The Positive Impact of Local Pharmaceutical Manufacturing on Economic Development and Public Health - FEAPM Advocacy Series No. 2
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The Positive Impact of
Local Pharmaceutical Manufacturing
on Economic Development
and Public Health
Tobias Buender, Nazeem Mohamed, Thomas Walter,
Wesley Ronoh, Moritz Fichtl, Rozenn Le Mentec
FEAPM Advocacy Series No. 2The Positive Impact of
Local Pharmaceutical Manufacturing
on Economic Development
and Public Health
Tobias Buender, Nazeem Mohamed, Thomas Walter,
Wesley Ronoh, Moritz Fichtl, Rozenn Le MentecExecutive Summary: Projections for jobs at different growth rates
The Positive Impact of Local Pharmaceutical Manufacturing on 90000
Economic Development and Public Health in the EAC
80000
Background: Local pharmaceutical manufacturing is high on the agenda in the East African Communi- 70000
ty (EAC) and throughout the continent. While there are positive developments with regards to industry
growth, political support and increasing demand by international and local procurement, doubts re- 60000
main whether local manufacturers can produce at sufficient quality and capacity and are able to com-
pete with imported medicines on price. However, this study based on a survey among members of the 50000
Federation of East African Pharmaceutical Manufacturers (FEAPM) and local distributors, as well as on
40000
a wide literature review shows that the contrary is true. There is evidence that local pharmaceutical
manufacturing already has a strong positive impact on economic development and public health alike. 30000
With the right support, this effect is projected to grow substantially within the timeline of the Regional
Pharmaceutical Manufacturing Plan of Action 2017-2027. 20000
Economic benefit of local pharmaceutical manufacturing: 10000
90000
0
80000
Revenue and • 2017 total EAC industry revenue: USD 323 million
potential for • Projected 2027 industry size and market share: 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
70000
growth • growth rate of 12% (2014 estimates): USD 1 bn (16.49% market share)
• growth rate of 15 % (industry estimates): USD 1.3 bn (20.58% share) Total jobs (10% growth) Total jobs (15% growth) Total jobs (25.17% growth)
60000 • growth rate of 25.17% (RPMPOA target): USD 3.18 bn (50% share)
50000
Employment • 2017 employment EAC total: 8456 jobs (29% university graduates)
Projections for jobs at different growth rates
• Projections for 2027 7
40000 • at 12% growth: 21933 jobs
• at 15% growth: 34210 jobs 6
30000
• at 25.17 % growth: 79834 jobs
• Annual training of ~800 students and interns 5
20000
USD billion
4
Attraction of
10000 • FDI implemented and schedule since 2010: > USD 130 mio
investment • Planned investment of local industry until 2023: ~USD 140 mio 3
0
Trade benefits • Total EAC Exports 2017: USD 140.49 mio (~300% increase since 2006) 2
2017 2018 2019• Total
2020 2021 imports
EAC medicine 2022 decreased
2023 by2024 2025
10% from 2026
2015-2017 2027
1
Totaland
Spill-overs jobs (10% growth) Total
• 2017: USD 91.29 jobs
mio (15% growth)
spill-over from pharmaTotal jobsto
industry (25.17% growth)
EAC value chain.
value-chain effects • Salaries made up about USD 45.52 mio 0
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
EAC Market size (based on 10% growth rate)
Industry revenue based on FEAPM survey and 25.17% growth
1800000
Industry revenue based on FEAPM survey and 12% growth
1600000
Industry revenue based on FEAPM survey and 15% growth
Value of imports (USD million)
1400000
1200000
1000000
800000
4 The Positive Impact of Local Pharmaceutical Manufacturing on Economic Development and Public Health 600000 5
400000Public health benefits of local pharmaceutical manufacturing Patient prices (in median price ratios), Kenyan public sector, individual medicines
6
Medicine prices • Price comparisons vary immensely from product to product and between
manufacturers
5
• Two Kenyan studies show that if local products exist, procurement prices
are lower on average than for imports
4
• KEMSA tender data shows that local manufacturers have become more
competitive Locally produced products
3 Imported products
• Tanzanian study finds that locally made products are cheaper on average
than imports
2
Better quality of • Quality assurance of local products through regulators is very strict
medicines • No major difference observed in quality of imports versus locally-made 1
medicines
0
Higher availability • Lead times of local manufacturers
e
n
a
e
b
ir
g
e
ol
op
ol
ol
lin
0m
ta
fe
ov
m
and health security • If in stock: 1-2 days
az
z
ro
yc
ld
icl
sp
ta
ra
25
nd
up
hy
yc
ce
Ac
ep
di
• If raw material in stock: 1-4 weeks
o
be
Ib
xc
et
ra
nc
m
pr
M
Pa
Do
Al
O
Ci
Zi
• If raw material not in stock: 1-2 months
• Delivery time for imported medicines: 2-3 months
• Survey: 88% of distributors have used local manufacturers to respond to
stock-outs in emergencies Policy recommendations for EAC level
Local adaptation of • Adaptations of formulas (e.g. reformulation for rural consumption)
medicines • Adaptation of packaging (e.g. information in Kiswahili) 1. Introduce a 25% import tariff on a list of selected medicines, for which sufficient and high quality
• Product development cooperation in international partnerships (e.g. local production capacity exists. For a suggestion of a list, see Chapter VI.
DNDI or CHAI) 2. Remove all duties on imports of raw and packaging material, pharmaceutical manufacturing
related equipment as well as spare parts for the equipment.
3. Introduce a universal price preference margin of 20% for all pharmaceutical products
manufactured in the EAC in all public tenders and remove similar preferences for local importers.
Speed of delivery 4. Enforce Article 35 of the Common Market Protocol, treating all manufacturers within the EAC as
equal with respect to national incentives and preferences in procurement.
Imported products
5. Harmonise medicine registration procedures within the EAC Partner States.
Local product (including import of raw material) 6. Streamline the implementation of pharmaceutical sector support in an East African Community
Local product (including manufacturing) Pharmaceuticals Management Bill.
