Relaxation of competition law increased access, reduced costs

The ministerial exemption from certain provisions of the Competition Act, which allowed healthcare market players to communicate and coordinate in a manner that would normally contravene the law, promoted access to COVID-19 services and reduced some of the costs. This is the broad conclusion of an impact assessment undertaken by the Competition Commission to evaluate the “block exemption” mechanism and actions to counter price gauging as the demand for particular products exploded in the early weeks of the epidemic.

The exemption allowed hospitals, pathology laboratories, pharmacies, medical schemes, and suppliers of medtech, medicines and other medical consumables to share information and coordinate their responses to the COVID-19 epidemic.

Some of the clearest impacts were seen in the area of testing:

• Sharing of data on testing contributed to the development of a set of national statistics on COVID-19.
• Collaboration among providers helped to identify the most efficient tools for testing and adopt these nationwide.
• The negotiation by funders brought down the cost of testing from an initial rate of R1 000 – R1 500 a test to R850.

Further cost savings occurred in relation to treatment through the negotiation of advantageous PPE prices for hospitals by a group of medical schemes.

Although the Commission has been unable to calculate total cost savings facilitated by the exemption, it estimates the nationwide reduction in COVID-testing costs alone saved funders and members of the public between R500m and R1bn over the course of eight months.

In the area of treatment, sharing of information on bed capacity and the availability of critical equipment and medicines facilitated transfers of patients and products between hospitals that were ordinarily in competition and improved access to care.

In terms of combatting COVID-related price gouging, the Commission resorted both to advocacy and enforcement measures. By late March this year, it had received 2 069 complaints of excessive price increases, of which 1 199 were valid in terms of applicable laws. The Commission referred 61 cases to the Competition Tribunal, is investigating 183, and decided against referring a further 955. Complaints dropped dramatically after the Tribunal took highly publicised action against a few offenders early in the lockdown period.

The Tribunal ordered the payment of fines amounting to R9.6m in 28 cases, donations worth R5.9m to the Solidarity Fund in 28 cases, and donations to the public (worth a bit under R1m) in 24 cases.