Drug pricing case keeps drama going
March 16, 2005
By Neesa Moodley
Listed hospital company Netcare and several other industry players have high stakes in the drama playing out in the constitutional court this week.
The court yesterday heard state counsel argue its case that the supreme court of appeal had no jurisdiction to overturn medicine pricing regulations in December. The Treatment Action Campaign presented a case as amicus, or friend of the court.
Legal counsel for New Clicks presented its case and will continue today. Counsel for the Pharmaceutical Society of SA will also present today.
Julien Veron, a health analyst at Andisa Securities, said Netcare had taken a loss of R29.9 million in the second half of the 2004 financial year as a direct result of the regulations.
For the year to September, Netcare revealed that its legal expenses for the medicine pricing case had amounted to R7 million.
Veron said that Netcare`s frustration with regard to the development of public-private partnerships in South Africa was best illustrated by its eagerness to develop an offshore platform.
Chief executive Jackie Shevel has said international operations were expected to contribute 15 percent to 20 percent of total revenue over the next three to five years.
Shevel has been vociferous in his criticism of the health department`s initiative to bring down the price of medicines.
Neither Shevel nor Darren Youngleson, Netcare`s head of investor relations, was available for comment yesterday.
New Clicks, which is also a respondent in the case, reported its first net loss of R12.5 million for the year to August last year. The group was forced to write off R258 million of goodwill related to its purchase of pharmacies from Purchase Milton & Associates.
Craig Nossel, the deputy general manager of research and development at Discovery Health, said most of the costs associated with the regulations had been absorbed by the medical scheme.
`Between May and August last year alone, before the dispensing fee was implemented, Discovery Health spent between R80 million and R90 million.`
Netcare shares fell 0.96 percent to close at R5.15 yesterday, while New Clicks was unchanged at R8.75. The health sector fell 1.09 percent.
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