PathCare is the latest private pathology group to heed the Competition Commission’s call to reduce Covid-19 PCR testing costs for consumers to a maximum of R500.
The commission announced Sunday that it had reached an agreement with leading pathology laboratories, Ampath and Lancet, to reduce the price of the Covid-19 PCR test from R850 to R500.
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PathCare has followed suit, saying in a statement that “patient care always comes first” and that it “remains committed to delivering its value-based, patient-centered care using trusted technology.”
Polymerase chain reaction (PCR) tests are considered the gold standard for testing for Covid-19 and are considered more reliable than rapid tests.
Impact on smaller laboratories
Some small private laboratories say that recommendation for him Competition commission Lowering the cost of the PCR test is good for the consumer but bad for the consumer as it could take them off the market.
“I do not think it was a great decision of the Competition [Commission] not at all, if anything, it creates a monopoly instead of creating a competitive space, ”Jonathan Blackburn, owner and director of iMed Distributors Laboratories, tells Moneyweb.
Blackburn believes that the commission’s decision, while beneficial to consumers, seeks to further benefit large laboratories.
After publishing its agreement with Ampath and the Lancet, the commission recommended that all labs adhere to this new price, saying there is no justification for labs to charge more than the recommended amount.
“The commission encourages all laboratories to lower their prices with immediate effect as we believe there is no reason to justify why the price should not be lowered,” commission spokesperson Siyabulela Makunga told Moneyweb.
Supply chain considerations
Some private labs are concerned about how the advertisement will affect their books and their ability to continue providing pathology services.
They say the R500 MSRP does not adequately cover the supply chain costs needed to run this particular Covid-19 test, citing various service and administration costs that need to be factored into the price.
iMed tells Moneyweb that it hasn’t been charging service providers (where customers get their Covid-19 swabs) more than R500 to process their samples. But with the new guidelines, they may be forced to charge these service providers even less for processing Covid-19 tests for them.
As Blackburn explains: “Just the administration costs, the lab professionals, the signing doctors, the license fee that we have to pay to the NICD. [National Institute for Communicable Diseases] (R5) to upload our results to your portal and the diesel costs of generators for load shedding; I mean the costs are exorbitant and we are not making a profit at all. ”
‘Just not feasible’ for this lab
SpesLab, another small private lab, which does Covid-19 PCR testing for R690, tells Moneyweb that while they understand why there has been a call to regulate the cost of testing, the new R500 recommended price is simply not feasible. for the laboratory. and as such it will stop Covid-19 PCR testing.
“We were significantly cheaper than the R850, we also thought the R850 was ridiculously high, but we are a very small lab, so our margins were already pretty small on the R690, and now that they’ve cut it down to R500, it’s just not feasible. for a small lab like us to continue testing, ”Dr. Andrine Smith, owner and director of SpesLab, tells Moneyweb.
“Unfortunately, what the downsizing to R500 has done is now forced [us], since the end of December, to stop testing for Covid-19, ”says Smith.
Large laboratories, larger volumes
For small private labs, the view is that the commission’s recommendations will benefit larger labs as they have the in-house capacity to process large volumes of Covid-19 tests at lower costs.
“Its volumes are magnificent by day,” says Smith. “We buy a kit that does about 200 or 300 tests at a time, but they buy hundreds of kits, so negotiating a lower price on test kits is much easier than it is for us.”
Smith believes that the new pricing regulations will effectively force many small private labs to stop testing for Covid-19 and focus on their core business, which will ultimately benefit the larger labs.
“It will most likely reduce the number of labs doing testing, so I think most small labs will close [that type of testing] now and that amount of samples that went to the smaller labs will now go to the Lancet kind of labs. ”
Impact on service providers
Service provider Dis-Chem says it has been in talks with its designated Covid-19 testing partner labs to find a way forward after the commission’s pronouncements on Sunday.
The pharmacy retailer tells Moneyweb that some of its partner labs will not take into consideration the group’s cost of providing the Covid-19 test to South Africans and will want to charge Dis-Chem the maximum amount of R500.
“We are still in negotiations with the laboratories also due to the fact that we are service providers, we are not a laboratory, so we have an additional cost regarding personnel and PPE. [personal protective equipment], and the installation as well. Unfortunately some of the labs will not take that into consideration and will [also] charge us R500, ”says Lizeth Kruger, executive of the Dis-Chem clinic.
The group says that this position taken by some of its partners could cause Covid-19 testing to be suspended at some of its locations across the country.
“Unfortunately, then we will not be able to offer this service because we are going to lose a lot of money,” says Kruger. “It’s still early … but as it is now, unfortunately [in] in some areas we will not be able to offer PCR testing. ”
The group said the commission’s recommendations could damage its books and reputation in the long run.
“We don’t have a profit margin on the test itself anyway, but obviously in terms of Dis-Chem as a company and our reputation, that will be detrimental and we obviously know that in the long term it will probably have an effect on profit margins.” says Kruger.
Listen to Fifi Peters’ interview with Competition Commission Chief Economist James Hodge (or read the transcript here):