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Independent pharmacies take on medical aid ‘bullies’

Community chemists say racial profiling and gated network are putting them out of business.

For more than 15 years Alfred Mokoditoa built his career as an independent pharmacist and businessman in Pretoria. For more than a decade he supported his family of five. But in 2011 he had to close his four pharmacies.

His pharmacies weren’t part of a big chain; they were small enterprises in Atteridgeville and downtown Pretoria that people could walk to with their doctor’s prescriptions.

Mokoditoa feels “frustrated, humiliated, harassed and bullied” and blames medical schemes and racial prejudice for the failure of his once successful businesses, in particular the schemes that pay medical aid members, and not him, for the services he rendered.

“Indirect payment continues to destroy our [independent] businesses, because we render services to members of various medical aid schemes. For example, if I have 100 members from a particular scheme and the total payment due to me by that scheme is R20 000, and the scheme decides to pay its members instead of me as the service provider, it means that I would have to go and recover all the small amounts from the individual members.”

Mokoditoa accuses medical schemes of discriminating against independent black pharmacists by instigating “bogus investigations” into them for fraud. “They then choose to not pay us directly because we’re under investigation. How long will it take me to collect the money paid to individual medical scheme members? How much will it cost?

“At the end of the day, I still need to pay my suppliers for the stock that I dispense. It is clear that I will not be able to recover all of the money due to me on time if the payment is made to the patient [instead of the service provider].”

Or, Mokoditoa says: “They don’t pay us at all.”

In 2007, medical aid scheme Hosmed started to investigate Mokoditoa for fraud and stopped paying him for his services. A year later the Council for Medical Schemes, a body that regulates medical schemes, ordered Hosmed to pay the more than R680 000 owed to him plus interest because Hosmed had been “unable to prove” the fraud allegations.

Mokoditoa decided to take Hosmed to court for a civil claim and opened up criminal charges against Hosmed’s curator.

But in April 2015 the medical scheme offered Mokoditoa a payment of R500 000 as a final settlement of all claims, on condition that he withdrew civil action and criminal complaints and that he kept the settlement confidential or risk having to pay back the settlement.

Mokoditoa was given only 24 hours to decide whether to accept the offer.

He refused.

Lost income

“I’m being bullied,” says Mokoditoa. “I’ve been robbed of my income and I know of many of my colleagues who have been, too. The independent pharmacy industry is under threat.”

Hosmed says this is untrue. Its lawyers told the Mail & Guardian: “The allegation that there is a Council for Medical Schemes 2008 ruling is a half-truth. The matter was appealed against and the ruling in favour was set aside.”

Hosmed also argues Mokoditoa “has failed to pursue civil proceedings instituted against the scheme diligently. The matter has been postponed three times in the Gauteng South High Court. He owes Hosmed R165 000 in wasted costs taxed by the registrar of the high court.”

Elsabe Conradie, from the Council for Medical Schemes, says medical aids cannot withhold payment to service providers while they’re being investigated. “Instead, the scheme must pay the member if relevant health services were rendered provided that the member had benefits available instead of paying the provider directly.”

But this creates far-reaching problems, says Mark Payne from the Independent Community Pharmacy Association, an industry lobby group. “The cost and time of recovering the money is immense to an independent pharmacist and money is often not recovered, leading to some pharmacists experiencing financial constraints.”

More problems

This is not the only problem independent pharmacists have with medical schemes, says Payne. “Medical aids appoint closed designated service provider networks, which usually exclude community pharmacists. This discourages members from using independent pharmacies by forcing them to pay additional fees.”

Payne says his association has appealed to the Council for Medical Schemes to “address this undesirable business practice”.

A designated service provider is a healthcare professional or facility chosen by a medical aid to provide services to its members when they “need diagnosis, treatment or care for a PMB [prescribed minimum benefit] condition”, according to the Council for Medical Schemes’s website.

Payne says designated service provider networks mean that patients who choose to go to a healthcare provider who is not part of this network end up having to pay a portion of their bill as “penalty” copayment.