Local product in stock
0 20 40 60 80 100
Average days for delivery
6 The Positive Impact of Local Pharmaceutical Manufacturing on Economic Development and Public Health 7Table of Contents I. Introduction
Executive Summary: The impact of local pharmaceutical This is an exciting time for local pharmaceutical and procurement preferences for the industry or
manufacturing in the East African Community even increased tariffs on specific pharmaceutical
manufacturing on economic development and public health in the EAC. . . . . . . . . . . . 4 (EAC). After some uncertain years, in which the products for which sufficient production capacity
globalisation of the generics medicine market exists in the region. Understandably, governments
I. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 created new challenges, manufacturers are looking and other public health actors want to make
cautiously optimistic towards the future in 2018. sure that this will not negatively affect access to
II. The benefit of local production. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Many companies in Kenya, Uganda and Tanzania medicines and is worth the political and fiscal
are currently expanding their production scale investment. This is why the Federation of East
II.I. Economic benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 and scope. In Rwanda, two companies have African Pharmaceutical Manufacturers (FEAPM)
started building new pharmaceutical production has decided to collect and present existing and new
II.II. Public health benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 facilities and the single producer in Burundi is evidence for the positive impact on the economy
planning an expansion. Investors from inside and as well as on the public health outcomes of the East
III. The Impact of Local Pharmaceutical Manufacturing in the EAC. . . . . . . . . . . . . . . . . . . 15 outside the EAC are considering investing in the African Community population. This study shows
sector. International and domestic procurement that manufacturers in the EAC already play an
III.I. Evidence for economic impact. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
organisations plan to increase their share of EAC- important role in their local economies, providing
III.II. Evidence for public health impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 sourced supply. This is first and foremost the fruit thousands of quality jobs, contributions to
of the hard labour invested by the employees government finances and investments in further
IV. Case Study A: Local manufacturing and public procurement – and management in East Africa‘s pharmaceutical growth. At the same time, public health actors are
industry. Yet, it could not have taken place without in need of domestic supplies to meet demand for
Collaborating for lower prices and better availability of medicines. . . . . . . . . . . . . . . . 30 a fruitful cooperation between many different low-price quality medicines. Evidence shows that
EAC governments, civil society and private local manufacturers are highly competitive on
V. Case Study B: The investment case for actors on national and regional level throughout price and speed of delivery, when compared with
local pharmaceutical manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 the last years. Together, a new EAC Regional imports, in many therapeutic fields. Yet, in order
Pharmaceutical Manufacturing Plan of Action to build on this strong foundation, further support
(RPMPOA) 2017-2027 was developed and is being from the EAC and its Partner States is needed.
VI. Policy Implications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 jointly implemented along six pillars: Promotion of This will enable manufacturers to invest into
competitive and efficient regional pharmaceutical expanding capacities and move into new product
production; facilitation of increased investment categories to meet upcoming health challenges in
List of Figures in pharmaceutical production; strengthening of the Community.
pharmaceutical regulatory capacity in the region;
Figure 1: Economic and Public Health Benefits of local pharmaceutical manufacturing. . . . . . . . . . . . . . . 15 development of appropriate skills and knowledge First of all, the study will elaborate on the dual
for pharmaceutical production; utilisation of WTO argument for local pharmaceutical manufacturing,
Figure 2: Projections for market and industry size. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 TRIPS flexibilities to improve local production of drawing links to the evidence from success
Figure 3: Share of employees at different qualifaction levels. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 pharmaceuticals in East Africa; and innovation,
stories in other developing countries throughout
research and development within the regional
pharmaceutical industry. In the RPMPOA, the world. Secondly, it will outline how the
Figure 4: Projections for jobs at different growth rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
public health and industrial development goals pharmaceutical industry currently contributes to
Figure 5: Pharmaceutical imports of EAC countries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 are strongly linked. A successful East African employment and economic development of the
pharmaceutical manufacturing sector will create EAC and what potential it bears for further gains.
Figure 6: Pharmaceutical exports of EAC countries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Thirdly, the study will focus on the performance
high-quality jobs, attract international investment
Figure 7: Export destination countries for EAC Pharmaceutical Manufacturers. . . . . . . . . . . . . . . . . . . . . . . 22 and technology transfer, provide export earnings of the EAC pharmaceutical manufacturers with
and strengthen the knowledge industry overall. regards to improving access to medicines by
Figure 8: (HAI STUDY): Patient prices (in median price ratios), At the same time it can offer high-quality looking at prices, quality, availability and adaption
Kenyan public sector, individual medicines. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 affordable generic medicines to patients, deliver to local health needs. Moreover, two case studies
faster than international suppliers and adapt relating to the experience of two FEAPM member
Figure 9: Performance of Kenyan manufacturers in its products to local needs. This dual argument
KEMSA tenders (solid formulations, excluding ARVs & ACTs). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 companies are presented. Finally, the study will
is the reason for growing support for local
pharmaceutical manufacturing not only in the end by outlining proposed policy measures that
Figure 10: Speed of delivery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 EAC, but throughout Africa and the international would help to further strengthen the industry
development community alike. in order to be able to take on new economic and
Figure 11: (HAI STUDY): Mean percentage availability / sector (Kenya). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 public health challenges.
Figure 12: Overview of policy tools used in Bangladesh and Ghana to promote As part of the RPMPOA, governments are
local production of medicines. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 discussing the introduction of supportive
industrial policy measures like additional tax
8 The Positive Impact of Local Pharmaceutical Manufacturing on Economic Development and Public Health 9II. The Benefit of local production
Local pharmaceutical production has gathered tions like PEPFAR or UNICEF equally report that II.I Economic Benefits
much prominent support throughout the African they are increasing their share of medicines made
and international policy community. In 2005, the in Africa. Industrial policy used to have a bad reputation Local production will stimulate the economy,
African Union Assembly mandated the AU Com- among African and international economists create jobs and contribute to government
mission to develop an overarching Pharmaceuti- While making medicines in Africa has a long tra- after the wide-spread failure of state-supported finance.
cal Manufacturing Plan for Africa (PMPA) and its dition going back to the 1920s2, a big push for local industrialization in the early post-colonial years4.
implementation is in full swing throughout the pharma arrived as a result of the Doha Declaration Yet, the neoliberal, hands-off recipe for growth The pharmaceutical sector, like other industries,
continent. In the ECOWAS region, the United Na- on the TRIPS Agreement in 2001: The World Trade propagated in the 1980s and 1990s did also not lead depends on labour from the local population.
tions Industrial Development Organization (UNI- Organization and its partner states recognized to much success with regards to the development In the successful Indian pharmaceutical
DO) and the West African Health Organization that Africa needs a strong generic medicines in- of competitive industries. At the same time, manufacturing sector, more than 450,000 people
(WAHO) work on initiatives like a Good Manufac- dustry to make use of the flexibilities in the TRIPS many Asian economies managed to reach this have found a high-quality job8. In a more local
turing Practices (GMP) Roadmap Framework. The agreement. This means being able to locally pro- goal with more sophisticated state-centred example, the Egyptian industry employs about
SADC’s pharmaceutical business plan supports duce low-cost generic versions of medicines that industrial policies. This lead to a rediscovery of the 100,000 workers9. While there are sectors that are
strengthening pharmaceutical manufacturing in were patent-protected in many industrialized potential of active industrial policy for structural more labour-intensive than the production of
Southern Africa. As mentioned above, the East Af- countries and thus unaffordable for the majority transformation of African economies from a medicines, the majority of the jobs created can
rican Community has been at the forefront of this of African patients. However, if you look at why natural resource focus to stronger manufacturing5. be considered as decent work providing dignity,
development having already launched its second African governments and international partners Dani Rodrik and other international economists a fair income and safe working conditions10.
