Fitch raises alarm bells over competition commission

The clampdown on excessive pricing by the Competition Commission has ruffled a few feathers, with Fitch Solutions saying the operating landscape in South Africa will become increasingly challenging, reducing revenue-earning capacity of dominant players and large corporations.

The agency, which is part of the Fitch Group, was reacting to the decision of the Competition Commission three weeks ago to file a referral with the Competition Tribunal for prosecution of Switzerland-based multinational healthcare company Roche Holding AG for alleged excessive pricing of breast cancer treatment drug Trastuzumab.

The competition watchdog said at the time:

“The commission’s referral also alleges that the excessive price of Trastuzumab constitutes a violation of basic human rights, including the right of access to healthcare enshrined in the Bill of Rights as it denies access to life-saving medicine for women living with breast cancer.

The alleged excessive pricing of Trastuzumab by Roche took place in both the private and public healthcare sector in South Africa.”

The commission also alleged that the excessive pricing conduct took place between January 2011 and November 2020 in the private sector, and between November 2015 and July 2020 in the public sector.

According to the Cancer Association of SA, a 12-month course of Trastuzumab is said to cost about R485 800, or more.

Roche has denied the allegations made by the commission and has said it would “contest all charges”.

Fitch Solutions said firms operating in South Africa would continue to see increased regulation and oversight following amendments to the Competition Act.

“We therefore believe that increased monitoring and scrutiny in the South African market will lead to a reduction of revenue-earning capacity for drug makers in the country, making the country less attractive for investment.

It is therefore our view that this will limit the potential of South Africa’s pharmaceutical market, and we forecast that the market will grow by a compound annual growth rate of 8.3% in local currency terms and 5.4% in US dollar terms over the next 10 years. This will take the market to around R172.7-billion by 2031.”

One of the changes in the amendment is the increase in penalties for contraventions from 10% to 25% of a firm’s annual turnover if conduct constitutes a repeat offence.

The group or controlling firm may also be held liable jointly and severally for an administrative penalty.

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Kabelo Khumalo

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