With Africa experiencing sustained and rapid economic growth income boom for 30 years and with gross domestic product growth rates averaging about five per cent annually over the past decade, the African pharmaceutical industry, like that of other emerging markets, is expected to make major strides in the in the coming years, according to a report.

The pharmaceutical market opportunity in Africa is significant and growing, with pharmaceutical spending expected to reach $30 billion by 2016 and $45 billion in 2020, driven by a compound annual growth rate (CAGR) of 10.6 per cent, the report adds.

According to IMS Health the growth in spending is driven by a 10.6 per cent annual growth rate that is second only to Asia Pacific (12.5 per cent) and in line with Latin America (10.5 per cent). Pharmaceutical companies are looking to expand into the region which offers a compelling opportunity and growth potential.

During the past decade the African continent has been home to some of the fastest-growing economies in the world, creating a large window of opportunity for the development of the pharmaceutical sector. The growing numbers of Africans with significant disposable income and spending power, the strong demographic dynamics, including fast urbanization, steady economic growth in most parts of the continent, and improved infrastructure in both rural and urban areas are all potential drivers of Africa’s pharmaceutical boom. Job creation prospects are also immense all along the pharmaceutical value chain.

 The African pharmaceutical sector is driven by the emerging middle classes and the medical needs of a population increasingly concerned with its well-being. Much of this growth is concentrated on countries with only a fledgling domestic industry, forcing them to rely on cheap Indian and Chinese imports.

Although it is relatively small in global terms (worth US $23.1 billion in 2011, or less than two per cent of the global market), Africa’s pharmaceutical industry is the fastest growing in the world and is driven by a small number of countries: South Africa, Nigeria, Ghana, some Eastern African countries and North Africa.

While large international pharmaceutical players, have prioritised countries like South Africa and Egypt with what was seen as bigger potential, they have largely ignored smaller markets and left them untouched.

A report titled “Pharma Emerging Markets : How emerging markets are driving the transformation of the Pharmaceutical Industry,” revealed that over the past five years, sales generated in emerging markets (Africa, including Nigeria) have doubled, totalling $19.1 billion in 2011 (representing approximately 20 per cent of global market volume)

The report noted that pharmaceutical firms’ top initiatives to drive growth in emerging markets over the next five years include investing in local research, development and manufacturing, building local sales forces as well as close collaboration with governments.

According to the report “many consider Africa to be the final frontier of emerging markets. The continent is vast, highly diverse and full of great potential—but it also presents great challenges. Although sub-Saharan markets are currently embryonic, their expected relative increase in importance is significant and not far behind that of South-east Asia.

“Top executives are already factoring this development into their business plans. While anti-infectives and anti-virals demonstrate strong short-term growth, they will be overtaken by treatments for lifestyle diseases in the long term. The market for oncological products is not expected to grow as fast in Africa as in other regions during the next five years. Partnerships that involve localized brands are very important in Africa.”

 Africa is also a particularly hot market with growth in the region predicted to outstrip the rest of the world over the next five years. According to Dan Rosen from IMS Health, Africa has six of the world’s top 10 fastest growing economies and will be a key growth market for pharma companies to target.

However he feels that development in this region is not uniform, and the best opportunities are in the 10 largest African cities, which represent 20-30 per cent ($6-9 billion) of the market. Companies that approach these regions with a committed, targeted and localised approach will quickly gain market share and access. Distribution is a key consideration and any company looking at market entry here must know how their portfolio aligns with the customer segments locally, he says.

There is a clear momentum in Africa for the development of the pharmaceutical industry. African heads of states had stressed the potential for local production and technology transfer in the Pharmaceutical Manufacturing Plan for Africa (PMPA) Business Plan, launched in Abuja, Nigeria in July, 2013. In addition, regional strategies on the local production of drugs reveal how high the development of the industry is on African countries’ agenda.

A recent report by the African Development Bank (ADB) has pointed to strong and sustained growth for the pharmaceutical industry across the continent in the coming years.

The report said Africa’s rapidly expanding economies would lead to a sharp increase in public and private spending on pharmaceutical products. Stronger spending capacity, coupled with the serious health issues which need addressing, including the high prevalence of HIV/AIDS, malaria and tuberculosis, would provide a growing market in the future for pharmaceutical companies, it added.

The bank has recognized that now is a critical time for African countries to develop their pharmaceutical sectors. The bank is thus developing a comprehensive plan to support its regional member countries through a range of activities, including:

• A regional operation to vitalize Africa’s pharmaceutical sector to support sustained access to affordable and quality medicines,
• Job creation and economic development in Sub-Saharan countries;
• Setting up a dialogue platform between public and private sectors to discuss the sector’s opportunities and challenges.

The Africa Pharmaceutical Summit organized in Tunisia in September 2013 was the first attempt on the continent to bring together public sector and industry leaders, attracting high-level policy-makers including Ministers of Finance, Health, Industry and Trade to discuss Africa’s pharmaceutical sector potential as a growth pole.

