Three large pathology companies, Ampath, PathCare and Lancet Laboratories, yesterday denied before the Competition Tribunal that they had charged excessive prices for COVID-19 PCR tests and instead asked that the allegations against them should be dropped.
During the pandemic, the Competition Tribunal signed agreements with the three pathology firms to lower the price of a PCR test from R850 to R500 following an investigation into the prices by the Competition Commission.
The Health Funders Association (HFA) and medical schemes have subsequently applied for an order from the competition authorities that the laboratory firms had engaged in excessive pricing through the pandemic. The HFA and medical schemes intend to make damages claims against the pathology companies in court.
Legal counsel for the HFA and medical schemes argued that they were not able to investigate all the costs and financial structures of the pathologists, but what they did know was that the price was reduced by R850 to R500.
In addition, the Competition Commission had stated at the time, following its own investigation, that the firms were still profitable at R500 per test. This meant the 70% increase in price was all profit, and all their costs were covered, with an additional profit margin, at R500 per test.
Legal counsel for the applicants said the pathology firms now “need to show us that their pricing is reasonable after a prima facie case has been established (that they were charging excessively).”
He said the fact that the Competition Commission may have resorted to an urgent application against the pathology firms because of PCR test prices, before the agreements to lower the price was reached, indicated that the firms had indeed charged excessively high prices.
He said the Commission had also found that the three firms had maintained the price at R850 per test from March 2020 to December 2021, even though the pathologist’ costs had decreased, and in spite of the fact that these firms must have generated economies of scale as many millions of people were tested and their claims submitted to medical aids.
The three pathologist firms in turn, each through its own legal counsel, argued that many of the applicants’ allegations were “vague and embarrassing” for their lack of detail and required information, and that if the case was not dismissed, at least their pleadings needed to be supplemented with additional information.
The Tribunal heard that in the midst of the aftershocks of the pandemic, it was inevitable that scapegoats would be sought among those at the “coalface” of the pandemic, and that it was easy to imagine a conversation around a braai about the price drop in the PCR test, and how easy it would be to assume that the pathologists were overcharging, an argument based purely on “speculation and conjecture.”
The pathologists argued that no evidence was brought from the applicants as to what PCR tests cost at the same time in other markets, how much did it cost to buy equipment, and materials for the test, the cost of additional staff, of PPE equipment, the fact that borders were closed and trade was difficult through the pandemic.
In addition, there was no certainty how the virus would change and whether additional test kits, equipment and staff may be required.
They argued that the applicants claimed that smaller pathologists had charged much lower prices for PCR tests, but no names were provided of these smaller companies, even though as medical aids they should have known these company names, and none of these lower prices was even disclosed in the evidence.
The applicants argued that the names of these smaller firms were “secret” but that they might be able to obtain the names of some of these firms at a later date.
“What is the price from a comparative firm? Were these firms among those that did unauthorised testing, that’s why they could do cheap prices, we don’t know,” one of counsel for the pathologists argued.
The pathologists argued that the initial Competition Commission probe into the PCR testing was an “expedited investigation”, that the facts established by the investigation had not been obtained, and all that was presented was some tenuous conclusions that the companies “may” be overcharging.
They added that what was being presented to the Tribunal yesterday “are some of the prima-facie preliminary conclusions reached by the Competition Commission”.
“We’ve got hearsay twice over,” they said.
They said the firms may have produced good profits through the period in question, but the firms sold many different tests, services, and products, and the applicants failed to attribute what products and services were attributable to what profits.
They also argued that the applicants did not adequately define the notion of profitability.
“They have to allege what a competitive price was, and they haven’t,” they argued.
The Competition Tribunal said it would issue a decision in due course.
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