by Johan Burger
PHARMACEUTICAL MANUFACTURING PLAN FOR AFRICA (PMPA)
Most African pharma firms currently operate in small fragmented markets. They cannot compete with their Asian counterparts who have access to vast global markets and thus enjoy economies of scale. In 2012, the Assembly of Heads of State of the AU endorsed a Pharmaceutical Manufacturing Plan for Africa (PMPA). This plan presented a package of solutions to the critical challenges confronting Africa's pharmaceutical industry. Immediate issues include Africa's small fragmented markets and weak regulatory frameworks; inadequate human resource capacity; poor procurement and supply chain systems; and incoherent national policies to govern trade, industry, health, and finance. Business expansion suffers from weak access to affordable financing and a lack of modern technology. Over the long run, the sector needs investments in research and development and continent-wide measures to protect intellectual property.
The PMPA requires multisectoral and multi-stakeholder collaboration. No single company, government department or organisation can address these challenges alone. The plan also calls for "improved access, quality, availability and affordability of pharmaceutical products, as well as increased economic benefits through sustainability, competitiveness, and self-reliance of the industry."
Other proposed solutions include strengthening the relevant regulatory systems and establishing a one-stop-shop to provide information, data and business intelligence to industry players. To boost local pharmaceutical production and improve health outcomes, the PMPA encourages procuring medical products from Africa-based companies. The plan proposes pooled procurement to incentivise local manufacturers to address maternal, new-born and child health issues.
In the long run, Africa must integrate its markets and implement cross-border trade facilitation policies. Countries must strengthen and harmonise their regulatory systems to assure the quality of medical products and ensure that local manufacturers adhere to international standards.
POINT OF INTEREST
- Africa's pharmaceutical sector needs to shift to local manufacturing. While manufacturing generic versions of medication is a challenge to the continent's fragmented markets, those countries with sizeable populations can justify the development of local production. Also, the regional economic communities should lean toward building up regional production capacity. This would negate the need to import many medicines. Many international pharma companies can licence production on the continent. Given that much of Africa imports between 80% and 100% of its medicine requirements, governments should have long ago adopted policies to encourage local pharma production. This tactic would help address the very high disease burden and lead to meaningful job opportunities, not only in production and marketing but also for chemists and pharmacists. These benefits are in addition to import substitution. While this situation is clear and addressing it is a recurring theme, progress is painfully slow.
EUROPE STEPS IN TO SUPPORT THE MANUFACTURING OF MEDICINES IN AFRICA
The European Investment Bank (EIB) recently partnered with the non-profit kENUP Foundation to launch a €50 million pharmaceutical investment initiative in Africa. This pioneering scheme has a broad footprint. It aims to strengthen the local production of Active Pharmaceutical Ingredients and scale up the manufacturing of drugs essential to public health. These measures will reduce Africa's dependency on drug imports and address medical supply chain weaknesses linked to COVID-19. This initiative should also improve the availability of specialist drugs and tackle the supply chain challenges that currently hamper public health across the continent. Upscaling investments in the African pharmaceutical sector can help protect millions of people from disease and disability and strengthen the resilience needed to cope with ongoing and future pandemics.
The pandemic highlighted the vulnerability of public health systems to global supply chain disruptions and Africa's dependence on international medicine sources. The demand for pharmaceuticals is expected to double in Africa by the end of the next decade. Increasing local production of Active Pharmaceutical Ingredients can improve the health of millions of Africans. This promises to provide business opportunities for African pharmaceutical companies and create many new job opportunities.
The lEB and kENUP Foundation launched the Active Pharmaceutical Ingredients financing initiative on 21 December 2020 with representatives from WHO, EDCTP, and Global Access in Action at Harvard Law School the kENUP. Kenyan-based non-profit APIFA (API for Africa) will act as a non-exclusive promoter. Director of APIFA Gerald Macharia observed that all relevant stakeholders should collaborate and support manufacturers to ensure this initiative's long-term viability.
The EIB/kENUP initiative will focus on manufacturing those Active Pharmaceutical Ingredients that constitute 45% of Africa's final drug costs. The new financing programme will also ensure that African pharmaceutical manufacturing companies benefit from the technological innovation that transforms the industry and facilitates local production through digital connectivity, automation and cloud computing.
