SAHPRA admits it lacks authority to force BEE, but still wants to demands certificates
31 July 2024
In July 2024, the South African Health Products Regulatory Authority (SAHPRA) published a revised version of its draft Broad-Based Black Economic Empowerment (B-BBEE) licensing policy, titled the “Draft Broad-Based Black Economic Empowerment Policy for Issuance of Licences as per section 22C of the Medicines Act.” (Revised Policy).
This policy, developed in collaboration with the B-BBEE Commission and the Department of Trade, Industry and Competition, is intended to align with the BEE Code for the sector. It attempts to link regulatory licence applications in terms of the Medicines Act with BEE compliance.
The Revised Policy, should it be made effective, will apply to licence applications under section 22C of the Medicines Act. This provision relates to licences to compound and dispense medicines for medical practitioners, dentists, veterinarians, nurses or other person registered under the Health Professions Act. It also relates to licences to manufacture, import, export, act as a wholesaler of or distribute medicines, scheduled substances, medical devices or in vitro diagnostics (IVDs).
Questionable reassurances with regards to refusals to issue licences
The Revised Policy broadly retains the policy positions of the previous version from April 2023, but removes the provision that “[s]hould an applicant fail to submit its B-BBEE level certificate, or the certificate not be verifiable, SAHPRA will not issue a licence to such applicant”. SAHPRA likely removed this provision because of input from Sakeliga and others who argued that SAHPRA does not have the requisite powers to refuse a licence on grounds of BEE level non-compliance. In a webinar with stakeholders on 14 June 2024, SAHPRA confirmed that it does not have such powers:
“…there will not be an applicant who would be refused a licence because of your BEE status, as I've said earlier. And again, I want to really stress this matter. We cannot do that. We don't have a mandate to do that.”
BEE certificates are “non-negotiable”
While SAHPRA confirmed that a certain BEE status is not required, it remains of the view that it has the power to demand that a BEE certificate be submitted by licence applicants. Submitting a BEE certificate, SAHPRA contended in the June webinar, will be “non-negotiable” for applicants. This, it contends, forms part of aligning SAHPRA policies with the B-BBEE sector code.
Beware the phased approach
The requirement to submit a BEE certificate, regardless of the level, is nonetheless still problematic. This indicates a phased approach where an initially subtle infusion of licensing requirements with BEE compliance occurs, as in other industries.
The first phase is usually styled as an “information gathering” exercise whereby licence applicants need to provide a BEE certificate. This ensures that all future licensees have at least tacitly consented to some degree of BEE compliance, albeit not at specific levels.
The second phase usually entails commitments to progressively higher BEE levels or “transformation” performance becomes a compulsory licensing condition. This could entail reaching a certain BEE level or making other race-based commitments.
The above approach has been followed by the regulatory bodies for property practitioners’, financial services, agriculture, and air services, among others. These regulators typically embark on a seemingly innocent “information gathering” exercise, and then later attempt to make compulsory certain BEE levels as a pre-condition of licensing. In almost all cases, this occurs despite no lawful mandate. Such requirements are also fundamentally unconstitutional. This is why Sakeliga is either considering or actively preparing litigation on several BEE matters.
Considering what has unfolded in other sectors, we caution against SAHPRA’s purported reassurances that no one will be refused a licence because BEE. Several signs point to SAHPRA preparing to escalate its demands in future, as per the phased approach. The Revised Policy reads:
“In phase 1, SAHPRA will require an applicant to submit its B-BBEE level certificate when applying for a licence. This requirement will be effective on a date to be communicated to industry.
Based on the learnings of the first phase, SAHPRA will develop criteria to be applied in the licensing process in terms of section 22C(1)(b) of the Medicines Act.”
Phase 1 may be a precursor to a more pernicious Phase 2
The “criteria” SAHPRA may try to enforce in Phase 2 will likely relate to a minimum BEE score or level. This highlights the risk associated with complying with the seemingly more innocuous requirement in Phase 1 in the Revised Policy.
Sakeliga warns that if the Revised Policy is approved, institutions subject to the Medicines Act should avoid complying with Phase 1 BEE demands as far as possible. This is to prevent implicitly endorsing future, stricter BEE compliance demands that could be expected in Phase 2. There are risks associated with both compliance and non-compliance with these types of BEE directives. Institutions should not assume that non-compliance is necessarily the riskier option, and they should obtain sound legal advice to inform their compliance considerations.
Sakeliga provided comments on the previous version of the draft policy in 2023. We will monitor the development of the Revised Policy, and have already instructed our legal team to review its Constitutionality and lawfulness.
We invite any potentially affected persons to raise concerns about the revised policy at [email protected].
Issued by Piet le Roux, CEO, Sakeliga, 31 July 2024
