South Africa's pharmaceutical policy has prioritized affordability, particularly for a country marked by inequality and a high burden of disease. The single exit price (SEP) system, introduced in 2004, aimed to increase transparency and encourage generic substitution and competition. The SEP has led to a significant decline in generic medicine prices, with the average unit price dropping from R4.04 to R2.38 after its implementation. This shift has also resulted in generics' market share rising from 14% in 1999 to 52% in 2012.
However, research has shown that generic entry into the market is not automatic and is influenced by commercial opportunity and manufacturing complexity. The more difficult a formulation is to manufacture, the less attractive it may be to generic entrants. This distinction matters, as a medicine whose price is driven below commercial viability may eventually disappear from supply. A cheap medicine is of little value when a patient cannot obtain it. The issue is critical, given that South Africa's pharmaceutical industry has shed over 2,500 jobs in 18 months, and medicine shortages are at a record high.
The localisation debate has brought attention to the challenges faced by domestic manufacturers. Industry association Pharmaceuticals Made in South Africa (Pharmisa) has pointed out that the share of pharmaceutical tenders awarded to local manufacturers has steadily decreased. According to Pharmisa, local manufacturers' share of the Aids medicines tender fell from about 72% in 2008 to about 28% in 2025, while their share of the solid-dose tender fell from about 56% in 2014 to about 18% in 2026. These claims warrant scrutiny, but they cannot be dismissed outright.
The erosion of local manufacturing capacity poses a significant risk to the security of supply. Research has identified tension between South Africa's public health objective of low medicine prices and its industrial objective of sustaining domestic pharmaceutical production. Excessive import dependence creates a security-of-supply risk, which could have far-reaching consequences for the country's healthcare system. The issue is not limited to the pharmaceutical sector, as the broader economy could also be affected.
There is also a fiscal dimension to consider. The National Treasury's recent revenue numbers are running ahead of budget estimates, largely due to strong corporate income tax collections. However, if industrial capacity disappears, the state may secure a lower procurement price today while losing part of the employment, investment, and future tax base that helps finance healthcare. A country cannot sustainably strengthen its fiscal position while progressively weakening its productive economy.
To address these challenges, South Africa should adopt an integrated pharmaceutical strategy that balances affordability with sustainability. Pricing, procurement, regulation, industrial development, and fiscal policy need to reinforce one another. The country needs affordable medicines, but it also needs sustainable suppliers, skilled jobs, tax-paying companies, and security of supply. These goals are not mutually exclusive, and a comprehensive approach could help achieve them.
Ultimately, the cheapest medicine is not necessarily the one with the lowest tender price. It is the medicine that remains affordable, meets the required quality standards, is available when the patient needs it, and can be supplied reliably through disruption. South Africa's next generation of pharmaceutical policy should be judged against this standard, ensuring that the pursuit of affordability does not compromise the long-term availability of essential medicines.
Key points
- South Africa's focus on low medicine prices may undermine its pharmaceutical industry, threatening the long-term availability of affordable medicines.
- The country's pharmaceutical policy should balance affordability with sustainability to ensure a stable supply of essential medicines.
- An integrated pharmaceutical strategy could help achieve these goals, reinforcing pricing, procurement, regulation, industrial development, and fiscal policy.