CHINESE INVESTMENTS IN AFRICAN PHARMA
Poorly regulated imports are thought to be responsible for the prevalence of dangerous counterfeit and sub-standard medical products in African markets. Africa's reliance on imported medical and pharmaceutical products have created these and other vulnerabilities, leading to strategies to strengthen local and regional manufacturing capabilities and supply chains. This goal dates to 2007, when the New Partnership for Africa's Development (NEPAD) proposed a pharmaceutical manufacturing business plan to develop Africa's capacity to produce cheap and high-quality pharmaceutical products. With few exceptions, these efforts were unsuccessful.
Developing the manufacturing sector, which converts labour from the agricultural sector to higher value-added economic activity, is critical to economic development. It will create employment opportunities for Africa's large, youthful population and benefit Africa's trade imbalances.
Foreign investment can support this process by providing capital, technology, and expertise to build pharmaceutical plants and factories in Africa. While China can help in this process, Chinese pharmaceuticals have a reputation for poor quality in Africa. Many see Chinese and Indian imports as the primary source of the counterfeits that plague African medical products markets. Another challenge is that the pharmaceutical industry's capital-intensive nature may deter Chinese investors who prefer to focus on low-cost light manufacturing products such as clothes and shoes. However, the large and growing African domestic market for pharmaceutical products is an attractive prospect. Local and regional initiatives and incentives to support foreign investment and Africa-made medical products can enhance the African market's rising attractiveness.
Chinese investment in Ethiopia's pharmaceutical sector typifies these opportunities. In 2018, Sansheng Pharmaceuticals inaugurated its US$85 million factory in Ethiopia, intending to serve growing local demand and exporting to other African countries. This project also created jobs for the local population and helped mitigate Ethiopia's shortage of foreign currency.
The Ethiopian government has identified pharmaceuticals as a strategic sector and launched a 10-year plan in 2015 to raise the share of pharmaceutical and medical products produced locally to 50% by 2025. To achieve this objective, the government provided specific incentives and indicated its willingness to engage with investor needs and address concerns such as reduced taxes and preferential market access for locally-based firms.
FRANCHISE STARTUP EXPANDS MEDICINE ACCESS ACROSS AFRICA
mPharma is a Ghanaian startup that manages prescription drug inventories for pharmacies and their suppliers. One of the most prominent players in the African pharmaceutical market, the eight-year-old company raised over US$50 million. mPharma recently announced its entry into Ethiopia via a franchise agreement, making Ethiopia its eighth market in Sub-Saharan Africa and the third in East Africa
mPharma signed a franchise agreement with Belayab Pharmaceuticals PLC to enable its entry into the Ethiopian market. mPharma and Belayab Pharmaceuticals aim to open two operational pharmacies in Addis Ababa this year. They will increase access to affordable and quality medications in Ethiopia.
With a footprint in Ghana, Nigeria, Zambia, Rwanda, and Kenya, mPharma serves approximately a million patients annually through over 300 partner pharmacies. The firm acquired Kenya's second-largest pharmacy chain in 2019, taking control of 27 Halton's stores in Kenya. Its strategy focuses on providing patients with affordable and high-quality medicine.
According to the Managing Director of Belayab Pharmaceuticals Robel Minassie, the growth in volume and complexity of Ethiopia's healthcare needs makes it critical to develop strong partnerships to provide quality and broad healthcare coverage. Working with others, mPharma contributes towards addressing the three significant killer diseases in Africa — malaria, tuberculosis and HIV/AIDS — by dealing with challenges such as "sprawling supply chains, low order volumes, and exorbitant prices."
mPharma's move toward franchising supports its growth strategy. By providing the infrastructure companies need to enter the retail pharmacy sector, the company plans to occupy every aspect of the African pharmaceutical retail space.
