In 2009 the Pharmaceutical Group of the Manufacturers’ Association of Nigeria pegged the size of the pharmaceuticals industry in Nigeria to be at least $2bn per year. Other organisations, however, have offered up more conservative estimates. For example, Frost & Sullivan, a global market research and consulting firm, estimated the industry at $740m for 2009. Whatever the actual figure, the industry is trending upward as more Nigerians are able to afford medicine. After multinational drug companies largely withdrew from the country in the 1990s due to pessimistic business forecasts, they have started to re-enter West Africa’s largest market.
INCOME: Multinational firms in Africa have shifted more toward generics in recent years, as more than 60% of the population lives in poverty. In some instances, there exists a three-tier pricing system, whereby companies offer the same product at different prices across high-, medium- and low-income countries. This practice has done well to ensure investors that returns can be guaranteed while keeping prices accessible to the general population.
However, low-income societies often present other challenges for the pharmaceutical industry, principally the prevalence of counterfeit medication. Multiple industry sources told OBG that as much as 50% of pharmaceuticals on the market are fake, mostly manufactured in other countries.
According to Yinka Subair, the primary care business unit director for Nigeria and the East Africa region at Pfizer, there is enormous potential for the Nigerian market, but noted that the amount of out-of-pocket payments put many products out of reach for most Nigerians. “The majority of Nigerians pay out of their pockets, which means they generally cannot afford to buy brand products,” Subair said, adding that, “At most maybe 20% can afford to do so.” This fact pushes many consumers to seek out cheaper products such as generics and become the victims of counterfeit pharmaceutical traders.
STANDARDS: Prominent brands become victims of their own success, as they are more likely to be counterfeited with packaging that looks like the real medication. To meet this challenge, the government has taken several steps, such as introducing sophisticated security code packaging and conducting raids on shops suspected of selling fake medication.
Colin Cummings, the chairman and CEO of Swiss Pharma Nigeria, a domestic drug manufacturer and distributor, said his company’s sales substantially increased after a recent series of raids on shops selling counterfeit medication. However, the country’s vast territory, porous borders and an expanding population that has reached 160m people, Nigeria has become an easy target for counterfeit drug manufacturers and distributors.
In response, the National Agency for Food and Drug Administration Control (NAFDAC) has teamed with Customs, border patrol and other security agencies in order to cooperate on all matters pertaining to drug imports. NAFDAC has acquired international-standard technology, including mobile laboratories, e-scanning and SMS authentication systems in order to combat counterfeits. NAFDAC is also working with the government and private investors to establish distribution centres to move drugs to state-level suppliers, enabling NAFDAC to better monitor Nigeria’s sprawling distribution network.
Regulations on distribution have also advanced over the past two years. Ultimately, the aim is to replicate the system in South Africa, where two or three designated bodies will oversee all drug imports and trace them from origin to destination. Drug companies also have the option of participating in Sproxil — a text messaging service used across Africa that verifies the authenticity of acquired medications.
These efforts could pay off, according to Lekan Asuni, the managing director of GlaxoSmithKline Nigeria.
“The reforms in distribution of medication will go a long way to battle counterfeits. Current estimates of their share of the market go as high as 25%, which shows how big the problem really is,” he said. Still, drug companies will likely need a multi-pronged strategy to battle counterfeits and monitor the marketplace, as well as lobby for proper enforcement of regulations and promote greater public awareness.
LOCAL MANUFACTURING: To provide an alternative to imported drugs, NAFDAC is encouraging local producers to meet international production standards. In April 2012 the agency began a vigorous push to establish a N200bn ($1.28bn) fund to provide low-cost loans that could be used to expand and upgrade local production facilities. WHO staff have also been brought in to enhance good manufacturing practices and to increase inspection standards.
Swipha is one of more than 100 local pharmaceuticals manufacturers and is currently seeking prequalification certification from the WHO. The purpose of prequalification is to ensure that medicines, vaccines and diagnostic equipment meet global safety and quality standards in order to increase the likelihood of positive health outcomes. As of July 2012, no domestic drug manufacturers in West Africa were prequalified by the WHO. Nonetheless, striving to achieve these standards may well be beneficial to domestic manufacturers. As Cummings of Swiss Pharma Nigeria told OBG, “To meet WHO requirements, though challenging, offers opportunities for upgrading manufacturing facilities, enhancing personnel skills and providing products that meets international standards. We have been manufacturing for the past 37 years and we are one of the leading companies in the quest for WHO prequalification.”
However, the scope for increasing local production may be low, given the many challenges to cost-competitive manufacturing. The numerous banned items from imports are not in line with market realities and make it tough on pharmaceuticals companies to ensure high quality, so more alignment is needed. Nevertheless, efforts are under way to become compliant with local content guidelines. Also, protectionism in Nigeria has created a robust internal market, as tariffs protect companies and keep them afloat, but local products cannot compete externally due to the current system.
AREAS OF GROWTH: But for companies that can overcome these challenges, Nigeria represents a opportunity for growth. Foremost among medication in high demand is treatment for malaria. Additionally, pharmaceuticals to treat lifestyle-related conditions such as diabetes, hypertension and anxiety are on the rise. Psychiatric drugs, meanwhile, tend to lag behind due to the stigma that is often attached to psychiatric disorders. Subair said that key to the industry’s growth will be to ensure access to health care through government and tertiary health institutions, particularly given the increase in demand for medications for hypertension, anxiety, cholesterol and diabetes. The Nigerian pharmaceutical industry — though not without challenges — should continue its upward trajectory in the medium to long term.
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