Africa is considered to be one of the the fastest growing pharma markets in the world. Given the rapid economic growth, the African pharma industry, like that of other emerging markets, is expected to grow tremendously in the coming years. It is estimated that the African pharma market would be valued at US$45-60 billion by 2020. Africa’s pharma market has huge prospects for boosting economic growth and creating jobs.
The pharma market in Africa had made rapid strides from US$4.7 billion in 2003 to US$ 20.8 billion in 2013. The African pharma market is growing fast with a CAGR of 10.6 per cent, which is second to the Asia-Pacific region (12.5 per cent) but higher than the Latin American region (10.5 per cent).With the Asian and Latin American markets beginning to attain maturity, Africa shows a lot of potential and promise for the pharma sector for the next decade.
According to a report by McKinsey & Company, in the last 10 years, the value of Africa’s pharma industry increased by almost five times. The market is projected to double in value from US$20 billion to between US$40 billion and US$60 billion by 2020. This growth is likely due to the result of urbanisation, increased healthcare capacity and an increased focus on domestic drug manufacture in the region.
The govt initiatives
The government’s national health plans are expected to boost demand for lower cost drugs especially generics in coming years, as is its commitment to provide greater access to anti-retroviral (ARV) medication within the public health system to combat the HIV/AIDS pandemic. Generics currently account for around 60 per cent of the overall market in terms of volume, but because of their low cost, around one-third in terms of value. The government procures mass volumes of generic products via tender.
However, the private market for generic drugs is growing; the higher prices paid by the private sector help to subsidise the low-cost generics made available to the public sector. Many African governments spend a disproportionate amount of their scarce resources on procuring medicines. Trends now indicate that new health challenges facing the continent will generate more pressure for their demand. Non-communicable diseases, like heart disease, lung disorders, diabetes and cancer, are rising due to demographic and lifestyle changes. These conditions will soon account for half the deaths in Africa, surpassing those provoked by infectious disease.
The African pharma market is majorly constituted by small, privately-owned companies, public sector manufacturers along with a few large manufacturers with the likes of Sanofi and Aspen.
It is not only the country’s economic growth that is favourable but also the shifting nature of the disease burden that is attracting big pharmaceutical companies for treating chronic diseases rather than just fighting infections.
The world has its 14 per cent population living in the African continent. With a growing middle-class population, the annual disposable income is expected to reach US$ one trillion by 2023. The rising economic standards have also improved the standards of living of the population in Africa. The adoption of a more Westernised lifestyle has led to significant shifts in the disease patterns in the African continent.
Africa bears the greatest disease burden in the world. About 75 per cent of the world’s HIV/AIDS cases, 90 per cent of deaths by malaria and majority of tuberculosis cases are all evident in the African continent. Two-thirds of Africa’s disease burden is constituted by infectious diseases, maternal and perinatal conditions and nutritional deficiencies.
Non-communicable diseases like cardiovascular diseases, lung disorders, diabetes and cancer are expected to account for 46 per cent of all deaths in the African continent by 2030.The rising non-communicable diseases with the communicable ones along with the emerging infections need new medical services and medical treatments in Africa.
African cities are slowly experiencing better logistics infrastructures and healthcare capabilities leading to more purchasing power and better adoption of modern medicines.
Africa’s pharma market is witnessing consolidation of pharmacy chains, horizontal and vertical integration and expansion of local manufacturing. This along with a range of mergers and acquisitions, joint ventures, alliances, partnerships and private-equity deals are further driving the growth of the African pharmaceutical market.
R&D and drug production
Africa’s capacity for pharma research and local drug production is amongst the lowest in the world. The problem of inadequate investments in this area, unfortunately, continues. Overall, 37 African countries have some pharmaceutical production, although only South Africa produces some active pharmaceutical ingredients. Where there is local production in Africa, normally there is a reliance on imported active ingredients. As a result, the supply of African pharmaceuticals remains highly dependent on foreign funding and imports. The pharma market in Africa is now 70 per cent imported. The market for API in Africa is expected to have the highest growth rate. Increasing prevalence of diabetes, neurological disorders and other chronic diseases are the major driving factor of the global API market.