Regional Pharmaceutical Manufacturing Plan of decided to support local manufacturing, you find point out that the design of the policy matters. The industry offers opportunities to both high
Action (RPMPOA), now covering implementation a much wider argument. What is so special about In the past, governments have supported the and lower skilled workers ranging from natural
until 2027. Moreover, African regional econom- promoting pharmaceutical manufacturing is that wrong sectors in the wrong way6. In the new science, engineering and research-oriented tasks
ic communities have integrated and prioritised it is a holistic way of undertaking industrial poli- wave of industrial policy governments should, to more basic production line operations. Due to
pharmaceutical manufacturing as part of their cy; if done right, you may potentially hit two birds amongst other criteria, focus on the sectors the high quality standards applied in the industry
industrialization strategies. with one stone. Not only do you contribute to that show potential for great knowledge spill- and international supply chains, the work
industrialization and create jobs, but you may im- over or economies of scale7. Pharmaceutical environment is usually much cleaner and safer
Outside of Africa, many international and devel- prove public health and access to medicines at the manufacturing has proven to be such a sector. For than in other sectors.
opment partners have seen the need for a stronger same time. This requires strong cooperation and many countries like India, Bangladesh, Egypt or
pharmaceutical industry in Africa. UNAIDS Chair- coordination to reach policy coherence among the Ghana, such an active industrial policy has been Moreover, pharmaceutical manufacturing creates
man Sidibé, for instance, is a great proponent of different departments from industry, trade and fi- a success in the sector. Subsequently, such benefits spill-over effects into many other industries along
African pharmaceutical manufacturing: “The nance, to Ministries of Health and their regulatory will be discussed. its supply-chain. Upstream, it may lead to the
growth of new pharmaceutical industries...will save and procurement agencies.
lives and deliver measurable returns through in-
creased productivity, longevity and lower long-term However, there have been critical voices towards
health-care costs in the long run. It is a win–win for supporting local pharmaceutical manufacturing3,
all.”1 Other UN institutions like WHO, UNIDO and especially during the early years of the discussion. 1
NAIDS (2017). Believing in African Pharma. Retrieved from http://www.unaids.org/en/resources/presscentre/
U
the UN Conference on Trade and Development Doubts exist mainly in the public health com- featurestories/2017/march/20170329_CIPHARM
(UNCTAD) have all built pharmaceutical sector munity and among medicine importers. Some of
2
Banda, G., Wangwa, S., & Mackintosh, M. (2016). Making Medicines in Africa: An Historical Political Economy
support programmes within their organizations. their representatives argue that prices of imported Overview. In: Making Medicines in Africa. The Political Economiy of Industrializing for Local Health. Baskingstoke:
Palgrave Macmillan
On top of that, development partners like the Ger- medicines tend to be cheaper and local producers 3
Kaplan W, Laing, R. (2005). Local production of pharmaceuticals: Industrial policy and access to medicines – an
man Ministry for Economic Cooperation and De- would not have the necessary capacities to fulfil overview of key concepts, issues and opportunities for future research. Washington, DC: World Bank.
velopment, Swissfund, or Finnfund have invested local demand. On top of that, there is a recurring 4
Lin,J. (2012). New Structural Economics. Washington, DC: World Bank.
in pharmaceutical capacity building throughout perception that local manufacturers produce 5
Rodrik, D. (2004). Industrial Policy for the 21st century. CEPR Discussion Paper 4767; Wade, R.H. (2009). Rethinking
the last ten years. This political commitment has lower quality than manufacturers from outside Industrial Policy for Low Income Countries. Journal Compilation. Oxford: Blackwell; Altenburg, T. (2011). Industrial
also brought in long-time sceptics of local man- Africa. Whilst these problems indeed existed and Policy in Developing Countries: Overview and lessons from seven country cases. GDI discussion paper; Stiglitz, J.,
ufacturing like the Global Fund to Fight AIDS, may still occur in some countries and sub-sectors, Lin, J., Monga, C. (2016). The Rejuvenation of Industrial Policy. World Bank Policy Research Working Paper No. 6628.
6
Rodrik, D. (2004). Industrial Policy for the 21st century. CEPR Discussion Paper 4767
Tuberculosis and Malaria. It has integrated local generally, the African pharmaceutical industry 7
Norman, A. and Stiglitz, J. (2012). Strategies for African Development. In: Good growth and governance in Africa:
suppliers in its 2016-2021 market shaping strate- has made critical advancements towards competi- Rethinking Development Strategies. Oxford: Oxford University Press.
gy and hosted a ground-breaking conference with tiveness both in quality, capacity and price. In this 8
Guennif, S., & Ramani, S. V. (2010). Catching up in pharmaceuticals: a comparative study of India and Brazil. UNU
African manufacturers to establish new partner- paper, we assemble evidence for this development MERIT Working Paper.
ships. Other international procurement organiza- in the EAC region. 9
Oxford Business Group (2012). Egypt: Regulating pharmaceuticals production. Retrieved from: https://
oxfordbusinessgroup.com/news/egypt-regulating-pharmaceuticals-production
10
International Labour Organization (2018). The ILO’s Decent Work Agenda. Retrieved from: https://www.ilo.org/
global/topics/decent-work/lang--en/index.htm
10 The Positive Impact of Local Pharmaceutical Manufacturing on Economic Development and Public Health 11build-up of a strong chemical industry for the to around 70% in Kenya. To import medicines, II.II PUBLIC HEALTH BENEFITS
production of Active Pharmaceutical Ingredients Kenya, for example, required foreign exchange
(API) like in India or China. On top of that, the reserves of USD 518 million in 201712 alone. This Public health is nowadays mostly addressed large supply chain of imported medicines, adding
more labour-intensive packaging industry gets a signifies a great potential for import substitution. in a systematic approach. Health systems intermediate costs and margins, is improved with
boost from supplying packaging material. Even Bangladesh started off similarly with more than strengthening makes up an important part of the local manufacturing. Local manufacturers could
the agricultural sector may benefit from the 70% of medicines imported into the country in UN Agenda 2030 for Universal Health Coverage supply directly to hospitals, reducing costs to
pharmaceutical industry for the production of the 1980s and has decreased that number to only and the G20 global health strategy. While hospitals, patients by between 25% and 50%. In Bangladesh,
herbal medicines or plant-based APIs such as 2% after years of effective support to the industry. pharmacies, medical schools, biomedical research average medicine prices have decreased by
artemisinin for malaria treatment. Such economic After saturating the local market, Bangladeshi labs and health product supply chains are about 80% in real terms since the push for
growth, spill-over effects and increasing wealth of firms have moved to exporting to more than commonly accepted to be part of a country’s local production in the 1980s17. Yet, still today,
all stakeholders in the industry will pay back any 70 countries and generated export earnings of health system, there is a strong argument that a Bangladesh reports that domestically produced
government support through rising corporate, more than USD 80 million in 2017 with the trend local pharmaceutical industry also plays a vital medicines are nearly 50% cheaper than imports
consumption and income taxes, trade levies and pointing strongly upwards13. Thus, it is a great role within a health system. By supporting health- from neighbouring India18. African economies
other contributions to public finance. opportunity to tap into international markets for industry linkages, policy makers can contribute could also achieve this, having comparably low
African manufacturers. to the health systems strengthening agenda labour costs and decreasing costs of business,
Local production will attract investments and provide a building block for better access to which will help to raise their competitiveness.
