Regaining Control of the Market


Economic News

22 Jul 2010
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As Nigeria strives for more of the pharmaceutical products it consumes to be manufactured domestically, the critical issue of counterfeit drugs has taken centre stage. Although aggregate statistics for pharmaceutical demand in Nigeria remain unreliable, the underground economy still dominates sales.

Independent guesstimates value the pharmaceuticals market at about $280m in 2007, with a fairly steady annual growth rate of about 5% year-on-year. According to such forecasts, the market should reach $369m by 2012.

The health care challenges in Nigeria are significant, with an estimated 20% of children dying before the age of five. Indeed, as one example, Nigeria records 225,000 to 300,000 malaria deaths annually. The government recently launched a $1.2bn anti-malaria initiative to try to halve the malaria mortality rate by 2011, through the distribution of bed nets and medication. Half of the funding required has been mobilised from multilateral and bilateral sources, such as the World Bank, Department for International Development and US Agency for International Development.

"The total pharmaceuticals market in Nigeria is worth about $300m, with spending per person at between $2 and $2.5 per year," Pierre Le Belenger, the former managing director of Sanofi Aventis for Nigeria & Ghana, told OBG. "In the absence of a national health insurance scheme, we can imagine only about 10% to 15% of Nigerians have some kind of private health coverage."

Although the federal government is trying to initiate a national health insurance scheme, the pharmaceuticals market has not benefitted from this kind of stimulus in the past. As a result, the government has resolved to adopt a national strategic health development plan in order to reposition the health sector in a more organised light, with attention focusing on the distribution channels.

The national drug policy aims for 70% of the country's demand for medicine to be met by local manufacturers. Independent estimates suggest that over 50% of drugs sold on the market are locally manufactured, although these are open to question.

To encourage local manufacturing, the National Agency for Food Drug Administration and Control (NAFDAC) seems to be moving closer towards gaining World Health Organisation prequalification for local manufacturers who can supply domestic demand.

"Counterfeit drug makers essentially target the top-selling brands on the market, in order to capture the volumes,” Le Belenger told OBG. “Around 50% of the products on the market are counterfeit. NAFDAC is going to exercise more enforcement powers and further formalise the profession of pharmacists."

A majority of local manufacturers produce generic or lifestyle pharmaceuticals. Swiss Pharma Nigeria, for example, produces 70% of its products locally – these are mainly products whose patents have lapsed and are thus generic products. The company is about to commission its $7m extended factory, which will manufacture certain pharmaceuticals for multinational drug makers such as Pfizer and Sanofi Aventis.

A new generation of Nigerian pharmaceuticals companies has meanwhile emerged, focusing on lifestyle and over-the-counter drugs. Thus in January 2008, both Fidson Healthcare and Neimeth Pharmaceuticals announced that they were to launch consumer health lines. Nevertheless, patented and sophisticated pharmaceuticals, produced by international corporations, continue to be imported.

In order to further shore up the industry, wholesale import tariff reform is needed to reduce the incentive for corruption at the ports. Given the 50% tariff on imported pharmaceuticals as well as the import ban list (which includes 17 banned molecules such as paracetamol), the incentives to illegally import goods has allowed unquantifiable amounts of illicit pharmaceuticals into the country. A group within the US embassy is working on the issue of tariff reform.

One of the key challenges in the fight against counterfeit and smuggled pharmaceuticals products lies in the distribution channels. The enforcement arm of the Pharmaceutical Council of Nigeria (PCN), the Drug Distribution Committee (DDIC), has to contend with certain fundamental challenges, including a limited budget and a relative lack of public awareness.

"Since the public do patronise illegal outlets, they will still continue to thrive because if there is no demand, the supply will fizzle out," Dr Paul Gar, chairman of the DDIC, told a media briefing in late May. The DDIC estimates that a majority of companies still distribute their products through unlicensed channels. The regulatory body has, however, closed a number of companies it has judged to be in breach of regulations in distribution regulations.

NAFDAC is also playing its role in cracking down on illicit drugs. Arresting 21 more illegal operators in Benue State in early May, the organisation estimates it has impounded N700m ($4.7m) of fake goods in the last three months. The organisation had already made impressive inroads when headed by Dora Akunyili, now Minister of Information and Communication. Estimates indicate that counterfeits were reduced from 70% to about 50% of the market during her tenure.

"All stakeholders need to be involved in the fight against fake drugs," Colin Cummings, the chairman and CEO of Swiss Pharma Nigeria, told OBG. "NAFDAC and the Pharmaceutical Council of Nigeria need to enforce a clear regulatory framework, companies need to be able to track batches of medicine and the wholesalers need to keep good records of who they are selling to. If these measures were applied we would see a rapid reduction in fake products and a consolidation of pharmaceuticals companies in the market."

Although the challenges are quite clear, the industry as a whole seems to be moving in the right direction, with multinational companies working alongside the regulators to insure the integrity of supply chains.

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