Nigeria’s idle drug capacity hangs on $4b contract manufacturing potential

Nigeria’s idle pharmaceutical industry capacity is a $4 billion growth potential that key stakeholders say can be unlocked through contract manufacturing opportunities that will ramp up local production.

Leading players in the sector say the country can stop poor capacity utilisation and address the wide margin between drug demands and supply from within by ensuring manufacturing facilities are adequately equipped to meet global standards for general manufacturing practice (GMP).

With a quality, transparent and verifiable production procedure, idle capacities in most Nigerian pharmaceutical companies fed be fed by contract manufacturing outsourcing (CMO) firms, which are increasingly driven by the growing demand for generic drugs, need to cut complex production costs and requirements, Sammy Ogunjinmi, vice president, the Nigerian Representative of Overseas Pharmaceutical Manufacturers (NIROPHARM) told BusinessDay.

He said efforts to ramp up local pharmaceutical manufacturing must shift from locking importers out of the domestic market to collaborations that can result in the production of foreign products locally.

“Those interested in owning a factory must see the current importers as potential customers and they must be able to demonstrate capacities, that their factories that can manufacture in volumes, produce the desired quality in a transparent way that is verifiable by both parties,” Ogunjinmi said.

“No one should be pushed out of the market. Contract manufacturing will make it easier and there has to be a policy framework that will protect the interest of the contractor and the manufacturer.”

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From capsules to tablets, syrups and different forms of dosage, both for local and foreign franchises, most companies have excess capacities to produce essential drugs, according to the Pharmaceutical Society of Nigeria (PSN).

However, development is yet to occur in some therapeutic areas such as in injectable and vaccines among others and very few companies are able to meet the World Health Organisation approved practices.

May & Baker Plc., a major local manufacturer in 2019, for instance, struck a deal with multinational giant, Sanofi to manufacture some of Sanofi’s products that were imported into the country previously.

Also, GSK, another international research-based pharmaceutical company has contracts with Fidson, a Nigeria-based pharmaceutical manufacturing company, to produce some of its products

Sam Ohabunwa, PSN president agreed that substantial opportunity lies in contract manufacturing for Nigerian pharmaceutical companies in a chat with BusinessDay.

He attributed the seeming uncompetitive tendency of made-in-Nigeria products to the low volume of production, making unit costs high given the production cost factors.

“Operating at a reduced cost is the benefit of contract manufacturing because it increases the volume of output. You build up volumes, leverage quantity and unit cost will come down,” Ohabunba said, noting that companies can leverage the N100 billion loan by the Central Bank of Nigeria to the pharmaceutical sector to build up their capacities.

While the awareness is growing, the Nigerian Representative of Overseas Pharmaceutical Manufacturers (NIROPHARM) wants the adoption to scale up to a level capable of realising Nigeria’s industrialisation goals.

The body believes local manufacturers should see multinationals and importers as partners on a journey to industrialisation.

According to the body, developing the sector is crucial for inclusive growth, job creation and reduced demand for foreign exchange. Manufacturing in Nigeria also has the potential to deliver significant value addition for export with the tie into a growing agricultural sector.

According to a manufacturing forecast by Reportlinker, one of the biggest drivers of growth of the CMOs in the pharmaceutical industry is the growing need for advanced processes and production technologies that have proven highly effective in meeting regulatory requirements.

As a means of improving profitability in the competitive market, through consolidation, large CMOs have expanded their geographical presence and penetrate the niche markets. The small CMOs leverage the technical expertise and resources of larger CMOs.

Some Nigerian pharmaceutical companies, however, have fears that certain conditions can affect profitability in contract manufacturing sometimes.

Humphrey Mogbogu, health systems manager at Phamatex Industries Ltd. said despite being capable to take up contract manufacturing, some past attempts with a few foreign and indigenous companies have failed, not because of capacity, but unfavourable clauses in the contract.

“Products that are manufactured outside come cheaper because of the high exchange rate. The bulk of the raw material we use is imported and when you put all these things together, you need to break even. You don’t want to take up a contract where at the end of the day, you lose out. That is where companies in India have an advantage,” Mogbogu said.

As its conference comes up in October, NIROPHARM told BusinessDay it seeks synergy to build capacity and deliver good quality medicines that Nigerians deserve from manufacturers, and hopes to address some concerns on limitations to uptake of contract manufacturing.