Competition Law, Medical Schemes and the Legality of the NHRPL

1. Competition Law, Medical Schemes and the Legality of the NHRPL Debbie Pearmain Head: Health Services and Legislation 18 October 2006

2. Competition Act 89 of 1998 The purpose of the Act is to promote and maintain competition in the Republic in order inter alia- (a) to promote the efficiency, adaptability and development of the economy; (b) to provide consumers with competitive prices and product choices; (c) to promote employment and advance the social and economic welfare of South Africans;

3. Restrictive Horizontal Practice Prohibited (s4) An agreement between, or concerted practice by, firms, or a decision by an association of firms, is prohibited if it is between parties in a horizontal relationship and if- (a) it has the effect of substantially preventing, or lessening, competition in a market, unless a party to the agreement, concerted practice, or decision can prove that any technological, efficiency or other pro-competitive gain resulting from it outweighs that effect; or

4. Restrictive Horizontal Practice Prohibited (b) it involves any of the following restrictive horizontal practices: (i) directly or indirectly fixing a purchase or selling price or any other trading condition; (ii) dividing markets by allocating customers, suppliers, territories, or specific types of goods or services; or (iii) collusive tendering.

5. Restrictive Vertical Practices Prohibited An agreement between parties in a vertical relationship is prohibited if it has the effect of substantially preventing or lessening competition in a market, unless a party to the agreement can prove that any technological, efficiency or other pro-competitive, gain resulting from that agreement outweighs that effect. The practice of minimum resale price maintenance is prohibited.

6. Restrictive Vertical Practices Prohibited A supplier or producer may recommend a minimum resale price to the reseller of a good or service provided- (a) the supplier or producer makes it clear to the reseller that the recommendation is not binding; and (b) if the product has its price stated on it, the words 'recommended price' appear next to the stated price.

7. Settlement Agreement BHF & CC BHF undertook to cease publishing a tariff, recommended scale of benefits or other form of price guideline for services rendered in the private healthcare industry BHF is entitled to convert information that exists in the public domain into an alternative format for use by medical schemes There are competition concerns that arise out of medical schemes jointly utilising the Reference Price List published by the CMS and BHF must impress on its members not to act collusively

8. Medical Schemes Act (s29(1)(q)) The Registrar shall not register a medical scheme , and no medical scheme shall carry on any business, unless provision is made in its rules for the following: The payment of any benefits according to- (i) a scale, tariff or recommended guide; or (ii) specific directives prescribed in the rules of the medical scheme.

9. Legal Position of Schemes Medical schemes are free to decide as individual schemes what tariff or guideline they will use in their rules as required in the Medical Schemes Act; Medical schemes must not discuss or agree with other medical schemes what tariffs or guidelines they will use in their rules; Medical schemes can use the NHRPL or their own adaptations of the NHRPL or their own tariffs in their rules in order to indicate benefits.

10. Legality of the NHRPL SAMA has argued that publication by the DOH of the NHRPL is illegal because there are no regulations to allow it to do so in terms of the National Health Act Section 90 of the National Health Act empowers the Minister to make regulations. The Minister is not obliged to make these regulations. The section says she MAY make regulations.

11. National Heath Act (s90(1)(v) The Minister may make the following regulations - The processes of determination and publication by the Director-General of one or more reference price lists for services rendered, procedures performed and consumable and disposable items utilised by categories of health establishments, health care providers or health workers in the private health sector which may be used- (i) by a medical scheme as a reference to determine its own benefits; and (ii) by health establishments, health care providers or health workers in the private health sector as a reference to determine their own fees, but which are not mandatory

12. The Legal Position of the DOH The Minister has a discretion to publish certain regulations under the National Health Act The regulations relate not to the reference price lists themselves but to information to be gathered from stakeholders; processes to be used by the DG in obtaining prescribed information Processes for the determination and publication of reference price lists

13. Legal Position of the DOH The reference price lists are not themselves to become regulations. The NHA states expressly that they are not mandatory The government has a constitutional obligation to respect, protect, promote and fulfil all of the rights in the Bill of Rights. It also has a constitutional obligation to take reasonable legislative AND OTHER measures to ensure the progressive realisation of the right of access ot health care services (s27)

14. Legal Position of the DOH This includes the right of access to health care services and the right to freedom of expression which includes freedom to receive or impart information or ideas One cannot assume that it was the Legislature’s intention to muzzle government on the subject of reference price lists or other benchmarks in healthcare simply because it gave the Minister the disretionary power to regulate certain processes

15. Legal Position of Medical Schemes The Medical Schemes Act obliges schemes to reflect the benefits of the scheme inter alia according to a scale, tariff or recommended guide Schemes may use the NHRPL for 2006 adjusted for inflation They may use the draft put out by the DOH for 2007 They may use their own adaptations of the NHRPL They may use their own scale of benefits or tariff