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16 December 2010 | Angeline Albert
The South African government has halved the amount it pays for HIV and AIDS drugs by using good pricing data and promoting competition among suppliers.
The Department of Health secured a reduction of R4.7 billion (US$ 6.8 billion) – 53 per cent – as a result of the R4.2 billion (US$ 6.1 billion) deal for the procurement of antiretroviral (ARV) drugs for the next two years, effective from 1 January 2011.
The lower price means the country can treat twice as many HIV and AIDS patients with ARVs.
Although the new contract has been signed with the same 10 suppliers who are working under the current arrangement, the Department of Health said encouraging more suppliers, including international competitions, to participate in bidding helped reduce the price. The publication of a reference price list based on international transactional costs, requiring suppliers to give a breakdown of their cost components and price change monitoring through the life-cycle of the tender, had also helped.
In addition, the Department of Health called in an auditor to oversee the evaluation to see that it complied with procurement legislation.
Dr Aaron Motsoaledi, minister of health, said: “Early this year in my health budget speech I mentioned the prices South Africa pays for ARVs are significantly higher than all other countries. We must be able to purchase ARVs at the lowest prices as we are the largest purchasers of ARVs in the world and must benefit from economies of scale.”
He said: “We are delighted to note that for all items, the tender price is substantially lower than it was in the last tender. This kind of saving is what government must achieve in other areas of procurement. This will ensure that taxpayer’s money is used in a manner that provides value for money.”
The success of this approach has prompted the Department of Health to set up a Central Procurement Authority which will replicate this approach for other medicines. The authority will focus on buying ARVs, TB drugs, vaccines and drugs for the treatment of diseases related to maternal and child health.