Minister of Health, et al. v. New Clicks South Africa (Pty.) Ltd., et al.

This case involved the regulation of fees for the dispensing of medicines by public and private pharmacies. The first Applicant (the Minister) had made and published the Regulations Relating to a Transparent Pricing System for Medicines and Scheduled Substances (the Regulations) under the Medicines and Related Substances Act 101 of 1965 (the Medicines Act). The first respondent, New Clicks South Africa (Pty) Ltd., and the second respondent, the Pharmaceutical Society of South Africa and others (the pharmacies), launched separate applications in a Provincial Division for orders declaring the Regulations to be unconstitutional and invalid on various grounds.

The Provincial Division dismissed the consolidated applications and refused to grant leave to appeal to the Supreme Court of Appeal.  Due to a delay in the High Court judgement, the matter was decided in the Supreme Court of Appeal first, which granted leave to appeal and held the Regulations to be invalid and of no force and effect. The Minister and the Pricing Committee thereupon appealed to the Constitutional Court.

The Regulations provided a pricing system for medicines and scheduled substances with the aim of making medicines more affordable. The system envisaged a “single exit price” (SEP) for the sale of each medicine that was sold by a manufacturer or importer. The SEP was not to be higher than a maximum price calculated on the basis of sales during 2003, and provision was made for the calculation of the SEP in respect of medicines sold for the first time after January 2004. The SEP thus established became a fixed price at which the manufacturer or importer had to sell the product. Wholesalers who bought the medicine for onward sale had to sell at a price not higher than the SEP. The same applied to pharmacists, whether they bought the medicine from the manufacturer, importer, wholesaler or distributor. The wholesalers and distributors were entitled to a logistics fee for their services and the pharmacists were entitled to an “appropriate” dispensing fee for their services. Provision was made for price increases and for bringing manufacturers’ prices into line with international standards by a system of international benchmarking.

There were several challenges to the validity of the Regulations, dealing with both procedural and substantive aspects, as well the regulation-making process.

The decision leading to the enactment of the Regulations was challenged as procedurally unfair because not all the members of the Pricing Committee were present when stakeholders made oral representations to it. This challenge failed because neither the Medicines Act nor the Regulations made in terms of the Medicines Act made provision for a quorum of the Pricing Committee and because the pharmacies had a fair opportunity to make their views known.

The Applicant challenged the SEP fixed by the Regulations for the sale of each medicine, contending it was a system of price control not authorized by the Medicines Act. The Court dismissed this challenge because the Medicines Act not only permitted but in fact required the formulation and implementation of price control measures that affected all parties in the distribution chain.  It was also held that the choice of price regulation was a policy decision within the domain of the Legislative and Executive, with which the Court would not interfere.

Respondent pharmacies contended that provisions in the Regulations addressing the procedures required to increase the SEP were incoherent, in part contradictory and inconsistent with the Medicines Act. They also contended that the Regulations were vague and uncertain in other respects. The Court stated that the doctrine of vagueness was based on the rule of law and thus required administrative regulations to be consistent with, and not contradict, one another.  The Court held that the Regulations failed to comply with this requirement, but were not void for vagueness.

Respondent pharmacies also contended that the dispensing fee prescribed by the Regulations was not appropriate. The pharmacies argued that the dispensing fee would cause pharmacies to operate at a loss and destroy the viability of the profession. The Court considered the purpose of the Medicines Act and held that, as a whole, its purpose was to enhance the accessibility and affordability of medicines. The Court declared that the State has a constitutional obligation to take reasonable measures to enhance access to health care, including medicines, and that these measures must be appropriate. The Court, however, held that the dispensing fee was not appropriate because the Minister and the Pricing Committee had not satisfied themselves that the view of the pharmacies was inaccurate. The Court further noted that the Pricing Committee had not provided models or other evidence to demonstrate how the dispensing fee had been calculated or how members of the Committee had determined it was appropriate. The Court noted that the purpose of the Pricing Committee was to make medicines more affordable, but that in doing so the Committee was obliged to justify the basis upon which it determined the dispensing fee and demonstrate that the fee itself was appropriate.

“Bearing in mind the important constitutional purpose served by the pricing system, we are satisfied that the correct remedy in the present case is to preserve as much of the scheme as is possible, as long as this can be done in a manner that serves the main object of section 22G of the Medicines Act. The main object of section 22G is to make medicines more accessible and more affordable by means of a transparent pricing system.” Para. 16

“[I]t should be emphasised that the regulations seek to introduce a new scheme with the purpose of enhancing access to affordable medicines, a goal to which all the parties to this dispute subscribe and which is in the interest of all consumers of medicines. For this goal to be achieved, the co-operation of all interested parties in both its establishment and implementation is required.” Para 18.

“The purpose of section 22G of the Medicines Act read in the context of the Medicines Act as a whole is to enhance the accessibility and affordability of medicines. This is an obligation of the state which in terms of section 27 of the Constitution is obliged to take reasonable measures to enhance access to health care.” Para. 315

“The purpose of [section 22G(2)(b)] is clearly to give effect to the right of access to health care services comprehended in section 27(1)(a) and (2) of the Constitution. This section guarantees the right of access to health care services and enjoins the state to ‘take reasonable legislative and other measures, within its available resources, to achieve the progressive realisation of [this right].’ The right to health care services includes the right of access to medicines that are affordable. The state has an obligation to promote access to medicines that are affordable.” Para. 514.

“Regulation of prices of medicines is a wholly legitimate form of regulating the [pharmacy] profession.  Indeed, preventing excessive profit-taking from the manufacturing distribution and sale of medicines is more than an option for government.  It is a constitutional obligation flowing from its duties under section 27(2).” Para. 659.