emerging market for pharmaceuticals, and one that shows signs of long-term growth.

The South African pharmaceutical market is by far Africa’s most vibrant. At producers’ prices, the market was valued at some US$663 million in 2001 and US$814 million in 2002. Drugs account for some 18% of the total healthcare bill, relatively high by global standards. Growth in pharmaceutical consumption has wildly outstripped that of both durable goods and non-durable goods (to which medicines belong) over the same period. With domestic output declining, demand has increasingly been met by imports. Pharmaceutical imports have increased by 154% in real value terms since 1991.

Expenditure on drugs has historically been substantially more than the factory value of sales. South Africa has one of the highest mark-ups in the world for the distribution component of the supply chain. However, as of June 2001, pharmacists have been permitted to levy a professional fee for dispensing drugs. This means that prescription drugs no longer undergo a mark-up at wholesale level. Instead, the wholesale price is reimbursed, with the percentage dispensing fee on top. The idea is to ensure transparency of prices and remove retail and wholesale margins. Pharmacists now can only levy flat universal prescription dispensing fees, which should keep prices down. The mark-up for wholesalers had been around 21%, while retail pharmacies added a further 50%, as well as a dispensing fee.

Nonetheless, the disparity between manufacture and retail prices is great. Prices also vary greatly between public and private sectors, with a de facto policy of cross-subsidization apparent. Prices are hiked in the private sector so they can be reduced for public facilities. This alters the data somewhat and explains why out-of-pocket expenditure on medicines was around five times that of the public sector in 1999

In general, the trend is for the government to attempt to drive prices down, writing the promotion of generic drugs into law. The question of high drug prices has been a source of controversy for some time. Lowering prices has been a government priority since the National Drugs Plan was promulgated in 1996.