Local production will contribute to a knowledge medicines14. With the right approach, prices may
Investors are always looking at the potential society through technology and skills transfer drop, quality can be better assured, and medicines Local production will improve availability of
of an industry. Pharmaceutical manufacturing become more available and better adapted to local medicines
faces a growing market in Africa that McKinsey Pharmaceutical manufacturing is a relatively needs. Moreover, such linkages may build local
estimates to reach a value of USD 20.8 to USD high-tech and high-skilled industry. In this emergency capacities or increase the pool of the Stock-outs or delivery delays can cause severe
65 billion by 202011. Drivers here are a growing way, strengthening pharmaceutical production health workforce. The following paragraphs lay harm if patients cannot access the medicines they
middle class, improving health financing and means supporting the transformation towards out more of these aspects in detail. need at the right time. Unfortunately, this is a
unfortunately also a change in disease burden a knowledge economy in that country. New common issue throughout many EAC countries.
with non-communicable diseases (NCDs) on the domestic or foreign investments will often bring Local production will decrease medicine prices Local pharmaceutical production capacity can
rise. In combination with strong support for local in cutting edge development or production reduce this problem, as their supply is usually
manufacturing, international companies will technology to the economy, which may spill- When the discussion about local pharmaceutical faster. Local companies tend to keep stock for
look strongly into greenfield investments, joint over to other sectors. At the same time, working production started in the early 2000s, prices of stock-out situations or at least keep raw material
ventures or other partnerships on the continent in pharmaceutical manufacturing will create medicines on the international market were still to manufacture needed medicines within a few
to supply the African markets. Moreover, with new skills in a workforce making an economy extraordinarily high. Increasing competition days or weeks. In addition, transport times are
growing demand, local manufacturers will more productive overall. Many pharmaceutical through large-scale production of generic shorter between factories and warehouses and
increasingly mobilize investment resources to manufacturers run their own workplace medicines in rapidly industrializing countries they may be able to produce smaller batches to
improve production capacities and upgrade the trainings or internship programmes to make like India and China has helped to alleviate this cater for fluctuations in demand. International
capital stock of their local economy. sure that university or high school graduates are problem throughout the developing world. A first- large-scale producers often prefer to ship
adequately prepared for work in the industry. line HIV treatment used to cost about USD 10,00015 product only once or twice a year to make use of
Local production will save foreign exchange Thereby, they contribute to capacity-building that until the early 2000s. This figure has gone down to economies of scale. Then deliveries can take up
reserves and generate export earnings will contribute to the wider performance of an USD 75 per patient per year16. While many argue to three months, not including delays caused by
economy. Moreover, pharmaceutical companies that the Indian and Chinese producers’ economies potential administrative issues at customs. The
All African countries import the majority of offer career opportunities for highly educated of scale make it harder for other countries to gain Global Fund has acknowledged this advantage of
their medicine demand. In the EAC Partner university graduates reducing the brain drain in price advantages through local production, there local production and awards special points to local
States, this share ranges from 99% in Burundi developing economies. still seems to be room for efficiency gains. The manufacturers within their tendering procedures
11
cKinsey (2015). Africa: A continent of opportunity for pharma and patients. Retrieved from: https://www.
M 14
ackintosh, M., Mugwagwa, J., Banda, G. Tunguhole, J. (2017). Local production of pharmaceuticals and health
M
mckinsey.com/industries/pharmaceuticals-and-medical-products/our-insights/africa-a-continent-of-opportuni- system strengthening in Africa: An Evidence Brief. German Health Practice Collection. Berlin: BMZ
ty-for-pharma-and-patients 15
MSF (2011). Untangling The Web Of Antiretroviral Price Reductions. Retrieved from: https://d2pd3b5abq75bb.
12
International Trade Centre (2018). International Trade Statistics 2001-2017. Retrieved from: http://www.intracen. cloudfront.net/2012/07/16/14/42/23/52/UTW_14_ENG_July2011.pdf
org/itc/market-info-tools/trade-statistics/ 16
UNAIDS (2017). New high-quality antiretroviral therapy to be launched in South Africa, Kenya and over 90 low-and
13
Ibid. middle-income countries at reduced price. Retrieved from: http://www.unaids.org/en/resources/presscentre/press-
releaseandstatementarchive/2017/september/20170921_TLD
17
Amin, Md., & Sonobe, T. (2013). The success of the industrial development policy in the pharmaceutical industry
in Bangladesh. GRIPS Discussion Paper 13-07). Chowdury, N. & Kabir, ER (2009). Per pill price differences across
therapeutic categories: A study of the essential drug brands marketed by multinational and local pharmaceutical
12 The Positive Impact of Local Pharmaceutical Manufacturing on Economic Development and Public Health companies in Bangladesh. African Journal of Marketing Management; 1(9), 220-226. 13
18
FEAPM (2018) Internal unpublished Report, FEAPM study tour to Bangladesh.if they can assure rapid delivery. Within a country, A major quality scandal in the USA involved like Ebola. Local production of emergency medication or vaccines can ensure that African countries will
local manufacturers also have an incentive to Indian manufacturer Ranbaxy. In 2013, Dinesh not have to wait until everybody else has been supplied. The international flu outbreak of 2009 was such
cover the whole market including poorer rural Thakur, a Ranbaxy executive and whistle-blower a case, in which all countries held on to their supplies and forbade the export of vaccinations25. However,
areas. Many producers even develop their own in this case, stated that “Ranbaxy took its greatest for local health professionals in many African countries, health security may instead refer to having a
distribution networks for this purpose. Importers liberties in markets where regulation was weakest security of supply of essential medicines to avoid preventable harm in regular treatment situations like
tend to focus on the more lucrative urban areas and the risk of discovery was lowest”24. Thus, as giving birth26. Here, as mentioned above, local manufacturing can help to ensure this safe supply.