According to the Council for Medical Schemes, a copayment could be either a percentage of the cost of the medicines or the difference between the designated service provider’s tariff and that charged by the provider the patient went to.

Payne says not all small pharmacists can afford to join the designated service provider networks. “The dispensing fee [the fee a pharmacy charges to dispense the medicine] that schemes reimburse [to] contracted service providers, who are part of their networks, is a fraction of the department of health’s maximum legislated dispensing fee that pharmacists are allowed to ask and independent pharmacists can’t survive on that alone,” he says.

“By and large medical aids determine what they ‘can afford’ to pay and they stipulate this to the pharmacies and if you don’t conform, you’re out of the pharmacy network.

“Medicine costs probably make up 20% of a medical scheme’s annual spend, with a further 3% accounting for the dispensing fee. With the pharmaceutical industry being so highly regulated, it is easy for medical schemes to target the pharmacy profession. The scheme must focus elsewhere and remove the fat from the doctors’, specialists’ and hospital bills.”

Payne says designated service providers and copayments take away the patient’s choice of where they get healthcare services.

“They can always go to the designated pharmacy of choice for a specific medical aid, and they won’t pay a copayment. But if they want to go to their local noncontracted pharmacy around the corner, then they will be paying a 20% copayment, or whatever the penalty is, for going to a nonnetwork pharmacy.”

Patients are deprived of the “personal touch” smaller pharmacies can afford them, says Payne. “We, as independent pharmacies, offer service excellence and we know our customers. We have watched them grow up and we understand their health intimately and they’re not just a number to us.”

Decision-maker: The Council for Medical Schemes says medical aids cannot withhold payment to pharmacies while they are being investigated. (Oupa Nkosi)

The country’s biggest medical aid scheme, Discovery Health, says designated service providers are key to medical schemes’ ability to provide full cover for chronic medication at affordable medical aid premiums.

Discovery’s chief executive, Jonathan Broomberg, denied claims that schemes do not allow small pharmacists to join designated service provider networks.

“In constructing DSP [designated service provider] arrangements for its client schemes, Discovery Health always consults widely with all industry stakeholders and, wherever possible, allows access to any provider willing and able to comply with network requirements,” Broomberg says.

“Discovery Health has always been a strong supporter of community pharmacies, and … has consistently paid higher dispensing fees to these pharmacies than most other medical schemes. Over 2 000 independent pharmacies, and all major corporate pharmacy chains participate in the Discovery Health DSPs, giving patients a wide choice of pharmacies to use,” he says.

At the time of going to press, the Pharmacy Council of South Africa had not responded to the M&G on how many pharmacies there are in South Africa, and how many of them are independent. 

Harassed: Ndaba Kgaka, an independent pharmacist from Germiston, believes racial prejudice underlies allegations by medical aid schemes that black pharmacists are guilty of fraud. (Delwyn Berasamy)

Like Mokoditoa, Ndaba Kgaka, an independent pharmacist from Germiston, believes racial prejudice is often a motivating factor behind medical schemes’ “harassment” of black independent pharmacists.

“We, as black pharmacists, are part of a marginalised group within the already sidelined independent pharmacy community,” he says.

But Payne dismissed claims that investigations are based on racial profiling. Instead, he says, medical schemes have systems in place to identify suspected fraudulent claims.

“If the medical schemes say that they suspect you of fraudulent activities, they will investigate you. It will never be based on a colour issue.”

Kgaka says that in 2011 he was summoned to Discovery Health’s offices. The scheme suspected him of selling items on medical aid that are not medicine.

“When I asked them to show proof [of these allegations], they showed me products like baby milk with handwritten labels that they claimed were from my pharmacy. But we use computerised labels in the pharmacy.”

The scheme’s Broomberg confirmed Kgaka’s pharmacy was investigated but says when Kgaka was “invited to a meeting to discuss the outcome of the investigation, and resolve the issues … he declined this invitation and refused to engage with us. In this situation, we were left with no choice but to suspend payment to this pharmacy, and we also reported this matter to the South African Pharmacy Council for further investigation.”

