The Global Pharmaceutical Industry has become a major contributor to the global Economy. In 2012, total world Pharmaceutical market was worth an estimated 857 Billion dollars. This is twice the total GDP of Nigeria, the biggest Economy in Africa. The United States and Canada remained the World’s largest market with 41 percent share; Europe came next with 26.7 percent, followed by Japan with 11.7 percent. Africa and Asia (excluding Japan) had 14.7 percent while Latin America had the balance of 5.9 percent. When the data is further disaggregated, Sub-Saharan Africa will be seen to contribute less than 2 percent of the Global Pharmaceutical market( 8-10 billion dollars)
As well as driving medical progress by researching, developing and bringing new medicines that improve health and quality of life for patients around the globe, the researched based Pharmaceutical industry is a key asset to global economy. It is a high technology sector with the highest added value per person employed, significantly higher than the average value for high tech and manufacturing industries. According to Eurostat data, the pharmaceutical Industry is also the sector with the highest ratio of R&D investment to net sales. In 2012 R&D investment in Pharmaceuticals and Biotechnology only amounted to 17.7 percent of total business R&D expenditure worldwide. Recent studies in some countries have shown that the researched-based pharmaceutical industry generates three to four times more employment indirectly- upstream and downstream than it does directly. Further, a significant proportion of these are valuable skilled jobs.
CHANGING TREND
After long periods of market dominance by the USA and Europe, there is increasing competition from emerging economies such as China, Brazil and India. Whereas the Uk for example has slipped from the 6th position in 2007 to the 9th position in 2012, China has moved to the 3rd position and Brazil to the 6th position in the Global Pharmaceutical market. The USA market grew by 6 percent and the Uk by 2 percent between 2010 and 2012, while China and Brazil grew by 21 percent and 38 percent respectively. This rapid growth in market size is replicated in R&D, leading to a gradual migration of economic and research activities from the US and Europe to these fast growing markets. Specifically in 2012, the Brazilian and Chinese markets grew by 16 percent and 21 percent respectively compared to an average market growth of minus 2 percent for the five major European markets and the minus1 percent for the US market. Most of these changes have been driven by the global Economic crisis (2008-2010) and its aftermath.
AFRICA: increasing opportunities, over-coming challenges
As growth opportunities continue to move away from the traditional pharmaceutical markets, Africa presents a ripe opportunity. From all indications, Africa will be a significant Economic force in the near future. IMS Health projects that by 2016, pharmaceutical spending in Africa is expected to reach 30 billion US dollars. This value is driven by a 10.6 precent compound annual growth rate through 2016, second only to Asia Pacific (12.5 percent) and in line with Latin America (10.5 percent) during this period. Driven by a convergence of demographic changes, increased wealth and healthcare investment and rising demand for drugs to treat chronic diseases and even the emergent new epidemics like Ebola Virus Disease, this market will exceed 45 billion US dollars by 2020. This projected growth is a reflection of economic strength accompanied by increased health care spending as the economies of several African countries are growing faster than anywhere else in the World outside China.
Underpinning these prospects are a series of positive economic trends; greater political and fiscal stability and improvements in pro-business legislation( like deregulation and Privatization) have led the United Nations(UN) to forecast that foreign direct investment(FDI) could double within three years. This FDI is fuelling macroeconomic growth and vastly improving access to new technology. The recent boom in mobile subscribers reflects this trend. As at mid 2012, there were more than 600 million subscribers on the continent, surpassing American and European figures. At the same time, major demographic shifts show an increasing number of working-age Africans, a rising middle class which now accounts for 34 percent of the Continent’s inhabitants and an urban population expected to exceed that of China and India by 2050.
Alongside the increasing economic wealth is a notable rise in healthcare spending which has grown at a Compound Average Growth Rate ( CAGR) of 9.6 percent since 2000( across 49 African countries), fuelled by government, non-governmental organizations (NGOs) and private sector investment, this has largely focused on strengthening health system infrastructure, capacity building, treatment provision and specialized services. Real gross domestic product ( GDP) is expected to grow at above 5 percent per annum through 2017 in sub- Saharan Africa (SSA) and this trend of rising healthcare spending is expected to continue.
The changing economic profile of Africa is also linked to an increased demand for chronic care drugs, reflecting a marked shift in the burden of illnesses towards non-communicable diseases (NCDs) and the continued impact of human-immunodeficiency virus and acquired immune deficiency syndrome (HIV/AIDS) on the continent. The NCD proportional contribution to the healthcare burden is forecast to rise by 21 percent through 2030. While continuing to struggle with infectious and parasitic diseases, Africa is expected to experience the largest increase in death rates from cardiovascular (CV) diseases, cancer, respiratory diseases and diabetes over the next ten years, resulting in greater demand for healthcare services and appropriate medicines.
The combination of economic strength and an expanding middle class is already driving a demand for medicines across Africa. For example in Algeria, Morocco and Tunisia, a rise in wealth has triggered demand for chronic medicine consumption. In Algeria specifically, the chronic medicine to essential medicine ratio increased by 72 percent from 2002-2011,accompanied by a total gross national income ( GNI) increase of 70 percent.A similar trend is emerging in Nigeria, Kenya and Botswana where NCDs have been declared a national priority at the ministerial level.