and pockets of wealth. Thus, local production long as strict regulatory enforcement is in place
may potentially deliver wider rural availability of domestically, local manufacturing can improve
essential medicines. the average quality of medicines in the market. III. The Impact of local Pharmaceutical Manufacturing in the EAC
Local production will increase quality of Local production will create more locally
While we have demonstrated that producing medicines locally can have economic and public health
medicines in a country adapted products and medicines for neglected
benefits in theory and in practical cases from around the world, it is important to check how local
diseases
pharmaceutical manufacturing in the EAC is doing in comparison. Below, the study summarizes and
There is considerable doubt among public health
analyzes evidence for impact along the framework in Figure 1.
officials that African manufacturers can produce It is a dilemma for Africa that medicine research
high quality medicines. Whilst not all local is mostly driven by market forces. Thus, effective
The researcher undertook a comprehensive literature and database review to extract relevant data.
manufacturers may have the means to bring their medicines for many neglected tropical diseases
Additionally, with the support of the Federation of East African Pharmaceutical Manufacturers, a survey
production in line with international standards are still missing. For other products, dosage forms,
was conducted across FEAPM member companies to present a more comprehensive and updated picture
like the WHO GMP guidelines, local regulatory packaging or other specifications may not be
of the industry’s contributions. Respondents to the survey constitute a major share of the industry . For
authorities are mostly very strict to ensure product appropriate for local conditions. Climate or genetic
the share of the industry that did not respond, or is not part of FEAPM, numbers were estimate27 based on
safety19. In fact, they can impose much stricter differences between patients may undermine the
extrapolations from the respondents’ data with triangulation from FEAPM experts. Thus, final numbers
controls on the production environment of effectiveness of a treatment. Even though generic
for countries and EAC presented here are a combination of company reports and estimations. To provide
local manufacturers than manufacturing sites of medicines manufacturers do not engage in original
anonymity for the companies, data from this survey will be presented on a national or regional level only.
companies importing their products from around medical research, and seldomly conduct their own
Moreover, interviews were held with nine public and private medicine distributors to gather information
the world. Even the US FDA, with its relatively clinical trials, they are the first step to building up
on the perception of quality, availability and competitiveness of locally made products.
high capacity for inspections, is concerned that such research capacity. Through local production,
it is unable to effectively control production more staff gain knowledge of pharmaceutical
quality in India20. Studies claim that about 35% of research methods, universities expand their Figure 1: Economic and Public Health Benefits of local pharmaceutical manufacturing
worldwide sales of counterfeit medicines can be operations and overall research capacity increases
traced back to India21. For example, a 2013 report gradually. In India, after years of generic product
Economic Benefits Public Health Benefits
of the Ghana Food and Drug Authority showed development and reformulation, some companies
that 95% of the medicines to treat postpartum currently find themselves in a transition towards a
haemorrhage imported from China and India more research-based approach. In Africa, product Revenue and Lower medicine
failed quality control22. On top of that, regulatory development partnerships within institutions potential for growth prices
agencies in export-oriented countries may, from like the DNDI foster cooperation in innovation
time to time, be less strict with the quality of between researchers and local manufacturers.
products destined for export to Sub-Saharan Better quality of
Employment
Africa. A recent investigation showed, for instance, Local production will improve health security Potential of local medicines
that generic drugs exported from India to Africa pharmaceutical
are of lower quality than those for domestic Health security has received much attention manufacturing Higher availibilities
Atraction of
sales or exports to middle income countries23. lately, often focusing on the threat of epidemics of medicines & health
investments security
19
nited States Securities and Exchange Commission (2010) Registration Statement under the Securities Act of 1933
U Trade Local adaption of
[for] Vantage Health. Available at: http://www.faqs.org/sec-filings/100819/Vantage-Health_S-1/ benefits medicines
20
Harris, G. (2014). Medicines Made in India Set Off Safety Worries. New York Times. Retrieved from: https://www.
nytimes.com/2014/02/15/world/asia/medicines-made-in-india-set-off-safety-worries.html
21
Wertheimer, A., & Norris, J. (2009). Safeguarding against substandard/counterfeit drugs: Mitigating a Spill-overs and
macroeconomic pandemic. Research in Social and Administrative Pharmacy, 5, 4-16. value- chain effects
22
United States Pharmacopeial Convention (USP) (2013). Post-Market Quality Surveillance Project: Maternal
Healthcare Products (Oxytocin and Ergometrine) on the Ghanaian Market. Retrieved from:http://www.usp.org/
sites/default/files/usp_pdf/EN/PQM/ghana-mch_mqm_report_final-mar_27_2013_rdct.pdf
23
Bate, R, G Z Jin, A Mathur, and A Attaran (2014), Poor Quality Drugs and Global Trade: A Pilot Study. NBER Working 25
ackintosh, M., Mugwagwa, J., Banda, G. Tunguhole, J. (2017). Local production of pharmaceuticals and health
M
Paper 20469. system strengthening in Africa: An Evidence Brief. German Health Practice Collection. Berlin: BMZ
24
Eban, K (2013), “Dirty Medicine”, Fortune. 26
Ibid.
27
Respondents for Kenya represent ca. 65% of the industry value (Dawa, Cosmos, Regal, Universal, Biodeal,
14 The Positive Impact of Local Pharmaceutical Manufacturing on Economic Development and Public Health Laboratory & Allied, Elys); for Tanzania around 90% of the industry value (Shelys, Zenufa, Mansoor Daya, Keko); 15
for Uganda ca. 95% (KPI, CIPLAQCIL, Kwality Afro Asia, Abacus, Rene, Medipharm) of the industry value.III.I Evidence for Economic Impact In 2018, the estimated industry size measured in annual revenue stood at USD 339 million. Taking into
account an average intermediate consumption of 70%, this corresponds with annual value created of
about USD 96.95 million. Moreover, the pharmaceutical market and industry shows great potential for
Revenue and • 2017 total EAC industry revenue: USD 323 million growth. Assuming a continuation of a compound average growth rate of 10%32, EAC market size alone
potential for • Projected 2027 industry size and market share: will increase to USD 6.35 billion by the end of the 2nd phase of the RPMPOA in 2027. Figure 2 shows three
growth • growth rate of 12% (2014 estimates): USD 1 bn (16.49% market share) different projections for the growth of the industry. The grey line is the more conservative estimate of
• growth rate of 15 % (industry estimates): USD 1.3 bn (20.58% share) a 12% local industry growth rate, as stated in the RPMPOA. However, FEAPM members reported an
• growth rate of 25.17% (RPMPOA target): USD 3.18 bn (50% share) expected median growth rate of 15% in the 2018 survey, which is captured by the yellow line. Thus, we
90000 may expect an industry revenue between USD 1 billion and USD 1.31 billion in 2027. Even the higher
Employment • 2017 employment EAC total: 8456 jobs (29% university graduates) number would only constitute a local market share of 20.58% across the EAC. This shows that at the
80000 • Projections for 2027 current growth rates, it is unlikely that the EAC will reach the goal set in the 2nd RPMPOA of 50% locally
• at 12% growth: 21933 jobs produced medicines. Thus, increased political support and substantial investments in new manufactur-
70000 • at 15% growth: 34210 jobs ing entities are needed to achieve the 50% target. For this goal, a compound average growth rate of ca.
