The Health Funders Association (HFA) and 36 medical schemes are one step closer to having their damages claim heard against three major pathology laboratories accused of charging excessive prices for Covid-19 PCR tests.
A PCR test, which stands for Polymerase Chain Reaction test, is a laboratory method used to amplify and detect very small amounts of genetic material (DNA or RNA). PCR tests are widely used in diagnosing infections. During the Covid-19 pandemic, PCR tests were the “gold standard” for detecting the virus’s RNA in patient samples.
On 5 October 2023, the HFA and the medical schemes (the complainants) self-referred the matter to the Competition Tribunal. They allege that between March 2020 and December 2021, Dr Du Buisson, Kramer, Swart, Bouwer Inc. (trading as Ampath), Drs Dietrich Voigt, Mia and Partners (trading as PathCare), and Dr Mauff AC and Partners (trading as Lancet Laboratories) contravened section 8 of the Competition Act by charging excessive prices for PCR tests.
The complainants claim these prices caused financial harm to medical schemes, and they intend to pursue damages claims in the High Court.
Before they can proceed, section 65(6)(b) of the Competition Act requires them to obtain certification from the Tribunal or the Competition Appeal Court (CAC) that the conduct in question was a prohibited practice. The complainants are seeking a declaratory order from the Tribunal to support their case.
Ampath filed an answering affidavit, along with an exception. PathCare and Lancet also noted exceptions but did not submit answers. These exceptions, which covered similar issues, were heard together on 27 November 2024.
In a ruling issued on 19 February, the Tribunal dismissed all but one of the exceptions raised by the pathology laboratories. It rejected the arguments questioning the complainants’ claims regarding market power, excessive pricing, dominance, and consumer harm.
For those unfamiliar with legal terminology, a dismissed exception means the Tribunal has ruled that the complainants’ claims are legally sound and can proceed without amendment.
The only exception upheld relates to the complainants’ claim that smaller firms charged significantly lower prices for PCR tests.
The complainants argued that some smaller firms charged up to 70% less than the pathologists, despite facing higher costs because of lower sales volumes and smaller economies of scale.
The pathologists countered that the complainants had not provided essential details, such as which firms charged these lower prices, when and where this occurred, or how the 70% price difference was calculated. They maintained that if such evidence existed, it should be disclosed, even under confidentiality protections if necessary.
The Tribunal agreed with the pathologists on this point and upheld the exception, requiring the complainants to submit more detailed factual evidence.
The Tribunal ordered the complainants to file a supplementary affidavit within 15 business days. Lancet and PathCare must submit their answering affidavits within 20 business days of receiving this supplementary affidavit, while Ampath must do the same within the same timeframe. The complainants may choose to file a replying affidavit within 10 business days of receiving these responses.
On the dismissed exceptions, the Tribunal concluded: “The material facts necessary to demonstrate the alleged excessive price have been sufficiently set out.”
It further stated: “Whether that conclusion will be found to be justified on all of the facts is for the Tribunal to decide after hearing the evidence. At this stage, however, the Tribunal is of the view that the complainants have sufficiently set out the material facts necessary for the pathologists to answer to the allegations.”
The Tribunal will decide whether to issue a declaratory order – confirming that the pathologists engaged in a prohibited practice or not – only after reviewing all the evidence, including the factual evidence related to smaller firms’ pricing.
Background to the case
For many, the Covid-19 pandemic is a period best left forgotten, with memories of it fading into a blur. However, revisiting some of those events is necessary to understand how this case fits into the bigger picture.
South Africa reported its first Covid-19 case on 5 March 2020. Six days later, the World Health Organization declared the virus a pandemic, prompting the government to declare a National State of Disaster on 15 March 2020. By 23 March 2020, President Cyril Ramaphosa announced a nationwide lockdown, effective from 26 March 2020 at 23:59, initially planned for 21 days. However, these restrictions persisted for nearly two years, severely disrupting market operations.
The pandemic triggered an unprecedented demand for essential goods such as personal protective equipment and medical supplies, exacerbating supply-demand imbalances. In response, the government swiftly enacted the Consumer and Customer Protection Regulations under the National Disaster Management framework on 19 March 2020, aimed at curbing economic exploitation during the crisis.
