EAST AFRICAN PHARMACEUTICAL SECTOR:

OPPORTUNITIES AND CHALLENGES

Nazeem Mohamed

• Chairman Federation of East African Pharmaceutical Manufacturers Ass. (FEAPM)

• Vice Chairman Federation of African Pharmaceutical Manufacturers Ass. (FAPMA)

• C.E.O of Kampala Pharmaceutical Industries (1996) Ltd

Pharmaceuticals: Global Trends

R&D less innovative but increasingly costly

Manufacturing is less sustainable in the West - shift to developing markets

Health care costs rising globally – pressure on prices/profits

Emergence of non-communicable diseases (NCD’s)

Demand for medicines is growing more rapidly in the emerging economies than the industrialized economies Push towards generics over patented medicines

Focus on access to quality healthcare in Africa - (GF, PEPFAR, Gates/Clinton, etc)

Improving manufacturing/quality standards in developing countries

Increasing political support for local manufacturing in Africa

Greater focus on Africa as a “Market Opportunity”

Africa: The Healthcare Dilemma

Invest or Ignore?

17% of the world’s

population

30% of the world’s disease

burden

3% of the world’s total

health expenditure

40

45

50

55

60

65

70

75

80

85

1970 1980 1990 2000 2008 2015

Life expectancy

OECD (male)

OECD (female)

KE (male)

KE (female)

UG (male)

UG (female)

RW (male)

RW (female)

TZ (male)

TZ (female)

BUR (male)

BUR (female)

EAC: Composed of 6 countries: Burundi, Kenya,

Rwanda, South Sudan, Tanzania, and Uganda

East African Community (EAC): Population Trend

13 17.2 25.3 48.4

66.9

95.4 41.6

63.8

105.7

56.8

83.7

138

0

50

100

150

200

250

300

350

400

450

2017 2030 2050

EAC population (in million persons) 2017-2050

Burundi Rwanda South Sudan Kenya Uganda Tanzania

2017: 184 M.

2030: 263 M

2050: 412 M Source: UN Department of Economic and Social Affairs,

2017.

EAC – Economic growth

GDP growth: 239%

between 2005 and 2016;

from $43.4b to $163.9b

EAC average growth of

6.2% in last 10 years

compared to 1.7% in the

EU

8.6 12.7 18.7

40.0 42.0 50.4 55.1

61.4 63.8 70.5

4.3 10.2

16.9

31.4 33.9

39.1 44.3

48.2 45.6 47.4

4.3

6.2

9.0

20.2 20.5

23.5

24.9

27.9 27.9 25.5

15.7 17.8

10.4

13.3

13.3 9.0 9.0

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

1990 2000 2005 2010 2011 2012 2013 2014 2015 2016

GDP (USD billion)

Kenya Tanzania Uganda Rwanda Burundi South Sudan

Source: World Bank, 2016.

EAC: Healthcare spending

Average annual health

expenditure per capita:

Africa: US$ 222

EU: US$ 2,214

America: US$ 3,873

(Atlas of African Health

Statistics, 2016)

Average of US$ 98 per capita

across Sub-Saharan Africa

Around 7% of GDP spent on

health, which is far from reaching

the Abuja target of 15%.

However, still over 30% from out-

of-pocket payment (opportunity of

the private sector)

8.6 12.7 18.7

40.0 42.0 50.4 55.1

61.4 63.8 70.5

4.3

10.2

16.9

31.4 33.9

39.1

44.3

48.2 45.6

47.4

4.3

6.2

9.0

20.2 20.5

23.5

24.9

27.9 27.9

25.5

15.7 17.8

10.4

13.3

13.3 9.0 9.0

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

1990 2000 2005 2010 2011 2012 2013 2014 2015 2016

GDP (USD billion)

Kenya Tanzania Uganda Rwanda Burundi South Sudan

EAC: Pharmaceutical Market Drivers

EAC: Pharma Manufacturing Overview

Around 35 active manufacturers (members of FEAPM); 2 facilities with WHO cGMP approval and pre-qualified products

Primarily compounding and formulation of most dosage forms including infusions

Almost all raw materials imported

High dependency on imported finished pharmaceutical products

Focus on WHO list of essential medicines

No API manufacturing

Increasingly well regulated (NDA, PPB, TFDA)

Trade is mostly intra-East Africa

EAC: Key pharma sector data-estimate!

Countries Burundi Kenya Rwanda Tanzania Uganda

Pharma market size (US$

million, 2014)*

75 740 75 400 450

Compound Annual

Growth date (CAGR) 2007

to 2014**

13% 15% 16% 9% 9%

Market share of locally

produced pharmaceutical

drugs (% of overall

market)*

3% 30% <1% 12% 20%

Market by segment** 56% Generic,

44%, Branded

62% generic,

38% branded

54%

Generic,

46%

Branded

Generic

54%,

Branded

46%

Generic

80%,

Branded

20%

Number of local

pharmaceutical

manufacturers

1 33 1 6 9

Source: 2014 estimations (industry and associations)

EAC aggregated pharmaceutical imports vs. exports

EAC countries heavily rely on

pharmaceutical imports,

especially for branded and

innovator products

Pharmaceutical imports into

the EAC have been rising at a

much higher pace than the

pharmaceutical exports by

local firms (2006-2015).

African Union - local pharmaceutical manufacturing 3rd highest

priority!

