The Cost of Treatment in South Africa

7.1 Pharmaceutical Companies and Patent Rights

South Africa is a founder member of the World Trade Organisation (WTO), an organisation established in 1995 to oversee the global agreements that define the "rules of trade" between member states.

One of these rules of trade is the Trade-related Aspects of Intellectual Property Rights (TRIPS), which protects patents, copyrights and trademarks. When TRIPS was developed, proponents said the protection of rights would encourage pharmaceutical companies to research and develop new drugs. Critics have argued that instead it has resulted in higher prices. To counter the general trend of higher prices for medicines, some countries have introduced pricing controls that prevent pharmaceutical companies from abusing their patent rights.

In South Africa, pricing controls are especially important because of the large inequalities that exist in the provision of health care and the large divide between rich and poor.

In 1997, Parliament passed the Medicines and Related Substances Control Amendment Act, No. 90 of 1997 (Medicines Act) which contained provisions that made medicines more affordable.

The Act gives the government a legal framework to:

• compel pharmacists to prescribe cheaper generic substitutes of medicines no longer under patent (generic substitution)
• import cheaper brand-name medicines from countries where the product is sold for less (parallel importing)
• issue compulsory licenses, under certain conditions, to local companies to produce generics of patented medicines (compulsory licensing)
• introduce a transparent pricing mechanism to make pharmaceutical companies justify the prices they charge

The Medicines Act is an important piece of legislation for the provision of cheap ARV drugs in South Africa.

7.2 The Economic Cost of Providing Treatment in South Africa

AIDS treatment has been traditionally expensive due to the:

• multiple drugs needed to suppress the virus, and,
• the health infrastructure needed to ensure treatments are effectively carried out (see Antiretroviral Treatment).

For a number of years in South Africa, the SA government refused to offer AIDS treatment due in part to the affordability of a treatment programme. (see above treatment timeline for more information)

However, AIDS treatment costs have fallen rapidly over the last 10 years (from about $10,000 to $300 per-year per-person by some estimates) due to the production of cheaper generic equivalents and price cuts by pharmaceutical companies.

In March 2005, the SA government awarded tenders to seven pharmaceutical companies worth R3.4-billion for the supply of ARV drugs for public health facilities. (see press release) South African generics manufacturer Aspen Pharmacare received the greatest share of the tenders, while patent-holding international pharmaceutical companies were also included where no generic alternatives were available.

In July 2009, it was announced in an article by The Good News that The Department of Health had awarded a R3.6 billion tender for the supply of anti-retrovirals to support the implementation of the department's response to HIV and Aids in the country. Among the six successful companies was South Africa's largest pharmaceuticals Aspen Pharmacare, and Adcock Ingram, as well local firms Cipla Medpro and Sonke Pharmaceuticals, an empowerment company.

Total Projected Costs

In the SA National Department of Health's Operational Plan for Comprehensive HIV and AIDS Care, Management and Treatment for South Africa (1.9MB), the total budget is projected to rises from R296-million in 2003/04 to R4.47-billion in 2007/2008 for the treatment of people with HIV/AIDS. The cost of the ARV drugs is the largest item in the budget, projected at R1.65-billion in 2007/08.

Total Programme Budget Estimate (Millions of Rands)
	2003/04	2004/05	2005/06	2006/07	2007/08
Service Staff	21	322	432	662	1,027
Laboratory Testing	20*	152	311	520	806
Antiretroviral Drugs	42	369	725	1,118	1,650
Nutrition	63	343	421	532	656
Health System Capability Upgrading	70	171	184	160	160
Programme Management	16	103	128	128	128
Capital Investment	30	75	100	100	0
Research	34	55	55	48	48
Total	296	1,590	2,358	3,268	4,474
* includes R20-million advance payment to the National Health Laboratory Service (NHLS)Source: Table 16.20. SA National Department of Health (2003). Operational Plan for Comprehensive HIV and AIDS Care, Management and Treatment for South Africa (1.9MB).

Key Research

A South African study in 2006, "Cost-Effectiveness of Highly Active Antiretroviral Therapy in South Africa", found:

Patients with AIDS on ART therapy spent an average of two days in hospital per patient year. Their treatment cost an average of $1,513 per year (if placed on generic drugs). Patients with AIDS not on ART therapy spent an average of 15 days in hospital per patient year. Their treatment cost an average of $3,520 per year. (See AIDSmap article; fully study.)

Projected cost of treating adults with HAART in the public sector in South Africa (from CASE/CSSR). Credit: TAC. Source: The costs and benefits of treating HIV/AIDS (TAC Factsheet). Enlarge image.

In 2003, the Centre for Social Science Research (CSSR) found that:

• A 90% participation of AIDS patients in Highly Active ART Therapy would result in a cost of R6.8-billion in 2007, rising to a peak of R18.1-billion in 2015
• With realistic projections of reduced ARV costs (R300pm for first-line regimen; R450pm for second-line regimen), the cost in 2015 could be R14.5-billion
• The direct cost for "scenario three" — treatment with ART therapy, prevention and treatment of opportunistic infections and infrastructure and education costs — in 2015 would be approximately R20-billion
• The estimated savings for the government in hospitalisation and orphan costs would be approximately R7-billion for that year
• Over 2.5-million new HIV infections and 3-million AIDS deaths are avoided under scenario three by 2015

Centre for Social Science Research. The Cost of HIV Prevention and Treatment Interventions in South Africa.

(see TAC factsheet; full CSSR paper)

7.3 The Economic Benefits of Providing Treatment

(c) IRIN

Providing treatment eases the burden on the hospital services.

In 2001, research commissioned by the SA National Department of Health found:

• 628,000 admissions to public hospitals were for AIDS-related illnesses
• the cost of hospitalising AIDS patients at public facilities was likely to be at least R3.6-billion, or 12.5% of the total public health budget (source)

A 2002 joint HSRC and Medical University of SA (Medunsa) study into the impact of HIV/AIDS on the health sector, found:

• An estimated 15.7% of health workers in public and private hospitals were found to be HIV positive. However, among those aged 18–35, the prevalence was 20.0%. Single African nurses were found to be most at risk
• A total of 28.0% of patients attending public and private health facilities, including clinics, tested positive for HIV antibodies
• Patients with HIV/AIDS stayed in hospital for an average of 13.7 days, in comparison to the 8.2-day average of HIV-negative patients. (source)

Providing treatment will reduce the number of orphans

In the absence of treatment it has been estimated that approximately 5.7-million children would have lost at least one parent by 2014 (source). This may result in increased juvenile crime, lower literacy levels, and an economic burden on the state. It will also place a burden on the state to provide foster child grants and care for an increasing number of orphaned children.

Providing treatment reduces social and political costs

Treating working-age people in the public and private sectors will allow them to work longer and reduce the cost of training new staff if HIV is left untreated. The international political damage caused by South Africa's prior AIDS treatment policy could also be reduced.

Also see: Centre for Social Science Research. The Cost of HIV Prevention and Treatment Interventions in South Africa.