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The debate continues: what are the legal and health care implications of DSP agreements?

1 October 2014
– 4 Minute Read


Emergency and acute illness conditions are treated differently but fall outside the scope of this note. Medical aid schemes accordingly make use of DSP agreements with doctors to curtail these cost implications by prescribing the tariffs that contracting doctors are allowed to charge for services rendered with respect to the various PMBs. This provides medical aid schemes with the ability to reduce the cost of meeting claims for PMB treatment for the benefit of their members. Or so it is said.

In response to a press release from the Health Professions Council of South Africa (HPCSA), warning all doctors to be cautious when concluding DSP agreements, the Board of Health Care Funders (BHF) responded by stating that “in the current environment where there are no regulated tariffs for health care procedures and runaway increases in health care costs, the ability for medical aids to contract with DSP’s is one of the only ‘tools’ which medical aid schemes have to bring about some kind of certainty in the charges by health care providers. Without this, medical schemes would lose one of the most important mechanisms for containing costs for their members.”

This ‘tool’ used by medical aid schemes to contain costs creates some difficulties in light of the historical consent order granted by the Competition Tribunal, in terms of which the BHF agreed to cease the publication of a National Health Reference Price List (NHRPL) in full and final settlement of the Competition Commission’s finding that the publication of a NHRPL amounted to price fixing. Does a DSP agreement not do the exact same thing as the NHRPL? If a DSP agreement prescribes the charge that a doctor must levy then the DSP agreement, in effect, fixes the prices charged by doctors who compete for the custom of patients.

This sounds awfully like the anti-competitive practice of price-fixing? Medical aid schemes will probably respond that DSP agreements could never be said to fall foul of the Competition Act No. 89 of 1998 because they fix a maximum price for a service and, in so doing, reduce the cost of the service to the benefit of the patient. That is a noble argument, but only if the service – in this case, medical treatment – is the same when delivered by a practitioner in terms of a DSP agreement as it is when delivered by a practitioner to a patient who agrees to pay his normal fee. It is this potential difference which so concerns the HPCSA.

For example, if a member of a medical aid scheme is diagnosed and treated for a PMB condition and the medical aid scheme distributed a medicine formulary within its DSP network listing only the generic drugs to be dispensed for that PMB, then the possibility exists that the DSP will be influenced to prescribe the generic drug without offering or explaining the availability of the ethical drug to the patient.

This is problematic as it is known that some generic drugs are less effective and have other more severe side effects as opposed to their ethical drug counterparts. For example generic forms of a well-known antidepressant were found by an independent testing laboratory to release the active drug at different rates compared to the brand name, resulting in side-effects and the return of depression amongst some patients. The New York Times has also expressed this concern by reporting that “some specialists, particularly cardiologists and neurologists, are concerned about generic formulations of drugs in which a slight variation could have a serious effect on a patient’s health.”

This situation is undesirable. Because DSPs disincentive a patient from deviating from his medical aid scheme’s medicine formulary – by compelling the member to pay the additional cost associated with ethical drugs – the doctor prescribing medication for this patient is at risk of being accused of having acted unprofessionally in that the standard of treatment offered to the scheme member may be said not to be equal to that offered to a patient who is not a member of the same scheme.

It is this very concern to which the HPCSA is alive. Why else would it urge doctors to be cautions when concluding DSP agreements by stating that “schemes in certain instances exert pressure on medical practitioners to prescribe certain medication or take certain decisions on behalf of patient that will benefit the scheme and not necessarily the patient and/or make clinical decisions aimed at cost-cutting.”

So, it seems that in attempting to provide a justification for the existence of DSP networks, the BHF may have confessed to engaging in an anti-competitive practice. Or has it?