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The impact of pharmaceutical tendering on prices and market concentration in South Africa over a 14-year period

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  • Wouters, Olivier J.
  • Sandberg, Dale M.
  • Pillay, Anban
  • Kanavos, Panos

Abstract

Objective: We investigated the South African tendering system for medicines to (a) evaluate its impact on prices and market concentration over a 14-year period and (b) analyze the accuracy of government forecasts of drug demand. Methods: We calculated Herfindahl-Hirschman indexes to measure market concentration levels based on all pharmaceutical tender contracts issued by the South African government between 2003 and 2016 (n = 8,701). We estimated price indexes to track changes in medicine costs over this period. We compared prices set through tenders in the public health care system to the corresponding prices in the private system. We also analyzed government data on procurement in selected drug classes to assess the accuracy of demand forecasts. Findings: Between 2003 and 2016, the prices of medicines in most tender categories in the public health care system dropped by around 40% or more. The prices of medicines procured for the public system through tenders were almost always lower than those sold in the private system. Tenders generally remained moderately to highly competitive over time (i.e., Herfindahl-Hirschman indexes

Suggested Citation

  • Wouters, Olivier J. & Sandberg, Dale M. & Pillay, Anban & Kanavos, Panos, 2018. "The impact of pharmaceutical tendering on prices and market concentration in South Africa over a 14-year period," LSE Research Online Documents on Economics 90828, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:90828
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    More about this item

    Keywords

    South Africa; generic medicines; generic drugs; prices; competition; tendering; procurement; pharmaceutical policy;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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