Medtech suppliers owed R1 billion by SA public health sector
SAMED warns about possible disruptions to health services, requests urgent solutions

The SA Medical Technology Industry Association (SAMED) is seeking urgent government attention and engagement to ensure that the unsustainably high public health sector debt owed to its members is resolved in the immediate future to avoid the risk of disruptions to health services.

Almost R1 billion is owed to 39 of 152 medtech suppliers that are members of SAMED, and which submitted their figures for May 2024; R672 million is overdue by more than 160 days. The real amount owing is estimated to be double that. With most of the suppliers being SMEs, the government’s failure to pay for medtech goods and services within the public sector procurement 30-day payment timelines is jeopardising these companies’ sustainability, survival and operations. SAMED warns that this is already having negative consequences for the supply and provision of medical devices and in vitro diagnostics (IVDs) that are vital to healthcare provision.

SAMED regrets having to bring this long-standing matter to public attention. However, the decision to do this follows the latest round of positive, but in terms of payment, unproductive engagements between the medtech industry and national and provincial health departments.

These departments have acknowledged the problem which SAMED says is a systemic one and requires a sense of urgency and dynamic and coordinated government action, particularly with the adoption of the NHI Act, which can only proceed once there are properly functioning procurement and payment structures in place.

  • SAMED has advocated for and supported solutions to the ballooning public health sector debt for over 15 years, and has an extensive understanding of the primarily administrative and practical factors which add to the crisis:
    Inadequate communication as well as skills deficiencies among procurement officials tasked with placing and capturing orders and authorising and processing paperwork exacerbates account consolidation problems. A giant disconnect due to lacking internal processes has contributed to much of the debt which the Gauteng Province owes to 38 SAMED members, with the combined amount exceeding R413 million. In Gauteng, hospitals/facilities place orders, and the provincial health department is tasked with payments – and the facilities and the province have not been able to align their documentation and amounts.
  • National fiscal allocations have decreased public health sector budgets. This has compounded poor public sector procurement planning and resulted in orders being placed with the officials’ knowledge that there is no budget for procuring some of the products.
  • Due to broken or missing IT and communication equipment, the implemented process relies on manual processing of thousands of transactions which causes misplacement of documents, delays, errors and duplications. This has also increased the cost of doing business, with medtech suppliers having to invest in portable printers and other equipment to supplement for printer cartridges and similar consumables that are also not being ordered, paid and supplied properly to the public sector.

SAMED points out that these transactional functions are not different between the public and private sectors, which potentially opens opportunities for public-private collaborations and mentorship involving for example hospitals and administrators from both sectors or for the public sector to learn and adopt processes used by its private sector counterparts which ensure payments to suppliers within 30 days.

SAMED members have struggled to carry the public health sector’s expenses which exert a ripple effect on the entire medtech value chain and the South African economy.

In a bid to survive, businesses of all sizes are terminating staff, discontinuing product lines and rejecting to supply the public health sector. Most concerningly this directly impacts patient care.

SAMED members have shared some specific case studies such as the following:

  • A local medtech company with about 40 employees has had to decline an international investment offer that would have doubled or tripled its turnover, created more than 30 new jobs and allowed the company to serve two or three times more healthcare practitioners and patients. The company’s leadership decided against the opportunity because of the possible financial risks and lack of confidence that the company would be able to honour its part of the transaction without regular public sector payments.
  • A South African medtech company supplying trauma equipment and implants to provincial academic hospitals provided details to the finance manager in a provincial health department which owes millions of Rands to the company how extensively these payment delays are draining the company’s operations, causing delayed salary and supplier payments and impacting on the company’s ability to service hospitals in the province. The company emphasised that government action is vital not only for its own sustainability but also to avoid leaving healthcare providers and their patients without urgently needed products.

SAMED confirms its willingness to help, however it is for the government to take the next step to resolve the current debt and work with the private sector on co-building structures that can bridge the transition from the current pre-NHI procurement challenges and processes to those that will be more efficient and better suited to a more integrated public-private system envisaged under NHI.

 

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