Four drugmakers see 82% rise in production cost in three months

Four listed pharmaceutical firms in Nigeria have seen their production costs rise by 82 percent within three months, data compiled by BusinessDay shows.

The latest financial statements of May & Baker Nigeria Plc, Neimeth International Pharmaceuticals Plc, MeCure Industries Plc, and Morison Industries Plc show that their combined cost of sales rose to N17.5 billion in the second quarter (April-June) of 2024 from N9.6 billion in the previous quarter.

However, Fidson Healthcare Plc reported a decline in its cost of sales of N10.9 billion from N11.2 billion.

Further analysis of the statements revealed that MeCure Industries reported the highest production cost which rose to N11.4 billion from N5.4 billion, followed by May & Baker with N5.53 billion from N4.09 billion. Neimeth International own rose to N579 million from N143 million and Morison Industries grew to N83 million from N31 million.

According to the Pharma West Africa market survey, the Nigerian pharmaceutical market has over 200 manufacturing and packaging companies made up of three dominant segments of readily available

This includes over-the-counter drugs (43.1 percent), affordable generics (38.9 percent), and expensive branded patented drugs (12 percent), the drug market in the country has been dominated completely by imported drugs which comes to the average Nigerian at a very high cost.

Read also: Nigeria’s Supply Chain Report exposes challenges to pharmaceutical industry

Consequently, the cost of drugs in Africa’s most populous nation has become very expensive, as the prices of imported drugs are dominated in dollars.

The Federal Government recently introduced an executive order to suspend import duties and value-added tax on essential medical supplies imported into the country.

Experts in the pharmaceutical industry believe the high cost of locally produced pharmaceuticals will ease and importation will increase.

By significantly reducing production costs, this initiative will enhance the competitiveness of local manufacturers, according to Chinyere Almona, director-general at Lagos Chamber of Commerce and Industry

“The recent exit of some pharmaceutical firms has made drug availability difficult, leading to higher costs of medications. This policy intervention has come at a good time,” she added.

Data from the International Trade Centre, a multilateral agency, shows that the importation of pharmaceutical products into Africa’s fourth largest economy, fell to the lowest in five years largely on the back of the high cost of sourcing foreign exchange and rising inflation.

The amount dropped for the third straight year to $704.6 million in 2023, a 32.9 percent decline from $1.05 billion in the previous year.

The FX liquidity challenges, which worsened last year as a result of the naira devaluation, have led to a scarcity of pharmaceutical raw materials that led to an increase in the prices of drugs.

A breakdown of the pharmaceutical statements highlighted that on a quarter-on-quarter basis, their revenue rose to N35.8 billion from N33.9 billion due to the high cost of drugs.

Similarly, on a year-on-year basis, their combined revenue also rose by 38 percent to N25 billion.

However, their increase in revenue could not be translated to higher profits as a result of FX availability and accessibility that pose ripple effects on industry activities and competitiveness, even as naira depreciation, rising cost of production, and raw materials, among other issues, remain major problems facing operators.

Fidson Healthcare and MeCure Industries’ after-tax profit fell to N475 million and N295 million, respectively while Morison Industries reported a loss of N900,000 from a profit of N655.4 million. However, May & Baker and Neimeth International reported a profit of N806 million and N121 million.

According to the Nigeria Pharmaceutical Market Outlook: Market Segmentation By Type, & by Region with Forecast 2017-2030, the major challenges in Nigeria’s pharmaceutical market are poor infrastructure, counterfeit drugs, a brain drain of health professionals and inadequate funding of the public system mean enrolment in the sector will continue to be slow, hindering growth in the market.