Pharmaceutical industry, medicines availability and national security

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. 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 per cent share, Europe came next with 26.7 per cent, followed by Japan with 11.7 per cent. Africa and Asia (excluding Japan) had 14.7 per cent while Latin America had the balance of 5.9 per cent. When the data is further disaggregated, sub-Saharan Africa will be seen to contribute less than two per cent of the global pharmaceutical market ($8-$10 billion)

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 sixth position in 2007 to the 10th position in 2014, China has moved to the third position and Brazil to the sixth position in the global pharmaceutical market. The USA market grew by six per cent and the UK by two per cent between 2010 and 2014,while China and Brazil grew by 21 per cent and 38 per cent respectively. This rapid growth in market size is replicated in R&D, leading to a gradual migration of economic and research activities from the U.S. and Europe to these fast growing markets.
 
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 projected that by 2016, pharmaceutical spending in Africa was expected to have reached $30 billion. This value is driven by a 10.6 per cent compound annual growth rate through 2016, second only to Asia Pacific (12.5 per cent) and in line with Latin America (10.5 per cent) 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 and Monkey pox, this market will exceed $45 billion 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, despite the short term slow down in the oil dependent countries of Nigeria and Angola.

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 decentralisation and local manufacturing. Overall, many have shrunk their manufacturing operations in West Africa but have expanded marketing activities. 

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 per cent of African pharmaceutical import in 2011(up from 8.5 per cent in 2002) and China for 4.1 per cent ( up from 2.0 per cent in 2002)
  
Indian and Chinese manufacturers have gained market share primarily through competitive prices and simultaneously targeting several markets in the generics space.
 
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. 

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 three 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, who have historically been prime procurers of medicines on the continent have refused to buy essential medicines (e.g. anti-infectives, particularly ARVs) from domestic manufacturers. Thirdly, unstable government policies and high cost of doing business have challenged the competitiveness of African made pharmaceuticals especially in Nigeria.
  
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. 

2. Increased National self sufficiency in the Provision of Essential Medicines
Currently, nearly 80 per cent of Nigeria’s drug needs are imported. This has impact on foreign exchange out flow and job creation. But worse, is the National risk of depending so much on external sources for a national critical and strategic need like medicines. The national embarrassment suffered by Nigeria when a request made to the USA for the experimental drug-Zmapp during the Ebola viral disease epidemic, was flatly denied is a case in point. For a long time, all the antiretroviral (ARV) drugs were imported and this portended a lot of risk for patients. Thus Nigeria’s national security is severely threatened by this over dependance on imported pharmaceuticals.

3. Expanded investment window for industrial development.
As the economy and population of Nigeria continues to grow, the demand for quality pharmaceuticals intensifies. This creates attraction for investment, either in the existing pharmaceutical companies or in the set up of new plants, both from domestic and international investors. I believe that this sector is a germane destination for foreign direct investment (FDI) especially if we accelerate the enthronement of enabling operating environment. This is more so in areas of current national shortfalls like ARVs, vaccines and other anti-infectives. The call for investment becomes critical for the upgrade of the GMP of the domestic plants and possible progression to WHO pre-qualification status. This will not only guarantee additional quality for the finished products but will allow local industries compete for Global fund tenders

4. Export opportunity for the West and Central Africa markets
With increased GMP status of Nigerian local pharm industries, they would readily meet the regulatory requirements of most other African Nations and possibly beyond. West Africa is looking up to Nigeria’s leadership in the Pharmaceutical trade and the minimization of substandard products.

5. Increased demand for human capital and requisite skill development
Consequent on the anticipated growth of the Pharmaceutical industry and market, need for highly skilled manpower is imperative. Given the perennial underfunding of our universities and research institutes, there is need for creative thinking and innovative funding for producing the manpower with the required skills. 
  
Beyond the critical need for capital to drive industrialisation, which is apparently scarce, and seem to create the easier entry for Asian investors into the Nigerian Pharmaceutical space, lack of technology and appropriate scientific and technical expertise represent major deterrent to the domestic growth of local Industry. The recent focus of the Pharmaceutical Society of Nigeria (PSN) on these matters at its 90th Annual National conference in Umuahia last week was therefore well deserved. 
Mazi Ohuabunwa OFR,FPSN. sam@starteamconsult.com