Magazine article New African

Building a Pharmaceutical Industry: The African Pharmaceutical Market Is Likely to Be Worth between $40-60bn Annually by 2020, but How Much of This Can Be Captured by Local Manufacturers?

Magazine article New African

Building a Pharmaceutical Industry: The African Pharmaceutical Market Is Likely to Be Worth between $40-60bn Annually by 2020, but How Much of This Can Be Captured by Local Manufacturers?

Article excerpt

Often in the past, those on the continent who require medication have not been able to afford it because it is too expensive, while distribution networks have been limited because suppliers know that the market for selling their products at a commercial rate is limited. Yet the economics of pharmaceutical production are changing.

For many years, pharmaceutical companies sought to maintain fairly high prices for their products wherever they were sold, but that system has been greatly eroded for key drug classes, including for the anti-retrovirals used to treat people living with HIV-Aids.

Manufacturing costs, including the price of the raw materials, often comprise a very small proportion of the total cost of medicines, with the lion's share often absorbed by research and development (R&D). As a result, identical copies of many pharmaceuticals, known as generics, can be produced at very low cost.

Indian firms in particular have been able to fill this niche, as Delhi greatly reduced patent protection in 1970, allowing Indian firms to reverse-engineer many medicines.

Global pharmaceutical companies have repeatedly challenged this process through legal action but the generic manufacturers have won a number of high-profile victories, including on the supply of drugs to Africa that combat many of the continent's biggest killers, including HIV-Aids, and the same process is likely to occur with the distribution of anti-retrovirals.

The AfDB believes: "Africa's pharmaceutical industry is the fastest growing in the world". It is generally reckoned that the pharmaceutical market will be worth $40-$60bn a year by 2020. The Frost & Sullivan report argued: "African pharmaceutical market growth presents a 'win-win' for companies and patients."

Encouraging manufacturing

The cost of medicines could be reduced by more local manufacturing. This in turn could be encouraged by greater funding for pharmaceuticals. Some governments are taking steps in this direction. The Nigerian parliament, for instance, has passed legislation mandating minimum annual expenditure on healthcare in the federal budget, a welcome but surprising move given the country's current economic difficulties.

At present, Nigeria dedicates just 4.5% of its national budget to healthcare and spends less than 20% of its total health budget on pharmaceuticals, a low proportion even in comparison with other countries in the region.

Eyitayo Lambo, a former Nigerian minister of health, has said: "Nigeria is still heavily dependent on the importation of pharmaceutical products in spite of the existing local capacity. The prices of medicines are unaffordable to the great majority of Nigerians who generally pay for them out-of-pocket."

With government unable to afford to pay for most medication, the answer may lie in insurance schemes but it is likely to take far more rapid economic growth before incomes rise sufficiently to make this a viable option for most people in Nigeria and elsewhere in Africa.

Imported pharmaceuticals now account for 80% of all pharmaceutical sales on the continent. On pages 33-4 we discuss how the East African Community in particular is attempting to reverse the trend and promote local manufacture. There is certainly a need for more investment. The International Finance Corporation (IFC) calculates that between 2006 and 2016, $25-$30bn in health sector investment was needed to satisfy demand on the continent. …

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