Local pharmaceuticals manufacturing is set to expand in the near term

Pharmaceuticals production capacity in Algeria will increase noticeably in the next few years as several new plants come on-line. Sector authorities have been working to boost domestic output of basic medications for the last decade, and in 2011 the Ministry of Health announced a goal of meeting 70% of demand for pharmaceuticals through local production. The actual figure today is about 40%, estimates the National Union of Pharmacy Operators.

Yet imports continue to rise. After South Africa and Egypt, Algeria is the third-largest pharmaceuticals market in Africa by annual spend. Yearly turnover has risen three-fold from €1bn in 2006 to over €3bn in 2013, and is projected to reach as high as €4bn by 2015-16. Pharmaceutical imports have risen by 10-12% a year on average in the last few years. According to the Customs authorities, the volume of imported products in the first half of 2014 actually dropped by more than 20% year-on-year (y-o-y), to 13,960 tonnes, but their value continued to rise, jumping 25.8% y-o-y to €882m.

Means Of Production

The increase in consumption is driven by many factors, including rising income levels, higher incidence of non-communicable diseases, and the reimbursement of medication costs by public social security programmes. With about 80% of the population covered by health insurance, public spending on pharmaceuticals passed €918.9m in 2013, roughly 54% of social security health spending.

This puts significant pressure on domestic producers, especially for generic medications and products subject to the 2008 ban on pharmaceutical imports. The number of local producers swelled to include 55 manufacturers, 45 importers and another 330 pharmaceutical wholesalers. Of these 55 producers, many provide services or late-stage processing – for example, by producing capsules from pre-made, imported formulas.

Nonetheless, the market has attracted several multinationals to set up local processing plants for antibiotics, respiratory medications and other generics, including Sanofi Aventis, GlaxoSmithKline and Pfizer. The state-owned manufacturer, SAIDAL Group, launched a AD17bn (€158.1m) development plan in 2011 meant to double its production over five years, and it has signed several foreign partnerships that will expand its production lines in the near term. Several companies, and particularly SAIDAL, are working to source up to a quarter of their inputs locally, but most pharmaceuticals today are made from imported materials.

New Projects

SAIDAL is leading the charge with foreign partnerships. An agreement signed in September 2012 with Kuwaiti investment firm North Africa Holding Company will build the country’s first unit for making anti-cancer drugs, an investment of €25m that is set to begin operating in 2015. In April 2013, SAIDAL signed a partnership with Italy’s Bonanti, Spain’s EMTEL and local firm Softal to construct three new generics manufacturing plants, which will increase its production capacity by an estimated 75%. The units entail a total investment of €100m and are set to come online in 2015. Sanofi Aventis launched construction in September 2013 on a €70m production site in Sidi Abdellah, near Algiers. When complete, the plant will be the firm’s largest complex in Africa and will produce 250 types of medication for sale on the domestic market. The plant is scheduled for completion in 2016 and will create 133 jobs. The private Algerian manufacturer Biopharm signed a €40m agreement with Astra Zeneca to produce medication for cardiovascular disease and certain types of cancer, but the partnership has since stalled, and its future is unclear.

Regulatory Constraints

While drugs firms are working to diversify their offerings and boost local manufacturing as a share of the total, private actors report that regulation is an obstacle. The registration process for new medicines is slow and bureaucratic; according to some, it can take up to three to four years, placing a large burden on smaller producers. Efforts to speed up regulatory procedures and improve intellectual property rights will go a long way to reaching Algeria’s goal of a self-sufficient pharmaceuticals industry.

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The Report: Algeria 2014

Industry and Retail chapter from The Report: Algeria 2014

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