Widespread urbanisation in many African countries is driving much of this growth in pharma spending, as the process is supporting the rise of middle-class city-dwellers who typically have larger disposable incomes and longer life expectancy. In turn, lifestyle changes in large African cities are playing a major role in the increase of non-communicable diseases (NCDs) such as cardiovascular disorders, cancer and diabetes. According to World Health Organization data, NCDs are predicted to account for 60 per cent of illnesses and 65 per cent of deaths in Africa in 2020, compared to 28 per cent and 35 per cent, respectively in 1990.
Major multinational pharma companies such as GlaxoSmithKline, Johnson & Johnson and Sanofi with a large footprint in Africa, large-scale generic manufacturers from China and India are also increasing their exports to the continent. South Africa alone spent more than $500 million on Indian drugs in 2014-15, while Chinese pharmaceutical sales are often tied into China’s aid deals with African countries.
Major challenges
Lack of healthcare infrastructure emerged as the primary challenge in Africa. The biggest hurdles of the African pharmaceutical market are lack of efficient healthcare infrastructure and unaffordability of medicine.
Reimbursement and public funding also emerge as an important constraint for growth of the pharma market in Africa along with supply chain issues.
According to the World Health Organization, a seven-day course of treatment with the antibiotic Ciprofloxacin could cost in Kenya close to a month’s wages. Unfortunately, this scenario is not uncommon across Africa. In Uganda, it could cost about 11 days of a household income to purchase a single course of artemisinin-combination therapy used to treat malaria for an under five-year-old child. Lack of infrastructure to be another major key challenge in Africa and across all emerging markets.
The poor access and affordability of medicines are compounded by factors that include long lead times for international orders; infrastructure gaps such as poor logistics and storage capacity, as well as high transport and distribution costs. In addition, there have been scarce public finances and deficient public health procurement systems. It is estimated that there is scarcity of essential medicines both in the public and private sectors. People are also often being forced to buy medicines that may not be certified. In addition, there have been scarce public finances and deficient public health procurement systems.
A notable challenge is the World Trade Organization patent exemption that overseas companies face in least developed countries. This exemption means that countries under the classification of “least developed,” most of them in Africa, can import lower cost generic drugs without infringing existing patents. To overcome these obstacles, pharmal companies may consider partnerships with research departments at African universities and local companies. The familiarity with local conditions and domestic expertise may make research easier, minimise costs and improve access to medication. Admittedly, there is likely to be a sizeable capital outlay for overseas companies at first but the benefits both to the companies and the countries in which they will operate will make it worth it.
Africa faces the challenge of inadequate number of pharmacies and private clinics leading to a weak distribution system. This weak distribution system has thus, led to the challenge of counterfeit drugs and illegitimate drug trading.
The country’s pharmaceutical industry has a huge skills shortage‚ lacking at least 12‚000 pharmacists in order to meet international standards, according to a report. SA was lagging behind in meeting best international practices in pharmaceuticals.
“The skills shortage and the cost of specialised skills also affect the entire pharmaceutical industry supply chain as companies are required to have a supervising pharmacist. It is estimated that South Africa requires 12‚000 pharmacists to meet the international benchmark of 50 pharmacists per 100 000 people‚” read a recent presentation.
According to one of the experts, South African drug companies were struggling to compete with their counterparts in countries such as India and China‚ which were among top players in global pharmaceutical production.
Essential measures needed
The pharma companies should build a close collaboration with the African government in order to establish the infrastructure needed to sell or apply pharmaceutical products.
The market approaches employed in mature markets do not apply to the African market and thus, require customised approaches with flexible solutions.
Due to highly diverse markets across the African continent, building close partnerships with local NGOs, packing companies, retailers and distributors, would be the most common strategy for the years to come.
There is a huge need to localise certain functions like R&D, manufacturing, market access and sales and marketing to reduce the dependence on foreign imports.
The pharma companies should look at hiring more medical representatives, building teams’ technical skills, and selecting and developing strong local managers to lead them. The sales teams need to be flexible in order to be responsive to the need of the market.
In order to enhance the pharma industry, there is a need for fewer structures and harmonisation of policies through regional integration. Pharma and medical device manufacturers to gain a competitive advantage in Africa, need to have the ability to innovate and adapt to new regulatory standards and the distribution requirements of products. Global pharma companies need local business partners to help them navigate Africa’s many markets, which vary widely in consumer preferences, pricing, manufacturing and distribution. In the absence of a pan-African pharma regulatory body, they also need to invest in local partnerships to understand varying regulatory environments. Leading companies are building partnerships with local manufacturers and distributors to acquire expertise in all these areas and to facilitate market access and expansion in particular countries.