All Partner States have medicines policies, legislations and

regulations in place

Regionalisation is ongoing

Programme to support strengthening of regulatory institutions

and harmonize regulation (EAC-MRH)

First Regional Pharmaceutical Manufacturing Plan of Action

(2012-2016) implemented and several key milestones achieved

2nd EAC Regional Pharmaceutical Manufacturing Plan of Action

2017-2027 finalized and validated in August 2017

EAC: Political support for pharma

EAC: Govt incentives - local manufacturers

Incentive Kenya Tanzania Uganda

Price preference (15%) in public tenders √ √ √

Domestic tenders √ √

Import restrictions of certain products

Preferential payment terms - government √

Tax on imports of finished medicines √ √ √

Tax holidays for investment in new plant √ √ √

Subsidized credit

EAC: Regional Manufacturing Plan 2017-2027

Blue print for the development of the pharmaceutical manufacturing sector in the EAC

Setting 4 targets for the sector:

1. Reduce imports from 70% to less than 50%

2. Support expansion of product portfolio to cater for 90% of disease burden.

3. Government’s to procure at least 50% from local manufacturers.

4. At least five companies to produce more advanced formulations such as delayed release formulations, small volume injectables,

vaccines, etc.

Pillar 4:

Skills and

knowledge on

pharmaceutical

production

Pillar 1:

Promotion of

pharmaceutical

sector

Pillar 2:

Investment in

pharmaceutical

production

Pillar 3:

Medicines

regulation

Pillar 5:

Utilization of

TRIPS

flexibilities

Pillar 6:

Pharmaceutica

l innovation,

R&D

The 6 pillars of EAC manufacturing plan

EAC Pharma - Opportunities

Large unmet need for essential medicines

Significant population growth anticipated

Double disease burden (growth of chronic diseases):

NCDs are predicted to account for 40% of illnesses & for 42% of deaths (5.1 million) by 2030 (WHO Global Health Estimates, 2013)

Growing middle class willing to pay for better treatment

New models of care being designed (e.g. PPP, medical insurance, etc.)

Existing pharmaceutical production base & enabling regulatory environment

African traditional and herbal medicines as a market niche

No dominant players!!

Political will and action!

EAC Pharma - Challenges

Negative perceptions of locally manufactured products

Lack of capacity to manufacture advanced formulations due to a skills gap on product development and formulation expertise

High cost of borrowing (20-30%)

High cost of operations e.g. finance, utilities, infrastructure

Lack of market data

Poor and unreliable infrastructure (roads, utilities, etc)

Under resourced and weak institutions (Civil society, Regulatory agencies, etc)

EAC: Focus on Quality

cGMP Roadmap - supported by UNIDO

Objective: Development of an achievable, country-specific roadmap defining an approach for the industry to achieve WHO GMP compliance over a 5 year period

Roadmap for Kenya already developed, Uganda/Tanzania underway.

Existing approach towards pharmaceutical manufacturing in general in line with WHO GMP requirements

Low risk company

Existing approach towards pharmaceutical manufacturing not in line with WHO GMP but reduced risk with regards to product safety

Medium risk company

Existing approach towards pharmaceutical manufacturing not in line with WHO GMP and high risk with regards to product safety

High risk company

A:

B:

C:

cGMP Roadmap outcome

Preferential prices for medicines made in the EAC

Tax/ customs

incentives

Art. 35, Common Market

Protocol

Positive list for import

limitations

EALA – Private

Members Bill:

The East African

Community

Pharmaceuticals

Management Bill,

2017

FEAPM:

Lobby &

Advocacy of

FEAPM Position

Papers to

improve access to

medicine

Capacity building

to comply with the

EAC GMP

Guidelines

Dialogue at

international,

regional and

national level

EAC Secretariat:

CET

amendments,

public

procurement,

Common Market

Protocol

Non-discrimination

of EAC firms in

public procurement

The EAC Pharma Incentive Package

Come and Invest with us !!

EAC: Investment Opportunities

Manufacturing - medicines, vaccines, diagnostics, herbals, etc,

Healthcare delivery systems

Procurement and distribution systems

Financing systems e.g. health insurance

Use of mobile technology to increase access!

Tips for Investing in Sub-Saharan Africa

Understand the market structure (informal and formal)

Take a longer term view

Operational challenges

Learning curve

Work with a local partner

Need to be close to the action

Invest in local talent

Understand the needs of the Government

Develop relationships!

Let’s Invest Together for a Better Future for All

Back up slides

EAC: Composed of 6 countries: Burundi,

Kenya, Rwanda, South Sudan, Tanzania,

and Uganda

EAC population in 2017: 184 million.

Projections: 263 million by 2030; 412

million by 2050

Average economic growth of 6.2% in the

EAC region between 2004-2013 while GDP

growth rate in the EU in the past 20 years

averaged only 1.7%

East African Community

Therapeutic lines NOT covered in the EAC

Local Production Needs

Skilled Personal √

Capital Investment and access to

affordable finance

√ √

Infrastructure √

Regulatory Environment √ √

Access to technology √

Input materials √ √

Economies of scale √ √√

Sustainable Local Production: Pre-requisite

World map

Worldmapper map: Area of countries proportional to HIV prevalence

Worldmapper map: Area of countries proportional to malaria cases

Worldmapper map: Affordable drugs

Worldmapper map: Pharmacists working