POINT OF INTEREST
- The franchising business model has a high potential to create value for Africa. The small number of international pharmaceutical companies that operate in Africa tend to be selective regarding location, given the continent's risk profile. Adopting a licencing and franchising strategy is one way to mitigate the risk from safety and security factors. The franchisor can provide services such as access to manufacturing equipment, patents, formulae, technical training, maintenance of quality standards, and sales and marketing support. These strategies would also endear these companies to Africa's governments, which could lead to additional benefits. Local production could also reduce the potential for harm from fake medicines used by the unsuspecting population.
NEW VETERINARY DRUG PLANT IN ETHIOPIA
Ethiopia opened a new veterinary drug manufacturing in April. The US$2.3m plant will cover 15% of the veterinary demand of Ethiopia. Animal diseases have led to low stock levels in the country. It is envisaged that the new plant will enhance livestock productivity and accelerate the sector’s growth. The plant will produce 91.5m veterinary tablets annually at a production capacity of 60%.
POINT OF INTEREST
- Livestock in Africa is as vulnerable to disease and pandemic as people. Most veterinary products are also imported at high cost. Ethiopia has very scarce foreign currency reserves and cannot afford to import products that could be manufactured locally, such as fertilisers, pesticides and other agricultural products. Local production of these products could serve as an incentive for foreign companies that currently export to countries such as Ethiopia. With the advent of the AfCFTA, these companies might find it increasingly difficult and more costly to export to Africa, and should therefore seriously consider the development of production capacities in Ethiopia and elsewhere. One is reminded of Asiatic Agriculture, that exports to Ethiopia. While the risk of capital investment in Ethiopia is currently slightly high, this is not so everywhere else in Africa. With thorough due diligence, risks can be identified, and mitigation plans can be developed.
IMPACT OF AfCFTA ON THE PHARMACEUTICAL INDUSTRY
Implementation of the African Continental Free Trade Agreement (AfCFTA) will create new employment opportunities in Africa's pharmaceutical industry. Mr Ernest Bediako Sampong, CEO of Ghana's Ernest Chemist, views new markets as increasing employment and meeting higher demand for products. However, Sampong believes that while the AfCFTA is a laudable idea, the path will not be smooth due to many Africans' attitudes towards products manufactured in Africa, especially those from Ghana.
He believed the pharmaceutical industry would benefit from technology transfer and new employment opportunities as international pharmaceutical companies set up plants and factories in Africa. Multinationals can also benefit from collaboration with existing companies on the continent to enable exports to the sub-region.
According to Sampong, there is "a possibility of medicine security and a boost in industrial investment." He identified the need for workable policies and the scope to implement such policies. He called on the government to harmonise policies and systems for doing business in Ghana and to help the private sector develop their businesses to contribute to the development of the economy. His recommendations include waiving taxes on equipment used for manufacturing.
POINT OF INTEREST
- As noted in the article on the impact of the AfCFTA in the pharmaceutical sector, continental (and regional) integration would facilitate the movement of goods and services among countries in Africa. Meaningful regional integration will lead to less fragmented markets and lower transportation costs between countries. Sadly, many believe that locally manufactured products have less value than imported products. Because they were manufactured locally, they are seen as of lower quality. This perception is frequently all too correct as corruption regularly leaves its mark in the world of business on the continent.
PHARMA IN NIGERIA
Nigeria’s pharmaceutical industry is one of the fast-emerging industries in Africa with strong potential for further growth. Out-of-pocket spending accounted for 70% of total health expenditure in 2016, compared with just 7% in South Africa. The opportunities in the Nigerian market have attracted the presence of several major pharmaceutical companies, with the market set to grow at a CAGR of 9.1% between 2017 to 2030. Examples of these companies include Abbott Nigeria, Biocon, Cipla, Candila, Glenmark, Pfizer, Sanofi Nigeria, and Sun Pharma Elys. The pharmaceutical industry is expected to play a major role in transforming Nigeria into a multi-million-dollar economy.
There are various business opportunities in the Nigerian pharmaceutical industry. These include the marketing and sale of drugs and medications, manufacturing medicine, distributing medication (including mobile pharmacies), and selling alternative medicine.
However, various challenges need to be addressed. The lack of stable electricity supply in Nigeria forces pharmaceutical companies to acquire alternative sources of power such as generators, solar energy sources and inverters. The high costs of imported pharmaceutical products is problematic. Most of the raw materials, about 98% used in the production of drugs in Nigeria, are imported. Nigerians also tend to place more trust in imported drugs than locally manufactured ones. Counterfeit drugs are major sources of concern. Access to low interest funding is another major challenge.