• at 25.17 % growth: 79834 jobs 25% is required (orange line).
60000 • Annual training of ~800 students and interns
50000
Attraction of • FDI implemented and schedule since 2010: > USD 130 mio Figure 2: Projections for market and industry size
investment • Planned investment of local industry until 2023: ~USD 140 mio 7
40000
Trade benefits • Total EAC Exports 2017: USD 140.49 mio (~300% increase since 2006) 6
30000 • Total EAC medicine imports decreased by 10% from 2015-2017
5
20000
Spill-overs and • 2017: USD 91.29 mio spill-over from pharma industry to EAC value chain
USD billion
value-chain effects • Salaries made up about USD 45.52 mio 4
10000
3
0
Industry size and potential for growth
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2
In the Regional Pharmaceutical Manufacturing Plan of Action, EAC reports an estimated pharmaceuti-
cal market of USD
1
Total jobs1.84
(10%billion in 201428. EAC
growth) Totalmanufacturers capture about
jobs (15% growth) 15%
Total of this
jobs market,
(25.17% resulting
growth)
in an industry size of USD 276 million according to association estimates in 2014. Based on the 2018 0
FEAPM survey, industry revenue had already grown to USD 323.16 million in 2017. The EAC region has
66 registered manufacturers29, of which the majority are based in Kenya. Thirty-four (34) manufacturers, 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
representing the lion share of the market, are members of FEAPM.
EAC Market size (based on 10% growth rate)
Looking at the market share of local producers, it is important to note that it is much higher among Industry revenue based on FEAPM survey and 25.17% growth
the product categories that local manufacturers can already cover. In Kenya, for instance, local pro-
ducers fare well in specific sectors: one study found that 59% of chronic disease medicines had been Industry revenue based on FEAPM survey and 12% growth
made in Kenya, while only 2% of antiretroviral therapy was made locally30. Another research showed Industry revenue based on FEAPM survey and 15% growth
that among medicine categories covered by local manufacturers, they supply around 55% of the Kenyan
market31. Across the EAC, only an estimated 66% of disease conditions is covered by local manufactur- Employment
ers. Moreover, many have been crowded out from supplying HIV and malaria treatment through the
international procurement of the vertical donor programmes like the Global Fund. Their absence in The pharmaceutical industry employed more than 8800 East Africans on a permanent basis in 201833. In
many high-value categories, as well as the loss in the antimalarial and HIV market, decreases the average times of high capacity utilization, a large number of temporary workers is added to this number. While
market share and understates the importance of local manufacturing in their core categories like cough the industry is not as labour-intensive as other manufacturing sectors, it is notable that about 27%, or
and cold preparations, anti-infectives, antiseptics, analgesics and others. 2400 jobs, are occupied by university graduates working in drug development, quality assurance, man-
agement or finance (see Figure 3). Approximately 10% of university level employees are trained pharma-
28
Estimates by manufacturers’ associations in EAC (2017). Regional Pharmaceutical Manufacturing Plan of cists, while the rest have earned other degrees or diplomas, mostly in natural sciences34.
Action 2017-2027. Retrieved from: http://eacgermany.org/wp-content/uploads/2018/04/2nd-EAC-Regional-
Pharmaceutical-Manufacturing-Plan-of-Action-2017%E2%80%932027.pdf
29
ibid
30
Mackintosh, M., Tibandebage, P., Njeru, M., Kungu, J., Israel, C., & Mujinja, P. (2018). Rethinking health sector 32
EAC (2017). Regional Pharmaceutical Manufacturing Plan of Action 2017-2027. Retrieved from: http://eacgermany.
procurement as developmental linkages in1800000
East Africa. Social Science & Medicine, 200, 182-189. org/wp-content/uploads/2018/04/2nd-EAC-Regional-Pharmaceutical-Manufacturing-Plan-of-Action-
31
HAI (2018). Prices and Availability of Locally Produced and Imported Medicines in Kenya Report. Retrieved from: 2017%E2%80%932027.pdf
1600000
http://haiweb.org/what-we-do/price-availability-affordability/measuring-the-availability-and-prices-of-locally- 33
FEAPM survey
s (USD million)
produced-and-imported-medicines/ 34
Vugigi, S. (2017). Assessment Of The Pharmaceutical Manufacturing Industry In Kenya To Forecast Local Production
1400000 Sufficiency. PhD thesis in the school of pharmacy of Kenyatta University.
16 The Positive Impact of Local Pharmaceutical Manufacturing on Economic Development and Public Health 17
1200000
1000000Skilled work makes up a large share of the remainder of the permanent positions, requiring specific ad- Figure 4: Projections for jobs at different growth rates
ditional training following high school education. The quality of each job created in the pharmaceutical
industry is thus much higher than in more basic manufacturing. This is also represented by the com- 90000
parably high income of employees in the industry. In 2017, companies across the EAC spent USD 44.31
million on salaries. This means USD 44.31 million that impacted local economic development through 80000
local consumption and private investments. On average, each employee earned about USD 5000 per
year, which is far above the average GDP per capita in the EAC region (USD 966 in 2017)35. 70000
60000
Figure 3: Share of employees at different qualifaction levels
50000
40000
30000
29.06% 20000
High school level
University Graduate level 10000
70.94%
0
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Total jobs (10% growth) Total jobs (15% growth) Total jobs (25.17% growth)
Additionally, every company reports to offer in-house training and capacity development programmes
Applying the expected industry growth rate of 15%, we will see employment in the industry rise to for their employees37. Annually, companies train about 800 students in the region as part of internship
more than 34,000 jobs by 2027 (see Figure 4). Taking the desired 25.17% growth rate needed to reach the or attachment programmes contributing to the overall skill development in the economy and improv-
targets of the RPMPOA, employment will increase to ca. 80,000. Again, this does also not include the ing employability of graduates. Finally, as the number of pharmacy and pharmacy-related (Pharma
jobs created through spill-over effects to the upstream industries like packaging material production or technology, microbiology, biochemistry, analytical chemistry, industrial chemistry etc.) university pro-
downstream distribution of medicines. Studies of the European pharmaceutical industry showed that grammes in the EAC region has been increasing, and institutions are producing more graduates every
each job in the pharmaceutical industry carries another 4.7 jobs in the overall labour market36. For East year, the pharmaceutical industry can offer adequate positions for these talents if it continues to grow.