But Kgaka says Broomberg “is lying through his teeth”.

“I visited Discovery in 2012 after written threats that, if I did not go, it will negatively affect my practice. I signed in at Discovery’s reception and met a group of people from the fraud division.”

An inquiry was held by the South African Pharmacy Council, which regulates pharmacists, into Kgaka in 2013. This month the council made its ruling. In a document sent to Kgaka’s lawyer, the informal inquiry committee of council states: “The committee resolved that no further action be taken against your client. We therefore consider the matter to be finalised and closed.”

In the interim, Kgaka’s business has continued to suffer because Discovery has not paid him since 2011. “I’ve lost all my patients belonging to that scheme, which is up to 12% of my business gone in one clean sweep. I also lost customers who are members of smaller medical schemes that are administered by Discovery.”

But Discovery says Kgaka’s claims of racial prejudice are offensive. “We actively investigate any and all allegations of fraud, regardless of who is involved,” Broomberg says.

According to the South African Pharmacy Council’s website, 2 567 of the country’s 13 374 pharmacists are black.

Kgaka says he no longer trusts the Independent Community Pharmacy Association. Along with Mokoditoa and “several other black pharmacists also under investigation for similar issues as ours” he has resigned from the association. They are in the process of starting a new organisation, the Progressive Pharmacists’ Forum. “We are disillusioned with this so-called professional body, because they focus mainly on profit whereas we are faced with harassment.”

Payne responds: “We are service-focused, not profit-driven – we’re a nonprofit organisation. We have, during the years, advised our members on the cognisance of fraudulent activities and how to stay within the boundaries of ethical behaviour.”

Biggest losers

Kgaka and Mokoditoa say that, in the end, it is the people they serve who are left in the lurch. Mokoditoa says that, although he has since found other employment, the residents of Atteridgeville, west of Pretoria, are without service because the gap left by the closure of his pharmacies has still not been filled.

Says Kgaka: “It’s more important to me that maGumede can come straight to me and get her medication and I’ll be paid for it, rather than the medical scheme deciding that they will not pay the pharmacy that is just 100m from her home.”

The law decides what pharmacists can charge 

The sale of medicine in South Africa is regulated by the Medicines and Related Substances Control Act, which largely determines how the price is decided.

Factors that control it include:

  • The dispensing fee, which is the maximum fee – exclusive of value-added tax – that can be charged to dispense medicine; and
  • The single exit price, which is the price set by the manufacturer or importer of medicine, combined with VAT, and is the price of the smallest unit of the medicine in a pack multiplied by the number of units in the pack.

In June, Health Minister Aaron Motsoaledi issued a notice in the Government Gazette relating to a transparent pricing system for medicines, which proposes increases in dispensing fees. Interested parties have until mid-September to comment on the proposed changes. Currently, pharmacists’ dispensing fees are covered by Section 22G(2)(b) of the Act and calculated as follows:

  • l Where the single exit price of a medical substance is less than R85.69, the dispensing fee may not exceed R7.04 plus 46% of the single exit price of the medicine;
  • l Where the single exit price of a medicine is R85.69 or more, but less than R228.56, the dispensing fee may not exceed R18.80 plus 33% of the single exit price of the medicine;
  • l Where the single exit price of a medicine or scheduled substance is R228.56 or more, but less than R799.99, the dispensing fee may not be more than R59.83 plus 15% of the single exit price of the medicine; and
  • l Where the single exit price of a medicine or scheduled substance is R799.99 or more, the dispensing fee may not exceed R140 plus 5% of the single exit price of the medicine.

This fee, according to the Act, excludes VAT but is a maximum dispensing fee. The Act does not prevent dispensers from charging a lower fee to be added to the single exit price of a medicine. – Source: Medicines and Related Substances Control Act

Ina Skosana was a health reporter at Bhekisisa.