Covid-19 testing. Do private labs make a lot of money? Competition Council response

Based on the positive opinion of the Competition Council, IThe government set the prices for conventional PCR tests at 400 dirhams, and those for rapid tests at 600 dirhams last September. Since then, the next board closely the state of this sector, and has just published a “Study to Analyze and Monitor the Evolution of the Status of the Covid Testing Market”, Its conclusions revealed high profit margins achieved by private laboratories despite the price caps set by the state.

Upon the request of the Minister of Economy and Finance on August 31 to express an opinion on setting prices for Covid-19 examination tests, the Competition Council announced, on September 6, 2021, in light of market conditions, that the prices of the mentioned tests for a transitional period not exceeding six months, in accordance with the provisions relating to price freedom and competition. This is how the government, on the basis of this advice from the council, limited, after four days, the prices of conventional PCR tests at 400 dirhams and the prices of rapid tests at 600 dirhams. At that time, the prices charged ranged from 600 to 800 dirhams depending on the laboratory. But due to the continuing exceptional circumstances due to the spread of the Covid-19 virus, these temporary measures were extended by order of the Ministry of Economy and Finance on March 3, 2022, to extend the application of the temporary measures against the price. Increases in biological screening and diagnostic tests for SARS-CoV-2 infection, for six months from March 6, 2022.

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Since then, the Competition Council headed by Ahmed Rahwa, in his opinion, has reserved the right, once temporary measures are taken by the government, to closely monitor the conditions of this market, study it in depth, and propose recommendations. Able to improve its competitive performance. Accordingly, on Friday, May 27, the Board published a study that falls within the scope of the investigation work carried out in the framework of the previous opinion, which was updated in the framework of the meetings held with various stakeholders in the Covid-19 testing market.

According to this report, despite the September 2021 price cap for Covid-19 tests, private laboratories continue to achieve relatively comfortable profit margins, ranging from 12 dirhams to 115 dirhams, taking into account the costs related to the personnel component and depreciation of equipment and supplies, which should decrease according to To increase the number of tests per day and parallel performance of other types of diagnostic tests by the same laboratory.

The study also revealed that the margins vary according to the size of the laboratory, the number of tests that were conducted, and the choice of investment approved for each laboratory. According to Rahho’s teams’ calculations, “the annual net results of private laboratories can range from more than 126,952 thousand dirhams, if the laboratory provides only conventional PCR, to more than 1.7 million in the case of simultaneous performance of all types of tests.”

On hearing from some of the companies, the board has concluded that margins achieved by private labs are still fairly high and comfortable. This indicates that the latter does not incur losses after the ceiling set by the government.

And to add that some private laboratories have generated higher profit margins, by choosing less expensive, and sometimes free, reagents and diagnostic equipment given under purchase negotiations with certain importers. “This has allowed some private laboratories to benefit from economies of scale,” the report asserts.

As a reminder, the Competition Board came to this conclusion by scrutinizing the cost of conducting the tests. In detail, council educators found that the cost price of a conventional PCR test is highly dependent on the costs of reagents and consumables with an average of 38% for the lowest cost, to 61% for the maximum price. The report notes that “the share of the price of the reagent alone ranges between 13% in the case of the domestically produced reagent, and 37% in the case of the imported reagent.” On this point, the Board considers the cost price to be understated insofar as the common charges (staff, depreciation, equipment, miscellaneous expenses, etc.) have been calculated for each type of test, and not distributed by type of tests due to lack of a suitable allocation key.

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Thus, the Council issued a series of recommendations. The study recommends reducing the national market’s dependence on global supply chains. This is necessary because the national market is dominated by importers and distributors who generate more than 90% of its sales. For example, the council refers to the market for Covid test reagents that, according to the study, has one national factory with a “100% Moroccan” product, and two factories with manufacturing licenses of Korean origin. To strengthen the national productive fabric, the Council recommends a legislative framework of reference for the marketing of “100% Moroccan” reagents and to promote innovation in the diagnostic test industry. The report also suggests encouraging the consumption of locally manufactured reagents.

In addition, for a more solid production fabric, the Board recommends improving the governance of the pharmaceutical and medical devices sector. This is the reason why the study calls for the updating and operation of the platform for submitting applications for registration. To do this, it is necessary to establish the National Medicines Agency.

Note that according to the Council, the contribution of private entities does not exceed 31% of the total examinations conducted since the beginning of the epidemic at the end of 2021. For its part, the public sector conducted 68% of the examinations. PCR, 40% of which were provided by the military hospital.

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