Africa, this would contribute an additional employment effect of up to 39,750 positions. Thereby, companies are preventing further brain drain from EAC economies.
35
ata from Wordbank (2017): https://data.worldbank.org/
D Attraction of investments
36
uropean Federation of Pharmaceutical Industries and Associations (2016). The Economic Footprint of
E
Selected Pharmaceutical Companies in Europe. Retrieved from: https://www.wifor.com/tl_files/wifor/PDF_ The local pharmaceutical manufacturing sector has been successful in attracting international invest-
Publikationen/161219_Efpia_EF_report_WifOR_updated.pdf ments over the last years. In 2005, at the beginning of the push for more local manufacturing, Finnish
development finance company Finnfund had bought a 10% share of Universal in Kenya, supplying it
with capital and technical support38. In 2016, Indian generic medicine manufacturer, Strides, had tak-
en over a majority shareholding for an investment of almost USD 10 million39. Also in 2005, Ugandan
company Quality Chemicals Limited and Indian generic medicine manufacturer CIPLA had formed CI-
PLAQCIL, a Joint Venture to produce ARVs and ACTs under license from CIPLA. In 2013, CIPLA acquired
the majority shareholding of QCIL for an additional USD 15 million investment. QCIL has also attracted
additional investors, namely TLG Capital Fund (a London-based frontier market investor) in 2009 and
1800000
Capitalworks International Partnership Fund (an asset management firm specialized in mid-market
companies in Sub-Saharan Africa) in 20101600000
40
. The company is also the first pharmaceutical manufacturer
Value of imports (USD million)
1400000
37
EAPM survey
F 1200000
38
innfund (2016). Drugs producer sets an example for others in Africa. Retrieved from: https://www.finnfund.fi/
F
1000000
ajankohtaista/uutiset16/en_GB/universal_corporation_kenya/
39
Strides Shasun (2016). Strides Shasun to acquire controlling stake in Universal Corporation, Kenya. Retrieved
800000
from: http://www.stridesarco.com/pdf/pressrelease/2016/ss_universal_press_release.pdf
40
CIPLAQCIL (2018). Partners. Retrieved from: https://www.ciplaqcil.co.ug/partners/
18 The Positive Impact of Local Pharmaceutical Manufacturing on Economic Development and Public Health 600000 19
400000in East Africa considering to be listed on the stock market, offering 18% of their shares to the public and Figure 5: Pharmaceutical imports of EAC countries
raising about USD 45 million41. In this way, CIPLAQCIL could diversify its equity source and contribute
to the development of local financial markets42. Abacus Parenteral Drugs in Uganda was also successful 1800000
in attracting a USD 9.5 million investment by SIFEM (Swiss Investment Fund for Emerging Markets),
to build a new facility43. Moreover, Aspen Pharma, the leading South African manufacturer, acquired a 1600000
Value of imports (USD million)
60% share in Tanzanian manufacturer Shelys for an undisclosed amount in 2008. In 2012, it took over 1400000
the remaining shares as well. Also in Tanzania, in 2016 the international development investment fund
Catalyst Principal Partners bought a majority stake in Zenufa44. The latest addition to this list is the 1200000
decision by the leading Bangladeshi pharmaceutical manufacturer, Square Pharma, to invest USD 75
1000000
million in the first-ever factory abroad with a capacity of about two billion tablets and 60 million bottles
of liquid medicines45. Medicines will largely be for HIV/Aids, malaria, tuberculosis, diabetes and cardio- 800000
vascular diseases in phases within five years of starting operations. In Rwanda, where no industrial-scale
manufacturing of medicines is taking place at the time of writing, two companies have started building 600000
major pharmaceutical production facilities. Moroccan Cooper Pharma has commenced a USD 6 million 400000
project in December 201746 and Apex Biotech Ltd, a pharmaceutical manufacturing firm co-owned by
Rwandans and Bangladeshi investors followed suit with a USD 18 million project in May 201847. In total 200000
this adds up to implemented or committed FDI of more than USD 135 million since 2010.
0
However, it is important to point out that many established manufacturers are also gathering funds for 2015 2016 2017
large-scale investments of their own. All respondents in the FEAPM survey confirmed that they have
scheduled major investment projects in the next five years. Overall, the industry estimates to invest Rwanda Burundi Tanzania Kenya Uganda South Sudan
about USD 139.7 million until 2023, exceeding the ca. USD 100 million of planned foreign investments
mentioned above (Square, Cooper, Apex) by almost 40%. 35% of respondents mentioned that they have
scheduled completely new manufacturing facilities. The remainder is looking at capacity expansions, Local manufacturers are also expanding their horizon in exporting medicines and earning foreign cur-
improving their machinery, moving into new product categories or invest in adhering to international rency for their economies. Between 2006 and 2017, exports have almost tripled from USD 46.4 to USD
WHO manufacturing standards. The success of these investment projects will significantly affect the 140.4 million49 (see Figure 6). Kenya carries the lion share with about USD 120 million in exports. A
growth of the local industry. New entrants to the market and established producers entering new mar- recent study found that export makes up about 30% of Kenyan companies’ revenues. The leading com-
kets may drive up the share of local production more than anticipated. panies gather about 50% of their income from export activities.50 Yet, Uganda’s pharmaceutical exports
are growing fast as well. Between 2006 and 2017, its exports increased from USD 1.4 to USD 15 million.
Trade benefits This shows that with adherence to higher quality and international production standards, companies
can exploit export potential.
Increased local production of medicines has the potential to save foreign exchange reserves of more
than USD 1.38 billion, which were required to pay imports of medicines to the region in 201748. While Figure 6: Pharmaceutical exports of EAC countries
this number had been increasing until 2015, imports have decreased by 10% since then. This is the result
of the falling value of imports to Kenya and Uganda in the past three years (see Figure 5), where local 180000
manufacturing has improved their foothold. Yet, increasing imports to the remaining four partner states
160000
weakens the overall trend.
