NCPA - National Center for Policy Analysis

Aids Drugs Are Cheaper In South Africa

August 15, 2000

In recent months the South African government has accused manufacturers of HIV/AIDS drugs of price gouging. In truth South Africa already pays some of the lowest prices found anywhere in the world. And within South Africa, public sector drug prices are a fraction of those the private sector pays. Moreover, the government is exacerbating the crisis by threatening price controls and permitting a pharmacy "cartel" that keeps retail drug prices far above competitive levels.

South African prices for AIDS drugs are already well below those in the United States -- and even those of poorer African countries.

  • While U. S. consumers pay $10.12 for AZT, South Africans pay $2.16.
  • For Didanosine, it's $7.25 vs. $2.80.
  • South Africa also pays less for both drugs than the Ivory Coast, another sub-Saharan country: $3.48 vs. $2.80 for Didanosine, and $2.43 vs. $2.16 for AZT.

And in the public health care sector, prices are lower than in the private sector. For example, for the asthma inhalant, Ventolin, the South African private sector pays 28.99 rands while the state sector pays 5.66 rands. The world average price is 22.86 rands.

Although drug manufacturer prices in South Africa are among the lowest in the world, its retailers' markups in the private sector are among the highest. Just over half (55 percent) of the price of drugs (net of tax) in South Africa goes to the manufacturer, while wholesalers' margins add about 11 percent and retailers about 34 percent. By comparison, the manufacturer's price is 65 percent in Germany and 88 percent in Sweden.

Retail margins are high due to cartel-like distribution in a noncompetitive retail market. Small retail pharmacies have successfully lobbied against corporately owned retail chain pharmacies as well as managed-care-type contracting with selected retailers.

Source: Duncan Reekie, "South Africa's Battle with AIDS and Drug Prices," Brief Analysis No. 334, August 15, 2000, NCPA.

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