Spotlight on NHI: Why an Office of Health Products Procurement?

The Office of Health Products Procurement (OHPP) is an entity newly introduced in the 2019 version of the National Health Insurance (NHI) Bill. While much remains unclear about the rationale for and function of the OHPP, the Bill nevertheless gives us some important pointers.

The NHI Fund has various functions, which include actively purchasing health goods and health related products from health care service providers, health establishments and suppliers that are certified and accredited in accordance with the provisions of the National Health Insurance Act, the National Health Act and the Public Finance Management Act. From section 10(1)(b) of the Bill it appears that the OHPP will be housed in the NHI Fund and is intended to support the NHI Fund by actively purchasing health related products.

What is a “health related product”?

The Bill defines health related products as “any commodity other than orthodox medicine, complimentary medicine, veterinary medicine, medical device or scheduled substance which is produced by human effort… for medicinal purposes or other preventative, curative, therapeutic or diagnostic purposes in connection with human health”. The definition is confusing and excludes medical devices that fall under “health goods”. The phrase “orthodox medicine” is not found in the Medicines and Related Substances Act and is not defined or used elsewhere in the Bill.

The Fund is still responsible for purchasing health goods but medical devices (a form of health good) are meant to be procured by the OHPP. Health goods are defined broadly to include “medical equipment; medical devices and supplies… for the promotion, preservation, diagnosis or improvement of the health status of a human being”. Law must be as clear and as certain as possible – unfortunately, as the above shows, the parameters within which the OHPP will operate are uncertain.

Section 38 of the Bill provides a little more detail on the OHPP. It says that the office will be the central body for the public procurement of health-related products as well as medicines, medical devices and equipment for the accredited facilities. This will be done by determining the selection of products to be procured; developing a national products list; coordinating the supply-chain management process and negotiating prices; facilitating cost effective, equitable and appropriate public procurement of health related products; supporting the process of ordering and distribution of products nationally; as well as facilitating the procurement of high cost devices.

How will the OHPP know what to buy?

The Bill does not make it explicit that the OHPP must determine what to procure in conjunction with the Benefits Advisory Committee and District Health Management Offices or that it will conduct regular inspections to assess the needs of facilities in terms of the quantity and specifications of products required. These would be very helpful as the benefits package informs what will be treated and some facilities will already have the necessary medical devices that will need to be maintained appropriately.

Will the OHPP make decisions on behalf of private service providers?

According to the Bill accredited health care service providers and health establishments must procure according to the Formulary; and suppliers listed in the formulary must deliver directly to the accredited and contracted health care service providers and health establishments. Dr Anban Pillay, Deputy Director General in the Department of Health, says that both public and private facilities have access to the products purchased through the OHPP as contracted health care service providers and health establishments may order directly from and pay the supplier.

This arrangement massively increases the amount of procurement going through the government system, without reducing any of the risks of corruption, overpayment, or purchasing of sub-standard goods. In addition, in a worse-case scenario it might limit private sector providers to purchasing from providers of sub-standard goods.

Can a single purchaser improve affordability, availability and acceptability of health care in order to fulfil the constitutional objective of access to health care services?

The answer is Yes. The principle of procuring goods in bulk through a single payer should, in an open and competitive market, reduce the cost of the goods purchased since suppliers will all have to compete to provide to a single buyer with immense negotiating power. However, for this to work, we will require an efficient, transparent and accountable OHPP. If the OHPP is not all these things, it may become a vehicle for large-scale looting.

Unfortunately, the current version of the NHI Bill overlooks the harsh reality that health sector tender processes are often gamed and marred with controversy. One recent example is the case of Mediquip Hub SA, a company with politically connected directors that provided sub-standard theatre equipment to the Free State Department of Health (see Spotlight’s reporting on it here and here.)

Will the OHPP ensure better access to medicines?

Purchasing medicines through a single supplier could play out in various complicated ways. Under the right conditions it could, as has been the case with antiretroviral tenders, lead to much reduced medicines prices. On the other hand, there is an argument that higher private sector prices have in effect subsidised lower public sector prices for some medicines and that the loss of this dynamic might lead to some price increases. While this argument doesn’t really hold with hugely profitable pharmaceutical multinationals, it does point to the complicated dynamics at play.

The OHPP will of course also be hamstrung by various other factors currently impacting procurement. The slow pace at which SAHPRA (South Africa’s medicines regulator) is registering new medicines can delay both the introduction of new medicines and generic versions of existing medicines. It is a situation that will in time hopefully be remedied through the extensive reforms and the backlog clearance programme under way at SAHPRA.

Similarly, medicines procurement in particular will continue to be impacted by the fact that South Africa’s patent laws are unusually favourable to foreign pharmaceutical companies and routinely allows for over-patenting. Cabinet’s adoption of a more balanced IP policy in mid-2018 was a step in the right direction, but the law reform that should implement that policy seems to have stalled – something that will result in some medicines prices being higher than they should be, and other medicines not being affordable through the OHPP, no matter how well it is structured.

*Nkululeko Conco is an attorney at Section27