The challenges the pharmaceutical industry faces in upgrading facilities and production practices in Africa include the requirement for large capital investments and the need for experts, specially trained workers, increased regulatory oversight and regulatory harmonization at the regional and continental levels in order to create bigger markets. However, there is growing consensus that strengthening the local production of essential medicines is a priority, along with advancing industrial development and moving the continent towards sustainability of treatment programmes for HIV, tuberculosis and malaria, and improving access to safe and effective medicines to treat a broad range of communicable and non-communicable diseases.

South Africa
South Africa’s pharmaceutical market is one of the most attractive markets in Africa. Some of the main reasons for its rapid growth are the availability of cost-effective and skilled labour, high quality infrastructure, and the introduction of the South African Health Products Regulatory Authority (SAHPRA). Most of the local drug manufacturers and distributors are in the hands of big international pharmaceutical firms.

 South Africa’s healthcare sector is set to witness a number of new healthcare reform plans in the future, with the primary objective being to reduce the growing drug expenditure by increasing the use of generics. The healthcare system aims to cover the entire population under the National Health Insurance (NHI) scheme.

The government strategy will be boosted by plans to build a large-scale plant where generic drugs will be manufactured, according to KwaZulu-Natal Premier Senzo Mchunu. Speaking in early June, Mchunu said that the government hoped to have the plant operational within five years.

Having the capacity to produce more generics will be beneficial to South Africa as it begins to gradually implement its NHI initiative, which pledges universal access to healthcare. However, while the strategy will likely help contribute to containing the country’s healthcare costs, pharmaceutical firms have highlighted the importance of ensuring robust intellectual property protections for manufacturers, as well as the need to improve service delivery to ensure that end-users benefit from lower prices and greater access.

Plans to begin manufacturing generics locally, and reduce South Africa’s reliance on international pharmaceutical firms, had been in the pipeline for some time, Mchunu told .

“We have the land and the capacity to establish our own production plant to manufacture our own generic medicines which will be cheaper, more cost effective, and will allow us to use the savings in other areas of need,” he said.

While the NHI will doubtless increase consumption, the government’s strategy has prompted pharmaceutical firms to look for reassurances on intellectual property rights.

A number of factors beyond just production prices influence the final amount that a patient must pay, which has also focused attention on other areas of the healthcare sector, particularly in terms of storage and service delivery.

Despite changes in the local market, South Africa’s pharmaceutical manufacturers are well placed to cater to a rising demand for medicines elsewhere in the region.

The government is still in consultation with the pharmaceutical industry on ways to maximise cost effective access to medicine for the population. A compromise is likely, though generic products look likely to take a far greater market share, but manufacturers will nonetheless be able to benefit from a more bullish regional outlook.

Algeria
With a pharmaceutical market worth US $ three billion and a growth of 10 per cent, Algeria is the second largest pharmaceutical market in African continent after South Africa.

Algeria is the second largest economy in North Africa. The country’s pharmaceutical market is rapidly developing . Algeria presents lucrative opportunities for investments in pharmaceutical manufacturing and clinical research, supported by the Algeria Vision 2020.

With a sustained growth of 10 per cent per year coupled with a generous social security system that reimburses up to 80 per cent of drugs, the Algerian market is expected to reach US $5 billion by 2017.

Added to this the fact that as only 30 per cent of consumed drugs are manufactured locally (with the remaining 70 per cent being imported), the Algerian government has undertaken to boost and push investment projects in the pharmaceutical field to reverse this trend completely by 2014 with the objective of 70 per cent of medicines locally manufactured.

The result is an explosion investment and extension projects and pharmaceutical plants and therefore, a lots of opportunities for partnerships and joint ventures.

Morocco
The Moroccan pharmaceutical industry which exports about 10 per cent of its production, occupies, by its size, the second position on the scale of the African continent behind South Africa with 32 industrial units, 50 distributors and more than 11.000 pharmacies. The local production covers 65 per cent of the domestic need.

The Moroccan pharmaceutical industry illustrates huge potential for growing investment and business in the sub-Saharan region. Led by a number of local small and medium sized enterprises (SMEs), it already generates $1.5 billion in revenue.

These firms are mostly family entrepreneurs who learned their skills in the 1970s and 80s as licence manufacturers of big pharmaceutical laboratories. In the 90s, they successfully launched their own companies, producing an off-patent version of drugs with a stamp of quality at an affordable price.

The top five Moroccan pharmaceutical companies now generate $100m plus revenues. They have started expanding in sub-Saharan Africa through local distributors but also through their own manufacturing when required. And there is no shortage of opportunities.

It has left a space for Moroccan companies to provide high-standard drugs which governments and health authorities want to offer their citizens. This is particularly the case in helping meet local needs in treating chronic conditions such as diabetes and cardio-vascular problems whose prevalence is high and increasing at an alarming rate. Their involvement also helps in the transfer of technology and know-how which in turn creates jobs and tax revenue.

Nigeria
As growth opportunities continue to move away from traditional pharmaceutical markets and growth patterns in developed markets continue to flatten, many multinational companies (MNCs) like Norvatis, Pfizer, Sanofi, Johnson & Johnson, etc. look toward Africa, including Nigeria for their expanding global footprint.    

This is evident following GlaxoSmithKline (GSK) plan to invest over $200million in Africa over the next five years, expanding manufacturing in Nigeria and Kenya and building five new factories-Rwanda, Ghana and Ethiopia given its attractive long-term growth potential.