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Competition Law: Healthcare sector cautioned

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Competition Law: Healthcare sector cautioned

20th March 2013

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The Competition Commission has been provided with formal powers to conduct market inquiries from the 1st of April 2013, following the recent promulgation of Section 6 of the Competition Amendment Act 1 of 2009.

The proclamation was published by President Jacob Zuma in the Government Gazette on 8 March 2013.  There is no indication on when the other provisions of the Competition Amendment Act may come into force.
Implications for the healthcare sector

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As per an earlier e-Bulletin, it is generally considered that Chapter 4 A of the amended Act, dealing with market inquiries, will in the very near future be used to conduct an inquiry into the healthcare sector in South Africa.

Much has been said about the healthcare sector in South Africa in so far as the provision of services by that sector to the public is concerned, more particularly, the costs at which those services are provided. This is, of course, not the first time that participants in the healthcare sector have been engaged with the Competition Authorities.  Certainly, debates rage within the private healthcare sector about the setting of tariffs, both reimbursement tariffs and ethical tariffs.  In fact, the debate about setting ethical tariffs is currently afoot as between medical practitioners and dentists and the Health Professions Council of South Africa (“HPCSA”) following notifications published by the HPCSA in newspapers calling for comments on a process to be used to determine ethical tariffs.

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The prevailing view by the regulatory authorities within the healthcare sector in South Africa is that private healthcare is too expensive.  Primary amongst the culprits that are fingered for expensive services are specialist medical practitioners and private hospitals.  No doubt, any market inquiry will include those two constituencies.

In a recent presentation to the Parliamentary Portfolio Committee on Economic Development entitled “Market Enquiry into the Private Healthcare Sector” the Competition Commission stated that there were certain unique characteristics in the healthcare markets, such as information asymmetries, agency relationships and “distorted incentives”.

The Commission recognised in that presentation that concerns had been voiced about pricing, costs and the state of competition and innovation in private healthcare.  In its presentation to the Parliamentary Portfolio Committee on Economic Development, the Commission identified the purpose of a proposed inquiry into the private healthcare sector as, amongst other things, to inquire into the nature of the price determination in the private sector and to examine the interactions between selected segments and their contribution to healthcare costs.

Any market inquiry into the private healthcare sector would have to be approached with the recognition of the degree of regulation that already exists within the private healthcare sector in South Africa and the effect of such a regulation on the provision of healthcare services in South Africa.

A market inquiry into the private healthcare sector in South Africa needs to be cautiously approached and components of the private healthcare sector would, in all likelihood, be best encouraged to understand their rights in respect of competition legislation but also healthcare law and other pertinent legislation.

Companies in the healthcare and other sectors should, of course, proactively consider their business interactions and agreements (especially around price setting mechanisms, information exchanges and interactions with competitors), ahead of any formal announcement by the Commission as to the scope of its first market inquiry.

By Neil Kirby, director, and Dominique Arteiro, director, Werksmans Attorneys

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