Bonusing proposals clarified - what you need to know

The Minister of Health Dr Aaon Motsoaledi has prescribed some very strong medicine to cure the perceived ills of bonusing and incentives when he published the proposed Regulations relating to bonusing made in terms of the Medicines and Related Substances Act, 1965 (‘Regulations’ and ‘Act’) on 1 December 2017 for comment.

This briefing has been published by Stephen Langbridge of Fasken Martineau, Kenya, who has agreed to Simmons & Simmons making it available to elexica subscribers.

The Regulations seek to clarify the operation of section 18A of the Act which prohibits, simply, the supply of any medicine, medical device or IVD that is subject to a bonus system, rebate system or any other incentive scheme.

The prohibition against "bonusing" and incentives has been on the statute books for some time, but has been open to interpretation - some might say abuse - within the industry and there has been little enforcement. Now that both medicines and medical devices are under the regulatory spotlight, the time is apparently ripe for clarification as to just what was intended by this part of the Act. 

One can find little fault with the motivation behind the Regulations. They are intended to ensure that there is no undue or improper incentive or motivation when medicines, medical devices or IVDs are prescribed or sold in the industry. The most appropriate, effective and cost efficient remedy or equipment should be used or proposed for the benefit of patients and consumers.

Obvious commercial incentives are to influence decisions of those in a position to choose or recommend by offering benefits in some or other fashion. This may lead to decisions which are not made on the merits, but rather on grounds of the personal benefits which the decision leads to. This may be a consequence of markets which have regulated pricing such as the present Single Exit Pricing structure for medicines. Sellers and purchasers will naturally seek ways in which they can circumvent the strict regime in order to ‘share’ in the value chain, by providing or offering bonus, incentive or rebate benefits. These consequences are the ills that the Regulations will address.

Are the Regulations overbroad? If the Regulations become law without amendment, prohibited conduct will include the provision or supply of products which have as a consequence a bonus or incentive or rebate for:

  • Promotion or marketing
  • Shelf space
  • Discounting, including volume discounts and early settlement discounts
  • Sale of data (unless provided by a legitimate third party provider at reasonable fees)
  • Supply of products on consignment
  • Supply of loan kits for medical devices
  • Entertainment costs

A number of these have been very much ‘standard’ practice within the industry and not regarded as falling foul of the provisions of Section 18A. A dramatic rethink and restructure of sales and distribution of products will be required should the Regulations proceed unchallenged.

The parties which fall within the scope and net of the Regulations include a wide range, from end consumers, retailers, health care professionals, clinics and hospitals, but also funders and medical schemes. What is interesting too is that both or all parties to prohibited conduct will be guilty of the offence.

Penalties for the transgressors, if found guilty, may be fined or imprisoned for a period not exceeding 10 years. A maximum fine could be up to 10% of the turnover of the transgressor for the previous financial year.

Interested parties have until 28 February 2018 to comment on the Regulations.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.