South Africa’s pharmaceutical industry braced for change

Text size +-

Plans to increase the production and distribution of generic drugs in South Africa are gathering pace, paving the way for the government to push ahead with the phased rollout of its 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.  

Keeping it local

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 local news sources.

“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. “We are excited that this is no longer a question of if or when but has now moved towards the how.”

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

“Access and cost are two very important factors in the provision of medicines,” Ann-Marie Hosang-Archer, Managing Director of South Africa and Sub Saharan Africa of US pharmaceutical company Eli Lilly, told OBG. “We need to continue to have a robust intellectual property policy to ensure innovative pharmaceuticals have a strong presence in the NHI environment,” she added.  

Alternative solutions

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.

“In most of the emerging African countries, the price to patient is typically three times higher than the price when it leaves the manufacturer’s factory in Europe, due mostly to inefficiencies in the supply chain and high retail mark-ups,” Linda Reid, South Africa Country Manager of the healthcare information, services & technology company IMS Health told OBG. “In the South African state sector, the purchasing and storage of medicines is in need of modernisation to reduce leakages and wastage in the system.”

Luciano Marques, Novertis country president for South Africa, agreed. In a recent interview with OBG, Marques pointed out that cost will remain a factor under the NHI, since not all needs are set to be covered by generics.

“The notion that reducing the price of medicines will increase access by default is not necessarily true,” he said. “You need to improve infrastructure, especially in rural areas, and optimise the supply chain at every level as well.”

Marques said the government needed to ensure there was a place for innovation, when looking to strike a balance between access and cost, with protection for intellectual property also given weight.  

Looking north

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

The report, released in early June, 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 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.

Follow Oxford Business Group on Facebook, Google+ and Twitter for all the latest Economic News Updates. Or register to receive updates via email.

Covid-19 Economic Impact Assessments

Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.

Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.

Register Here×

Product successfully added to shopping cart

Read Next:

In South Africa

South Africa: Unsecured loans weigh on banking sector

Bankers have been quick to downplay weak results from one of South Africa’s largest providers of unsecured loans, saying the decline in profits at African Bank Investments Limited (ABIL) does not...

In Industry

Report: How can Saudi Arabia finance sustainable industrial...

Guided by the Vision 2030 strategy for diversification, rapid advancements are being made in Saudi industry, mining, logistics and renewable energy.


Emerging markets lead uptake of cryptocurrency despite bear market

Despite global financial headwinds and significant declines in the value of cryptocurrencies this year, emerging markets are adopting the technology at a rapid pace.