Explore Africa Pharmaceuticals Industry 2020 - Goldstein Market Intelligence

Goldstein

TM

Market Intelligence

AUGUST 2020

"EXPLORE"AFRICA PHARMACEUTICALS INDUSTRY 2020 Goldstein Market Intelligence

WRITTEN BY: Dennis Abraham Vice President Goldstein Market Intelligence

Goldstein

TM

Market Intelligence

ACCELERATE THE GROWTH

Africa’s pharmaceutical markets are growing in every sector. Between 2013 and 2020, prescription drugs are forecast to grow at a compound annual growth rate of 6 percent, generics at 9 percent, over-the-counter medicines at 6 percent, and medical devices at 11 percent. Three factors are driving this growth: Urbanization: Africa’s population is undergoing a massive shift. By 2025, two-fifths of economic growth will come from 30 cities of two million people or more; 22 of these cities will have GDP in excess of $20 billion. Cities enjoy better logistics infrastructures and healthcare capabilities, and urban households have more purchasing power and are quicker to adopt modern medicines.

Healthcare capacity: Between 2005 and 2012, Africa added 70,000 new hospital beds, 16,000 doctors, and 60,000 nurses. Healthcare provision is becoming more efficient through initiatives such as Mozambique’s switch to specialist nurse anesthetists and South Africa’s use of nurses to initiate antiretroviral drug therapy. The introduction of innovative delivery models is increasing capacity still further.

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The business environment: To create a more supportive environment for business, governments have introduced price controls and import restrictions to encourage domestic drug manufacture; required country-specific labeling to reduce counterfeiting and parallel imports; and tightened laws on import, wholesale, and retail margins. In the pharma industry, meanwhile, pharmacy chains are consolidating, horizontal and vertical integration is on the rise, and manufacturing is expanding. A flurry of mergers and acquisitions, joint ventures, strategic alliances, partnerships, and private-equity deals are further extending Africa’s markets.

What are the growth drivers and inhibitors for global pharmaceuticals industry?

Growing and Ageing Population

Innovations in advanced biologics, nucleic acid therapeutics, cell therapies and bioelectronics & implantables field.

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Tightening of Government Policies Decreasing R&D Expenditure due to Slowdown in Global Pharma Industry Decreasing Return on Investments in Generics Pharma Market Due to Price Erosion

Inhibitors

Increasing Focus on Rare & Speciality Diseases

Increasing Cost Controls In Key Pharma Markets

Drivers

Increasing Access of Pharmaceuticals to Poor and Middle Class Families Due to Their Rising Disposable Income

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CHALLENGES TO CONFRONT

Providing Africans with affordable health care could be realized if pharmaceutical products were produced on the African continent. The continent faces many challenges before it will be able produce its own medicines.

African and Chinese delegations came together this week at the Roundtable on China-Africa Health Cooperation to discuss how Africa can start producing health care products on the continent. This could help African countries provide their citizens with a stable supply of quality medicines.

Feng Zhao of the African Development Bank said that producing locally could bring many benefits for the continent. "If you look at the pharmaceutical sector now, the size is very small compared to the global overall size.

Africa is now less than 1 percent of the global share.� It has a great potential to grow, the average growth rate is expected to be more than 10 percent.

The sector would also create high quality jobs and bring more technology to the continent.

Africa suffers frequent bouts of many preventable diseases, such as malaria and tuberculosis. But the medicines to treat these diseases are imported from outside the continent. And the cost of those imports weighs heavily on the health care budgets of many African countries. ŠGOLDSTEIN MARKET INTELLIGENCE

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Lack of Market Understanding Among the Potential Customers 1. Poor Regulatory environment Desire to improve quality is driven by the regulatory regime Disparate regulatory requirements Uneven playing field 2. Fragmented market and poor Patronage Fragmented markets creates no economy of scale Left out of major procurement opportunities by development partners 3. Lack of capital All the initiatives risk failing when there is lack of capital for the manufacturers to implement Without infusion of capital by Government, companies are not positioned to improve standards 4. Lack of Technical Capacity Expertise for pharmaceutical manufacturing in a GMP compliant facility still being developed 5. Inadequate Application of Business Principles Lack of sound financial and business management principles Poor data on market size, demand and competition 6. Lack of Government support and poor vetting of initiatives High tariffs on API but low on finished products Poor vetting of initiatives- example AMFm

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But producing health care products in Africa comes with many challenges. The health systems are not adequate enough to address some of the challenges that the continent is facing. That includes human resources for health, that includes the facilities in terms of hospitals, clinics, laboratories and all of those things. Then Africa also have issues around low funding because the health sector is considered more of a social sector. It does not get enough funding, both from the government or even the donors.

