Like Brazil, India was mocked as ‘a country of the future’ in the 1950s. Industrial policies did not work. There were fewer jobs, and infrastructure was decrepit. There were pharmaceutical companies in the country but not many sick citizens could afford to buy key essential drugs.
Then economic liberisation came. Then the patent act, which removed composition patents from food and drugs. Though this drove out multinationals, which was not too great at that point, it led to the growth of local firms.
More than the patent act, local firms were provided with incentives such as tax cuts and holidays. Companies were certain about how to get inputs or how many taxes to pay. By 1990s, multinationals had returned, owing to better patent protection laws and convivial doing business environment.
The result was that in 2002, over 20,000 registered drug manufacturers in India sold $9 billion worth of formulations and bulk drugs, according to Wikipedia. Eighty-five percent of these formulations were sold in India while over 60 percent of the bulk drugs were exported, mostly to the United States and Russia. Most of the players in the market today are small and medium enterprises. The highest point of these was India’s drug export hitting $11.7 billion in 2014.
Nigeria is a different case. According to data from the Nigerian Export Promotion Council (NEPC), the total value of all non-oil exports of Nigeria, then Africa’s biggest economy, was $2.71 billion.
The local pharmaceutical industry is currently in a coma, with capacity utilisation lying about 20 percent. The industry is currently hard hit by absence of petrochemical plants, leaving local drug makers with no option than to import the majority of their inputs from abroad.
Frank Udemba Jacobs, president, Manufacturers Association of Nigeria (MAN), told BusinessDay that the absence of core industries such as petrochemical and steel plants was making life difficult for manufacturers.
Added to this woe is the near collapse of the foreign exchange market, which crimps the capacity of drug makers to get dollars.
One drug maker told this newspaper in May that the foreign exchange market situation had interrupted production many times at his factory.
Though the Central Bank of Nigeria (CBN) directed that 60 percent of the available foreign exchange be provided to manufacturers in the country, the pharmaceutical industry remains one out of over 60 sub-sectors in manufacturing.
Worse still, the FX supply is abysmally low and all of the available dollars may not be sufficient for even one manufacturer, Joseph Babatunde Oke, chairman, A.G. Leventis Nigeria plc, told this newspaper.
Pharmaceuticals say a larger proportion of the 60 percent should be allocated to them as drugs are essential commodities and should be treated as national security.
“It is wrong to rely on other countries for the importation of a serious product like drug. This is why this sector needs special attention,” one CEO, who pleaded anonymity, told this newspaper.
Also, the industry is challenged by the ongoing Common External Tariff (CET), which places zero tariff on imported finished drugs but imposes between five and 20 percent duty on imported raw and packaging materials.
Local manufacturers say the five to 20 percent duty on raw and packaging materials used in their factories is already threatening to destroy 150 local drug makers and estimated N300 billion investment made so far in the domestic sector, calling for a review of a the CET to include imposition of 20 percent tariff on imported finished drugs.
“The lack of demand for locally manufactured medicines as a result of cheap imports will lead to idle capacity and will negatively impact previous investments in the sector, worth over N300 billion,” Okey Akpa, chairman, Pharmaceutical Manufacturers Group of the Manufacturers Association of Nigeria (PMG-MAN).
Chief executive officers of drug firms in Nigeria told BusinessDay that drug importers were now winning more contracts than local manufacturers as the former’s prices became increasingly lower, owing to the zero duty phenomenon.
There are also other key challenges such as poor infrastructure and lack of expansion funds, which make competitiveness and obtaining the World Health Organisation (WHO)’s certifications difficult for local players.
In spite of these challenges, four companies have succeeded in getting the WHO prequalification necessary for competitiveness.
But one company that has shown capacity to expand and join the league of companies with the WHO certification is Fidson Healthcare Plc. At a period many firms were being conservative and cautious of the Nigerian economy, Fidson completed its N9 billion drug plant located at Sango-Ota, Ogun State. At a period briefcase investors were taking a flight, Fidson was completing its multi-billion plant, creating tens of jobs.
The plant completed at a point when critical challenges of high gas prices, foreign exchange delays by commercial banks, lack of good water scheme and the improperly negotiated Common External Tariff (CET) were confronting the manufacturing sector.
The plant not only positions Fidson for global competitiveness but also shows how serious it is to retool, recalibrate when necessary, and improve on what is on ground.
Abiola Adebayo, operations director, Fidson Healthcare Plc, told BusinessDay at a factory tour that the drug firm would need consistent policy, resolution of CET and gas saga, funding, as well as infrastructure needed for sustainable growth.
Key government officials have also recognised what Fidson has done. Isaac Folorunso Adewole, Nigeria’s health minister, paid a visit to Fidson’s factory in July. Adewole took time to commend Fidson, stressing that companies like this must be protected.
In August, Osagie Ehanire, minister of state for health, visited the factory, congratulating Fidelis Ayebae, managing director of Fidson Healthcare, for his entrepreneurial spirit which inspired him to establish a pharmaceutical business that could today boast of several remarkable achievements, including huge manufacturing facility.
Ehanire said the pharmaceutical sector was a very important sector to the government while the production of medicines in the country was being treated as a priority by the government. The minister made reference to the trip to India by a team of the country’s delegates to study the pharmaceutical research and manufacturing, emphasising that there was a lot to learn from the Indian pharma industry.
He said the industry should begin to work on knowledge transfer from India, promising that the imbalance in CET would be addressed.
He said the Federal government was interested in local vaccine production, despite that it might not be easy to end the importation of vaccines at the moment, considering the country’s huge health care needs.
In the area of patronage, the minister said he would tuse the opportunity to talk to chief medical directors (CMDs) of government hospitals to consider making patronage of local pharmaceutical products a priority.
ODINAKA ANUDU