Value of exports (USD million)
140000
41
Daily Monitor (2018). Cipla share price rises by 1.2 per cent. Retrieved from http://www.monitor.co.ug/Business/ 120000
Markets/Cipla-share-price-rises-by-1-2-per-cent/688606-4769982-80j98cz/index.html
42
Observer (2018). Drugs firm, Cipla to list on Ugandan stock market. Retrieved from: https://observer.ug/special- 100000
editions/58340-drugs-firm-cipla-to-list-on-ugandan-stock-market.html
43
SIFEM (2014). Abacus Parenteral Drugs. Retrieved from: http://www.sifem.ch/impact/case-studies/show/abacus- 80000
parenteral-drugs-ltd/ 60000
44
Catalyst Principal Partners (2016). Catalyst Principal Partners Acquires a Majority Stake in Tanzanian
Pharmaceutical Manufacturer. Retrieved from: https://www.catalystprincipal.com/catalyst-principal-partners- 40000
acquires-a-majority-stake-in-tanzanian-pharmaceutical-manufacturer/
45
The Daily Star (2018). Square Pharmaceuticals begins constructing Kenya plant. Retrieved from: https://www. 20000
thedailystar.net/business/global-business/square-pharmaceuticals-begins-constructing-kenya-plant-1517668
46
Rwanda Development Board (2018). RDB, COOPER PHARMA launch Construction of Pharmaceutical plant at the 0
Kigali Special Economic Zone. Retrieved from: http://rdb.rw/export/hello-world/ 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
47
The New Times (2018). Apex Biotech to open $18 million drug plant in Kigali. Retrieved from: https://www.
newtimes.co.rw/news/apex-biotech-open-18-million-drug-plant-kigali Kenya Uganda Tanzania
48
International Trade Centre (2018). International Trade Statistics 2001-2017. Retrieved from: http://www.intracen.
org/itc/market-info-tools/trade-statistics/ 49
i bid
50
ugigi, S. (2017). Assessment Of The Pharmaceutical Manufacturing Industry In Kenya To Forecast
V
20 The Positive Impact of Local Pharmaceutical Manufacturing on Economic Development and Public Health Local Production Sufficiency. PhD thesis in the school of pharmacy of Kenyatta University. 21In terms of geographical reach, about two thirds of exports still remain within the EAC market51. Howev- Spill-overs and value chain
er, East African medicines have increasingly spread throughout the whole continent. Companies report
to have exported medicines to thirteen non-EAC countries in 2017, as shown on the map in Figure Finally, it is important to not only look at the size of the pharmaceutical industry alone, but on the spill-
7. Moreover, they have obtained permits and product registrations to drastically expand their export over effects into other sectors. About 30-40% of the industry’s total production costs stem from the EAC
portfolio. East African exports have covered almost all neighbouring countries and are slowly moving region, according to the FEAPM survey. This share could be much higher, if supplying industries could
further into Southern and West African markets. improve their capacities. Nonetheless, the current share already signifies a direct spill-over effect from
pharmaceutical industry to the rest of the EAC of about USD 91.29 million in 2017 alone. Of these USD
Figure 7: Export destination countries for EAC Pharmaceutical Manufacturers 91.29 million, about 49% went directly to East African households through their salary income. Another
large benefactor is the packaging industry52. A study shows that in Kenya, all outer cartons and more
than 50% of plastic bottles used by the local pharmaceutical industry were produced in Kenya53. Yet,
there remains potential for growth, as manufacturers struggle to find sufficiently high-quality packag-
ing material for more complicated products like sterile injectables or glass bottles. For non-packaging
inputs like excipients or API, the potential for spill-overs is even higher. The established companies in
Kenya imported 94% of the APIs and 91.7% of excipients needed for the fabrication of medicines. Addi-
tionally, the pharmaceutical industry is a strong contributor to government finances. Applying a uni-
form corporate tax rate of 30% on revenue across the EAC, the industry transfers up to USD 96 million
to national finance ministries. In addition, in 2017 employees will pay income taxes on their salaries of
more than USD 45 million. All in all, evidence from other parts of the world shows that for every dollar
of gross value created by pharmaceutical manufacturing, an additional value of USD 0.3 (South Africa)
to 2.3 (EU) and 2.5 (USA) is created through direct and spill-over effects54.
III.II Evidence for Public Health Impact
Medicine • Price comparisons vary immensely from product to product and between manufacturers
prices • Two Kenyan studies show that if local products exist, procurement prices are lower on average
than for imports
• KEMSA tender data shows that local manufacturers become more competitive
• Tanzanian study finds that locally made products are cheaper on average than imports
Better quality • Quality assurance of local products through regulators is very strict
of medicines • No major difference observed in quality of imports versus locally-made medicines
EAC Partner States
Higher • Lead times of local manufacturers
Countries to which companies availability • If in stock: 1-2 days
exported in 2017 and health • If raw material in stock: 1-4 weeks
Countries for which companies security • If raw material not in stock: 1-2 months
have obtained future export • Delivery time for imported medicines: 2-3 months
permits • Survey: 88% of distributors have used local manufacturers to respond to stock-outs in
emergencies
Local • Adaptations of formulas (e.g. reformulation for rural consumption)
adaptation of • Adaptation of packaging (e.g. information in Kiswahili)
medicines • Product development cooperation in international partnerships (e.g. DNDI or CHAI)
52
Banda, G., Wangwa, S., & Mackintosh, M. (2016). Making Medicines in Africa: An Historical Political Economy
Overview. In: Making Medicines in Africa. The Political Economiy of Industrializing for Local Health. Baskingstoke:
Palgrave Macmillan
53
Vugigi, S. (2017). Assessment Of The Pharmaceutical Manufacturing Industry In Kenya To Forecast Local Production
Sufficiency. PhD thesis in the school of pharmacy of Kenyatta University.
54
European Federation of Pharmaceutical Industries and Associations (2016). The Economic Footprint of
Selected Pharmaceutical Companies in Europe. Retrieved from: https://www.wifor.com/tl_files/wifor/PDF_
Publikationen/161219_Efpia_EF_report_WifOR_updated.pdf; BAK Basel Economics (2015). The Importance of the
Pharmaceutical Industry for Switzerland. Retrieved from: https://www.bak-economics.com/fileadmin/documents/
reports/The_Importance_of_the_Pharmaceutical_Industry_2015_Interpharma.pdf; Department of Trade and
Industry, Republic of South Africa (2017). Portfolio Committee on Economic Development the dti’s involvement in
the State’s procurement of ARV’s. Retrieved from: (20https://www.thedti.gov.za/parliament/2017/Pharmaceuticals.
pdf
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