Local players lose out to big foreign firms in lucrative drugs-making sector

At a pharmaceutical plant. PHOTO | AFP 

By NJIRAINI MUCHIRI

Pharmaceutical manufacturers in the region will continue to miss out on the gravy train of the lucrative industry, which is expected to grow at a rate of 12 per cent over the next five years.

A recent meeting in Nairobi that sought to explore ways to boost production in the East African Community heard that local drug makers are struggling to grow their market share in an environment that continues to favour imports. Local manufacturers lack the capacity to compete while governments have failed to offer incentives.

A report by research firm McKinsey shows that the value of Africa’s pharmaceutical industry will grow to between $45 billion and $65 billion by 2020, from $30 billion currently. In East Africa, the industry is expected to double to $10 billion over the next four years.

The report shows that prescription drugs will grow at a 6 per cent rate annually, generics at 9 per cent, over-the-counter medicines at 6 per cent and medical devices at 11 per cent.

The growth will be driven by the convergence of demographic changes, particularly urbanisation, increased wealth and healthcare investment and rising demand for medicines, particularly to treat chronic diseases.

But despite the anticipated growth, regional manufacturers’ market share will continue to stagnate at about 30 per cent. There are about 65 pharmaceutical manufacturers in East Africa.

India and China remain the key sources of pharmaceutical imports into East Africa, jointly accounting for about 45 per cent of the total.

According to Christoph Spennemann, a senior official at the United Nations Conference on Trade and Development, the biggest challenge facing regional manufacturers is the lack of capital to invest in improving product quality.

“Local companies need to invest in new and better production and research facilities, but conventional banks are reluctant to finance their projects because they see them as too risky,” he said in Nairobi.

High costs

Lack of financial support has made it impossible for manufacturers to invest in research and development and in plants that meet the international Good Manufacturing Practices standards.

Regional governments have also failed to offer tangible incentives and protect the industry from the onslaught of imports.

The Federation of East African Pharmaceutical Manufacturers notes that governments have refused to impose taxes on imported medicines that can be produced regionally in order to protect the local industry.

The high cost of importing raw materials has not only driven up the cost of doing business but is also responsible for making regionally manufactured drugs expensive and uncompetitive.

More critically, East African governments continue to procrastinate on the issue of harmonisation of national drug regulations.