Market growth is forecast at 11% in revenue terms for 2017, and subsequently projected to grow in real terms at 3% to an estimated value of €0.32 billion (Rand 5.0 billion) by 2022, according to research analyst Rubab Abdoolla. (South African inflation is currently around 5%).
Manufacturers face additional costs of product evaluation/ certification procedures for new products and some existing ones plus more stringent labelling requirements.
“Getting the products evaluated and registered by the Medicines Control Council (MCC) is in itself a cumbersome and costly administrative requirement,” explains Abdoolla. “Then there are the new labelling requirements further entailing additional costs,” she adds.
Companies also incurred withdrawal costs on some products already on the shelves which did not comply with new legislation.
The regulatory changes may also be stifling innovation. Some stakeholders have even commented that the ongoing battle between the state and the manufacturers have left the market ‘in a rut’, because of the costs associated with bringing on new products.
“The registration process and the fact that all medical claims need to be substantiated is making it harder for new products to be introduced on the market,” comments Abdoolla.
The changes have particularly affected smaller players who are less able to shoulder the costs of the regulatory burden, and has made it difficult for new participants to establish themselves in a market which previous had virtually no barrier to entry.
Higher prices but safer products?
The original motivation for the regulatory changes was to promote consumer safety and protect them from unscrupulous manufacturers and distributors making unsubstantiated health claims for their products.
“So we can to some extent argue that the new regulations are creating a safer retail environment for consumers where dubious medicines are being weeded out of the market,” says Abdoolla.
“In the end it is hoped that only safe products with formally tested medical claims will be on the market,” she adds.
In the long term, increased costs to manufacturers will be passed on to consumers by way of higher retail prices. Effectively, consumers will be paying more to ensure they obtain safer products, argues Abdoolla.
Nevertheless, the dietary supplements market in South Africa is driven by well-educated middle/ high-income earners who are able to order products online from global sources, which are not available locally because of the recent restrictions.
“One can easily argue that this defeats the purpose of the amendments in the legislation,” says Abdoolla.
She also suggests that the establishment of an unofficial market in certain supplements, which may not have obtained MCC approval, may actually increase the exposure of less knowledgeable people to unsafe local products.
Key amendments
The legislation came in at the end of 2013 under amendments to the 1965 Medicines & Related Substances Act.
The main elements of the changes were:
- Immediate removal of products containing banned substances (including damiana and kava kava)
- Any products containing ‘scheduled substances’ (as defined in the above Act), either low-risk or high-risk, to be withdrawn pending product registration.
- Misbranded medicines: products found to have false or misleading labels to be removed from the market (including those with unsubstantiated health claims).
- Registration (prior to going on sale) of new products (under the catregory Complementary and Alternative MedicineS (CAMS), which must also comply with MCC requirements.
- Provision of a disclaimer on the label of new products which have not yet been evaluated.