Long seen as a market with untapped potential, Algeria’s pharmaceuticals sector is poised to benefit from a series of investments to expand local production capacity. “The recent slate of partnerships between domestic and foreign pharmaceuticals players is a testament to the industry’s positive outlook,” Cherif Benguerba, the country manager for Sandoz Algeria, told OBG. Additionally, a wave of new manufacturing units is on the way, resulting from a combination of elements that will likely help the pharmaceuticals business.

GOVERNMENT OFFER: The size of Algeria’s market, which is the third-biggest in terms of expenditure on the African continent after South Africa and Egypt, is helping to draw investors. The sector saw sales of $3bn in 2012, according to a report published by the International Federation of Pharmaceutical Manufacturers and Associations. Indeed, the Algerian market is increasingly catching the attention of foreign firms wanting to partner with local producers and expand in the region. The country’s domestic market is driven not only by demographic factors, but also by high spending, as Algeria’s social security system reimburses 80% of the price of pharmaceuticals products. Authorities believe that by 2017 the sector will be worth up to $5bn.

The boost in local production provides a win-win situation for private investors and the government. For the state, the foreign investment helps reduce the financial burden of imported medications. In 2012 the total value of pharmaceuticals imports reached $2.2bn.

INCREASING PRODUCTION: The pharmaceuticals sector’s dynamism is the result of the governmental strategy to increase local production. Despite an annual growth rate of about 10%, the Algerian market is still largely dependent on imports. Over the past few years, authorities have been working to attract foreign manufacturers to develop partnerships with local producers and create new manufacturing facilities. In 2013 the Ministry of Health announced there were 62 units operating nationwide, and the number is set to grow as new plants come on-line over the coming years.

A series of recent deals are bringing in new capabilities, as well as helping to bridge the gap between imported and locally manufactured products. In September 2012 North Africa Holding Company, a Kuwaiti-based investment firm, signed a joint venture with the Algerian drug manufacturer SAIDAL to produce anticancer drugs. The deal will see the establishment of the country’s first anti-cancer drugs manufacturing unit, at a total investment of €25m. The new facility is expected to be operational by 2015. Another important deal was signed between AstraZeneca and private Algerian manufacturer Biopharm to set up a €40m plant to produce medication for cardiovascular diseases and certain types of cancer. In April 2013 SAIDAL signed an agreement with Italian firm Bonati, Spanish company EMTEL and Algerian firm Softal, for the construction of three generics-manufacturing plants. The investment is expected to reach €100m and the new units are set to start operations in the next two years.

As part of the policy, Algerian authorities are targeting partnerships that help substitute imports. Currently, the Ministry of Health estimates that only abut 30% of locally consumed pharmaceuticals are manufactured in Algeria, but the government expects to be able to raise this to 70% in the next two years. The deal with North African Holding Company will allow for domestic production of 17 different products.

IMPLEMENTATION ISSUES: In 2012 the Algerian authorities banned the import of 800 pharmaceuticals that were produced in the country. However, the banning of products had unexpected consequences on access to medication. Since the quantities manufactured locally were insufficient to cover domestic needs, supply shortages led to certain medications being unavailable. Another issue raised by local producers is the time for registration and approval of products. Improved management of local production, licensing and reduced imports will enable authorities to better manage the transition to a health system in which local production capacity can better serve domestic needs.