Although China has much experience in producing its own pharmaceutical products, the country still faces a lot of negative perception towards their medicines, as the World Health Organization hasn't approved most of them yet.

It will probably take 20 to 30 years before Africa produces high quality health products, as the industry is in its initial stages.

Many countries, in early days, they are going for low cost and their quality doesn’t always meet the global standard. Then gradually they move up the value chain.

And they start producing better products.

For Africa to become a major player in the pharmaceutical sector, it has to start partnerships with companies outside the continent that have the technology, the people and the intellectual property.

The African Union has started with the development of a Pharmaceutical Manufacturing Plan for Africa to promote private-public partnerships to push the pharmaceutical sector.

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OPPORTUNITIES TO CONSIDER

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Opportunities and trends in the African Pharma The pharmaceutical market opportunity in Africa is significant and growing, but manufacturers need to be aware of the challenges involved in developing viable market strategies in this fast-evolving region, says a new report.

Success in these markets will be driven by a company's ability to address the challenges of both market and patient access, and overcoming these hurdles is contingent on rapport-building, local stakeholder buy-in and trust, says the study.

In a world of slowing and stagnating markets, Africa represents perhaps the last geographic frontier where genuinely high growth is still achievable. Early movers can take these four steps to pursue competitive advantage: Focus on pockets of growth. Africa is not one unified market, but 54 distinct ones, with wide gaps between countries in terms of their market size, growth trajectory, macroeconomic landscape, legal structure, and political complexities. Over the past decade, ten countries have delivered more than two-thirds of Africa’s GDP and cumulative growth. However, much of the opportunity lies not at country level, but in cities.

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In fact, our analysis shows that 37 percent of African consumers are concentrated in 30 cities, which will have more consuming households than Australia and the Netherlands combined by 2025.

Build strong local teams. Real talent is key and requires investment in big, effective local marketing and sales teams. That means hiring more pharmacy representatives, building teams’ technical skills, and selecting and developing strong local managers to lead them. Sales teams also should be set up in a flexible way that enables them to be responsive to the needs of local markets. Forge partnerships. Global pharmaceutical companies need local business partners—manufacturers, packaging companies, and distributors—to help them navigate the continent’s many markets, with their widely varying consumer preferences, price points, manufacturing, and distribution infrastructures. In the absence of a pan-African pharma regulatory body, they also need to invest in local partnerships to understand varying regulatory environments. Partnerships with governments are equally important, whether they involve working with medical opinion leaders to guide research priorities and secure funding, or collaborating with health ministries and nongovernmental organizations to provide public-awareness campaigns, health screening, treatment, equipment, and training for hospitals and clinics. Johnson & Johnson, for example, has partnered with the South African government to introduce an education program for maternal, newborn, and child health that operates via mobile-phone messaging.

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Address supply and distribution challenges. In parts of Africa, supply and distribution mechanisms still pose challenges: regulations are evolving, transport and logistics infrastructures are patchy, and lead times can be long. The ability to innovate the distribution channel and set up effective operations against this challenging backdrop is critical to capturing growth opportunities.

Helpful strategies include locating fixed assets in countries with well-established political and business structures, outsourcing supply chains to third-party operators, and partnering with local logistics providers to identify efficient transport routes. In the key area of customs and border control, companies should work with the most reliable agents to minimize shipping delays, use only bonded distribution centers, and ensure all customs paperwork is airtight.

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Scan the QR code or click the link below for our study on future of Africa Pharmaceutical industry. bit.ly/3kpjE77

About the author Dennis Abraham Ph.D, senior vice president at Goldstein Market Intelligence, leads GMI's syndicated health and wellness research. Before joining Goldstein Market Intelligence, Dennis held a variety of senior leadership positions in global and regional consulting roles covering consumer and retail insights across a broad range of healthcare categories. Dennis has been providing crosscategory strategic insights to healthcare brands for over 12 years on topics including digital disruption, ecommerce, and healthcare technology. Dennis holds a Ph.d from Havard University.

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About Goldstein Market Intelligence Goldstein Market Intelligence helping businesses to be successful at strategy and take informed decisions to grow the business in future. Goldstein Market Intelligence is one of the leading professional services firms, providing Intelligence Services, Consulting & Advisory and research related services to clients. We, at Goldstein Market Intelligence practice works side by side with chief executives and their teams to create effective strategies and secure alignment across the organisation. ŠGOLDSTEIN MARKET INTELLIGENCE

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