Policy on Transparent Invoicing

SAMED POLICY AND PROCEDURE REGARDING A TRANSPARENT INVOICING MODEL

1. Preamble:

As a result of the changing regulatory environment in South Africa and its impact on the provision of affordable health care in the country, the need arose for the South African Medical Device Industry Association (SAMED) to develop a policy to transform business practices within the medical device industry.

In order to establish such a policy, it became necessary that SAMED constitute a committee The Code of Ethical Business Practice portfolio committee, which was tasked with developing a policy to address mainly transparency and affordability within the health care industry. The Transparent Invoicing Model, to which this document refers, was workshopped with SAMED members on 31 August 2007. In addition, SAMED has consulted widely with key stakeholders including, but not limited to the various hospital groups and funders to ensure the successful implementation of this policy.

All members of SAMED are expected to adhere to this Model and the principle of presenting transparent invoices.

In addition, SAMED members must ensure their compliance with related legislation and/or regulation, and in particular must ensure that, in any discussion with any individual, institution; body and/or association, that their representations are compliant with Competition Law (see the Competition Act [Act No. 89 of 1998]).

2. Purpose:

To ensure that all off invoice rebates are eliminated from the invoicing process by suppliers of Medical Devices to their customers.

3. Definitions:

1. Customers: customers may include, but not be limited to: hospital groups, independent hospitals, health professionals etc

2. Inception date: that date by which all suppliers of medical devices shall commence with the transparent invoicing model and which is set as 1 October 2007.

3. Maximum List Price: that price which is the suppliers benchmark price and the maximum price at which the item will be sold at to a customer.

Note: this price replaces the previous list price that may reflect inflated pricing to accommodate rebates.

4. NAPPI code: the National Pharmaceutical Product Interface code, being that unique code which is allocated by MediKredit to a medical device as defined in the Medicines and Related Substances Act 101 of 1965. NAPPI codes are allocated to all reimbursable medical devices, in accordance with MediKredits NAPPI Code Allocation Policy, to uniquely identify such products using the product description and catalogue number linked to the supplier and associated price thereof. This allows identification of exactly which stent, catheter, cochlear implant etc. is being supplied. Only ONE such code shall apply per product as identified per catalogue number per supplier.

5. Other inducements: shall include payment for information or shelf space, supply of bonus or free goods, and the like.

6. Settlement discount: that discount which is granted for timeous settlement of an account and which reflects the normal cost of money.

7. Special requests, charitable donations and pro bono supplies: those devices which are supplied to a customer at a reduced or nil price for special cases such as the indigent or non medical scheme members.

8. Volume discounts: that discount which may be applied to the Maximum List Price in order to compensate the customer for volume purchasing.

4. The Transparent Invoicing Model:

The elimination of off invoice rebates in regard to the supply of medical devices shall commence by 1 October 2007 by adopting either of the following two transparent invoice models:

1. Model One: Nett Pricing Model

The nett pricing model allows for suppliers to invoice each line item at the contracted nett price as per the contract. This model is similar to the public bid system where no volume discount whatsoever is shown on invoice.

Suppliers are encouraged to display the NAPPI code for each product and may also display the settlement discount percentage on the invoice for purposes of transparency.

2. Model Two: Discount Model

In some instances, where suppliers are required to indicate their discount from the Maximum List Price to the hospital/hospital group, this may be done provided that the Maximum List Price is clearly indicated and that the discount is shown as a deduction from the Maximum List Price. The result should be that the nett price is transparent on the invoice.

Suppliers are encouraged to display the NAPPI code for each product and may also display the settlement discount percentage on the invoice for purposes of transparency.

To summarise:

The supplier shall ensure that the following appear on the invoice when charging their customer:

• Revised Maximum List Price

• Volume discount

• Nett price

• Value added tax

• Total amount payable

3. In addition to the above two models, the following may also be reflected on the invoice in order to ensure further transparency:

• NAPPI code

• Settlement discount terms e.g. 2,5% for 30 day settlement from date of invoice/statement

5. Maximum List Price / Nappi Codes:

In line with the affordability aspect of this policy document, SAMED implores its members to use this opportunity (i.e. the move to the Transparent Invoice Model) to review Maximum List Prices and revise these accordingly where possible to maximise cost benefits to the patient. As an association, we are committed to promoting action within our membership to address the spiraling cost of health care in the country. In accordance with this commitment:

1. All suppliers of medical devices are required to submit their revised pricing list, as applicable, to MediKredit. The revised Maximum List Price should be based on the maximum selling price per item as identified per catalogue number per supplier.

2. In reinforcing the policy governing NAPPI codes, only ONE NAPPI code should be applicable per item as identified per catalogue number per supplier. Where more than one NAPPI code exists for the same item, the supplier shall inform MediKredit of this and request that the duplicate Nappi Code(s) be discontinued with immediate effect.

3. Where applicable, the process of submitting the revised Maximum List Prices to customers shall commence from 1 October 2007 and should be finalised and fully implemented by no later than 31 December 2007.

4. Revised nett price and/or contracted nett prices below the Maximum List Prices can be negotiated between supplier and customer based on inter alia. volume and other criteria determined by each supplier on a free market and competitive basis subject to compliance with the terms and conditions of section 4 of this policy.

6. Other inducements:

1. No inducements of any nature or form are to be paid or offered to customers i.e. payment for information or shelf space, supply of bonus or free goods and the like. Sampling must be in accordance with the provisions of the SAMED Code of Business Practice.

7. Special Requests and pro bono supplies:

1. In the event of the provision or sale of an item that falls within the category of special requests, charitable donations and pro bono supplies, an invoice must be submitted along with supportive documentation, explaining in detail the reason for such provision or sale.

8. Revisions:

This policy and procedure may be revised from time to time in consultation with all signatories/stakeholders and to ensure compliance with any statutory requirements.

9. Signatories:

Signatories; shall include, but not be limited to:

• Members of SAMED;

• Non members of SAMED;

• Service provider groups;

• Schemes/Funders and;

• Other healthcare professionals.

Signatories shall be published on the SAMED website.

10. Compliance:

This document will be incorporated into the SAMED Code of Business Practice with its policy directives on ethical conduct and professional behaviour and the disciplinary measures which may be instituted against its members.

11. Enquiries:

All enquiries with regard to this policy document are to be submitted, preferably, in electronic format to: tanya@samed.org.za or fax 011 467 1697.