Notwithstanding its growth potential, Africa presents a complex multifaceted set of markets which are highly heterogeneous in terms of pharmaceutical growth, language and trading blocs such as the East African Community (EAC), the South African Development Community (SADC), the Economic Community of West African States (ECOWAS), the Francophones and the Lusophones. Consequently, the opportunities they offer are also quite variable
….INDUSTRY STRUCTURE
Three types of pharmaceutical industry players have emerged in the continents and have achieved sustainable revenue-generating business operations:
1. Innovative Multinational Companies
Most of the major pharmaceutical Companies (MNCs) have had presence in Africa for a number of years. Among the first companies (or precursors of today’s companies), to enter the continent were Abbot, Sanofi-Aventis, Norvatis, Pfizer, May & Baker, Glaxo, Wellcome, Sandoz, Roche and Johnson and Johnson. Some of these later divested from Africa during the difficult years of the late 80s and mid 90s. But there has been a return as African Nations began to resolve their lingering political and economic problems.
MNCs have predominantly focused on and succeeded in marketing branded innovative and generic drugs largely to the private sector but also to the public sector with growing demand for Vaccines, anti-infectives, anti-diabetics and antihypertensives. Many of these MNCs, some with over 40 years presence have had chequered history with their policies of decentralization and local manufacturing. Sanofi and Glaxo have strengthened their manufacturing operations in Africa whereas Pfizer and Norvatis seem to have shrunk their manufacturing involvement in Africa especially in West Africa. But whichever way, the MNC is seeing a resurgence in their businesses in Africa and many are increasing their stake.
2. Indian and Chinese Pharmaceutical Companies
The expanding presence of Asian manufacturers in Africa has seen the proportion of pharmaceuticals being imported from India and China more than double in value terms in recent years. According to global import and export data, India accounted for 17.7 percent of African pharmaceutical import in 2011(up from 8.5 percent in 2002) and China for 4.1 percent( up from 2.0 percent in 2002)
Indian and Chinese manufacturers have gained market share primarily through competitive prices and simultaneously targeting several markets in the generics space. Chinese firms have succeeded by exploiting many African Countries with low ease of doing business ratings, where they sell or gift medicines such as antimalarials through procurement contracts.
Indian manufacturing companies primarily sell medicines mostly through Private Local companies and NGOs and many have set up local subsidiaries. Leading Indian players like Cipla, Ranbaxy, the Serum institute, CHI and Dr Reddy’s have strong market presence. Many are reputed for integrating local talent into their operations and many of their plants have achieved World Health Organization (WHO) pre-qualification. They are currently dominating the sale of affordable HIV medicines in Africa, some of which are made in their local African plants
3. Local Pharmaceutical Industry
The success of local pharmaceutical companies is frequently contingent on their ability to attract MNCs into research and development (R&D ) licensing arrangements, a strategy which endorses their production capabilities. Leading local companies in parts of Africa especially the Northern, South and West Africa have been leaders in their domestic markets. For example Aspen ( South Africa), Adcock Ingram(South Africa), EIPICO( Egypt ), Saidal (Algeria), Cipla Medpro( South Africa); Fidson, Emzor, May&Baker, Swipha and Neimeth( Nigeria ), Danadams, Kama,Ernest and LaGray (Ghana),have combined licensed originator brands and their own branded generic products.
While success stories of local industry players exist, the majority have struggled to compete for two reasons. Firstly, the high cost of active pharmaceutical ingredients (APIs) in Africa has left most unable to compete on price with Asian generic manufacturers. Secondly, domestic manufacturers have struggled to implement good manufacturing practices (GMP) and ensure quality production. As a result, few companies have WHO pre-qualification status. For this reason, NGOs like the Global fund have been reluctant to buy essential medicines (e.g. anti-infectives, particularly ARVs) from domestic manufacturers.
Nevertheless, the MNCs and the WHO are now working with local players to help them obtain WHO pre qualification. For example, the WHO and UNITAID and NAFDAC have been offering capacity building and technical assistance to local Nigerian drug makers that has resulted in progress towards achieving GMP standards and pre-qualification.
In West Africa, Nigeria and Ghana represent the rising stars in the Pharmaceutical Industry. Whereas Ghana has about 30 registered Pharmaceutical Manufacturing firms, Nigeria has over 100 registered Pharmaceutical companies. In both countries local production ranges between 30-40 percent, creating enormous room for growth. LaGray Chemical company is reputed to produce APIs and ARVs in Ghana. Cipla-Evans, May & Baker and Fidson market locally produced ARVs. With over 160 million people and GDP growth in excess of 5 percent since 2006, Nigeria is one of the most attractive markets in Sub Saharan Africa. The Country’s Pharmaceutical spending has been rising at 16 percent compound annual growth rate. While Malaria and HIV are leading causes of Death, NCDs are rapidly emerging as major public health challenges, particularly in the urban slums. Yet over 80 percent of medicines required to treat these diseases are currently imported into the country. Here then lies great opportunities crying for additional investment to bridge this gap and reduce the over dependence on imported pharmaceuticals. This is both an economic imperative and a national security necessity.
Mazi Sam Ohuabunwa
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