Critical to the containment efforts was widespread PCR testing, despite initial shortages because of overwhelming demand and limited supply. By October 2021, concerns over excessive pricing surfaced, leading the Council for Medical Schemes (CMS) to lodge a complaint against certain laboratories, including the pathologists, for charging R850 per PCR test from March 2020 to December 2021.
Following an investigation, the Competition Commission found prima facie evidence of excessive pricing, prompting negotiations. On 8 December 2021, the Commission successfully negotiated price reductions, compelling the pathologists to lower their PCR test prices to no more than R500, confirmed through consent agreements with the Commission, albeit without admission of liability.
These consent agreements were duly confirmed by, and made orders of, the Tribunal.
In March 2023, the HFA and the medical schemes lodged a complaint with the Commission, alleging that the three pathology groups charged excessive prices for PCR tests between March 2020 and December 2021.
In September 2023, the Commission declined to refer the case, arguing that it mirrored the earlier complaint by the CMS that had already been settled through consent agreements.
Determined to have its day in court, the HFA and the medical schemes self-referred the matter to the Tribunal.
Is this a case of double jeopardy?
In its non-referral letter, the Commission stated it was of the view that the “full and final settlement” clause in the consent agreements has the result that the Commission cannot pursue any further action against the pathologists on the facts contained in the CMS complaint or a complaint relating to the same or similar conduct.
Section 67 of the Competition Act states:
“A complaint may not be referred to the Competition Tribunal against any firm that has been a respondent in completed proceedings before the Tribunal under the same or another section of this Act relating substantially to the same conduct.”
Ampath raised this as a point in limine (a preliminary legal objection) in its answering affidavit. At the hearing held in November last year, it argued that the purpose of section 67(2) is to protect firms from double jeopardy and from being repeatedly subjected to legal action for the same conduct.
Ampath contended that for proceedings to be considered completed, there must be an element of finality. It maintained that the full and final settlement contained in the consent order brought finality to the CMS complaint, which covered the same conduct and timeframe as the complaint brought by the current complainants.
After hearing additional arguments from PathCare, Lancet, and the complainants, the Tribunal referred to the case Sappi Fine Paper (Pty) Ltd v Competition Commission, in which the court held that section 67(2) serves to protect firms from double jeopardy.
The court identified two key requirements for section 67(2) to apply:
- The complaint must relate to substantially the same conduct as a previous case.
- The firm must have been a respondent in completed proceedings.
In its ruling, the Tribunal noted that the consent orders in question do not impose penalties on the pathologists or require them to compensate for past conduct.
“On the papers before us, the consent orders are forward-looking, relating to the future conduct of the pathologists. We do not think enabling the complainants to claim damages as compensation for past conduct gives rise to double jeopardy.”
The Tribunal stated that the complainants have the right, under section 34 of the Constitution, to take their damages claim to court. While section 65(6)(b) places some limits on this right, it is not taken away by a consent order that does not include an admission of liability.
“We are therefore of the view that the consent orders concluded between the Commission and the pathologists do not preclude the complainants from applying for a declaratory order as a necessary element of the process of seeking to establish and enforce a claim for damages,” the Tribunal noted.
‘Perverse and uncompetitive practices’
In a media statement released this week, the CMS noted that it welcomed the determination by the Tribunal to reject the exceptions in the Covid-19 test pricing case.
“Importantly, the Tribunal’s ruling means that the HFA and the listed medical schemes case against the pathologists can now proceed to the merits once the pathologists have filed their answers, as ordered by the Tribunal.”
The regulator stated that in line with section 7 of the Medical Schemes Act, “the Tribunal’s ruling re-affirms the legitimate claim of strengthening the sustainability of medical schemes by recovering any amounts, that have alleged been unlawfully paid out of medical schemes’ coffers”.
“The regulator is fully supportive of these efforts and hopes for a positive outcome from the Competition Tribunal, which considers the overall protection to members interest and to safeguard the medical schemes from perverse and uncompetitive practices,” the CMS stated.
