The Competition Commission reached an agreement with two of the major private pathology laboratories to reduce the price of PCR testing for Covid-19.
SOUTH Africans will no longer have to pay an arm and a leg to get access to Covid-19 testing. This comes after the Competition Commission announced that it had reached an agreement with two of the major private pathology laboratories to reduce the price of PCR testing for Covid-19 from R850 to R500.
Addressing the media virtually on Sunday, Commissioner Tembinkosi Bonakele said the commission had investigated a complaint from the Council of Medical Schemes which alleged that the testing price was unreasonably expensive.
“The Competition Tribunal, upon application by the Council for Medical Schemes, confirmed a ground-breaking agreement between the Competition Commission and each of the two largest major private pathology laboratories in South Africa, Du Buisson Kramer Swart Bouwer Incorporated (Ampath), Drs Mauff AC and Partners t/a Lancet Laboratories (Lancet Laboratories).
“The agreement settles a dispute on the pricing of Covid-19 PCR tests. In terms of the agreement Ampath and Lancet have agreed to reduce the price of Covid-19 PCR tests from about R850 (or whichever prevailing prices) to no more than R500 (VAT inclusive) per test with immediate effect,” said Bonakele.
During the investigation, the commission discovered that laboratories had made a “substantial” cost reduction for the test, but concluded the tests were still highly priced regardless of the decrease.
“In the main, it was observed that private pathology laboratories have experienced substantial cost reductions in conducting Covid-19 PCR tests and were processing significant volumes (especially during infection waves), yet the price charged by the private pathology laboratories for Covid-19 PCR tests remained persistently high and unchanged at R850. Even though in recent months there have been some negligible downward price adjustments, nonetheless the prices of Covid-19 PCR tests remained excessively high.
“The commission’s investigation revealed that costs for private laboratory firms have in fact reduced on average, thereby increasing their absolute margins. The commission’s investigation also revealed that the pathology groups have been earning significant profits since March 2020, especially in the current financial year to date.
“The commission’s view is that the failure to reduce prices in the context of material reductions in costs is the flip side of the Consumer Protection Regulations as it results in the same effect, namely an increase in the margin earned for an essential product or service. In this way, firms are still able to exploit consumers by earning excessive profits on essential products or services.”
The commission also discovered that while the Department of Trade, Industry and Competition introduced the “block exemption” aimed at ensuring that industries were not ill-advisedly inflating prices, it seemed to have negatively affected consumers in the long run.
“Minister Ebrahim Patel, following consultation with the commission, published a number of block exemptions in different sectors. These included the health-care, retail property, banking and hotel (hospitality) sectors. The minister published these regulations in terms of the Competition Act, which allows the minister, after consultation with the commission, to grant block exemptions to achieve a specific strategic purpose. The Block Exemption for the Healthcare Sector 2020 (“the Block Exemption”) was amended on April 8, 2020, mainly to include specific manufacturers of medical and hygiene supplies.
“Essentially, the purpose of these block exemptions was to allow market players in these sectors to collaborate and co-ordinate their response to the Covid-19 pandemic and associated national state of disaster, with the ultimate goal of mitigating the negative economic and social impact of the crisis. The commission is therefore deeply concerned that the multilateral engagements in the context of the Block Exemption, while initially working to protect the interest of the public through an agreement to reduce pricing, appear not to have worked in the public interest in the long run,” said Bonakele.
The commission revealed that there was still an ongoing investigation into pathology company PathCare, and urged other private laboratories to be considerate in the pricing of the tests.
“The case against PathCare continues, including a possible interim application for urgent relief at the tribunal. We call upon all labs conducting PCR tests to be sensitive to the plight of the public and use the settlement as guidance.”