"The court has decided in favour of the Minister of Health," Debbie Pearman, chief legal director at the Department of Health, told reporters.

The regulations will come into effect immediately and will set a maximum 26 per cent retail "dispensing fee" which pharmacists may charge customers - a move pharmacists' groups say could drive many of them out of business.

The regulations also set a so-called "single exit price" for drugs coming from manufacturers, forbidding discounts and incentive programmes that are have in the past been offered to retailers and pharmacies.

South Africa's Pharmaceutical Society, along with retailer New Clicks and private health care provider Netcare had challenged the new laws.

New Clicks shares fell 3,1 per cent to 7.51 rand after the ruling while Netcare shares tumbled 4,2 per cent to 4,76 rand by 0855 GMT.

Drug prices are a particularly sensitive subject in South Africa, which has the world's highest HIV-AIDS caseload with some five million people infected.

South Africa launched its drug pricing plan in April, saying the elimination of manufacturer incentives and capping of pharmacists' mark-ups would save consumers up to three billion rand per year.

The court challenge delayed the caps on pharmacy fees, while the manufacturer incentive ban was implemented quickly.

Both are now fully in force following Friday's ruling, Health Ministry officials said.

Hmphrey Zokufa, the Department of Health's director for pharmaceuticals, said the court's ruling would open the door to better health care for millions of poor South Africans.

"This is not a victory for the Department of Health.

This is a victory for consumers.

We know what was done over the last couple of weeks.

Consumers have been held ransom by high prices."

Ivan Kotze, executive director of the Pharmaceutical Society, said the fact that the court failed to rule unanimously against the group's complaint showed there were still questions about the new pricing rules "We are disappointed, but the split judgement shows there is merit in our case.

We will have to study the judgement to determine what to do from here.

We still say the pharmacies will not be able to operate their business, pay their salaries and pay their rents," he said.

-Nampa-Reuters

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