POINT OF INTEREST
- These opportunities and challenges are not unique to Nigeria. Other countries where large opportunities exist include those with large populations and high importation tendencies, such as the DRC, Ethiopia, Ghana, Kenya, and Tanzania. It is in the best interests of foreign manufacturers to set up manufacturing facilities in Africa to enable local production of generic medication. This will reduce Africa’s dependence on imported medication as well as vulnerability to global supply chain shocks. A Singaporean company keen on exporting its licensing business model is Beacons Pharmaceutical. Their business model provides for establishment of a manufacturing facility, training of personnel and support in acquiring raw materials and quality control. This model will support entrepreneurs and SMEs in Africa to develop production facilities, help their countries to benefit from import substitution and reduce their vulnerability as indicated.
BOOSTING THE PHARMA SECTOR IN KENYA
A report released by the International Finance Corporation (IFC) shows that domestic producers only hold 30% of the US$1bn Kenyan pharma market. While local manufacturers have a strong presence in ‘anti-infective’ product categories such as cough and cold preparations, antiseptics anti-asthmatics, and antibiotics, they have failed to tap into the lucrative immunological and cardiovascular markets, worth about US$711m. Most local pharma firms manufacturer simple non-patented products or rely on technology transfer agreements with foreign multinational manufacturers. The pharmaceutical industry also imports 60% of packaging material from India and China as well as production equipment from Europe and Asia. A report by the Kenya Investment Authority (KenInvest) in October last year indicated that Kenya is the leading producer of pharmaceutical products in the Common Market for Eastern and Southern Africa (Comesa) region, supplying about 50%, and the third largest exporter of pharmaceuticals in Africa. Kenya’s exports to Comesa, East Africa Community and the rest of Africa amounts to US$63m, with a total market valued at US$13.6bn. An increase of 5% in Kenya’s share of this total African market would amount to exports worth US$678m. Kenya’s pharmaceutical sector must deal with challenges such as dominance by foreign multinationals, high cost of utilities, and inadequate access to credit for the private sector to fund product research and development.
POINTS OF INTEREST
- The lack of local manufacturing capacity led to severe shortages during the Covid-19-induced lockdown when global supply chains were disrupted. Many products became unavailable, undermining the ability of the government to deal with medical challenges in the country. Prices subsequently rose to very high levels. This emphasises the need to develop the local pharmaceutical manufacturing industry.
- Kenyan President Uhuru Kenyatta adopted his Big Four Agenda in 2017, and one of the items entails boosting the manufacturing sector’s contribution to GDP from 8.5% to 15% by 2022, and another is providing universal healthcare for all Kenyans. Should the Kenyan pharmaceutical industry focus on tapping into the above opportunities, and foreign manufacturers embrace these opportunities too, this would be a welcome boost. Boosting local production will also grow the sector’s export revenues.
A PHARMA ‘CITY’ COMES UP IN EGYPT
Egyptian President Abdel Fattah al-Sisi opened a 150,000 sqm pharma factory complex in April. “Gypto Pharma” is said to be the largest pharma complex in North Africa and the Middle East with a production capacity of almost 150 million medicine packs annually. It will manufacture pills for chronic diseases, such as hypertension, cardiovascular, kidney and brain diseases, and neurological disorders, in addition to some vitamins. The Pharma ‘city’ consists of two very large factories, which include 20 production lines in which all pharmaceutical forms are manufactured, from tablets, capsules, effervescent, syrup pharmaceutical products, and creams. The government hopes the Gypto Pharma City will make Egypt self-sufficient in the production of life-saving drugs and turn the country into a regional hub for manufacturing medicines. Egypt currently imports 15% of its medicine needs.
- The city should attract pharmaceutical companies with Africa and the Middle East as target markets. Tapping into the facilities at Gypto will ease the challenges manufacturers face in countries such as Kenya and Nigeria. The SMEs and entrepreneurs could particularly benefit from such facilities.
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