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European Biopharmaceutical Review

Out of Africa

By 2016, pharmaceutical spending in Africa is expected to reach $30 billion. Encouraged by recent demographic changes, increased wealth and healthcare investment, and rising demand for drugs to treat chronic diseases, this market could value approximately $45 billion by 2020. Such predicted growth is second only to Asia-Pacific and in line with Latin America, demonstrating a ripe opportunity for multinational pharmaceutical businesses to move away from traditional markets.

Lie of the Land

The appeal of Africa stems not only from the continent’s size, but in the dynamics that drive sustainable growth at a time when many pharma companies face an uncertain future in their home markets. A series of positive economic trends – including increased political and fiscal stability, and improvements in pro-business legislation – mean that investment in the region is becoming easier.

Alongside this, major demographic changes are revealing a growing number of working-age Africans, an expanding middle class that accounts for 34% of the continent’s inhabitants, and an urban population expected to surpass that of China’s and India’s by 2050.

Healthcare spending is also on the up; fuelled by governments, nongovernmental organisations (NGOs) and private sector investment, it has largely been focused on strengthening existing healthcare infrastructure, capacity, treatment provision and specialised services. This is in line with an increasing demand for chronic care drugs, as Africa is expected to face a large rise in mortality from cardiovascular disease, cancer, respiratory disease and diabetes over the next decade – not forgetting the continuing battle with infectious and parasitic illnesses.

Current Involvement

To date, three types of pharma players have enjoyed market success – defined as a sustainable, revenue-generating business – in Africa. These are innovative multinational companies (MNCs), Indian and Chinese pharmaceutical firms, and local manufacturers in North and South Africa.

Multinational Companies
The vast majority of large pharmaceutical MNCs have had a presence in Africa for a number of years. The first to enter the continent included Abbott (South Africa, 1930s), Sanofi-Aventis (Morocco, 1953), Novartis (Egypt, 1962), Pfizer (Morocco, 1963) and GlaxoSmithKline (GSK) (Nigeria, 1971).

They have predominantly focused on marketing, and delivering branded novel and generic drugs to the private sector in urban areas. Products have tended to target in-demand therapy areas, such as vaccines, anti-infectives and anti-diabetics, with sales largely concentrated in the northern and southern countries on the continent. In general, success has correlated with linguistic and economic links, where existing business ties stem from colonial history. For example, French companies – such as Sanofi, the most successful MNC in Africa to date – have typically performed best in French-speaking North and West Africa.

Indian and Chinese Firms

The growing incidence of Asian manufacturers present in Africa has led to the proportion of pharmaceuticals being imported from India and China to more than double in value in recent years.

These manufacturers have gained market share primarily through competitive pricing and simultaneously targeting different niches in the generics space. Chinese companies, in particular, have succeeded in countries with low ease of doing business ratings, where they are able to negotiate ‘gift medicines’ – such as anti-malarials – through procurement contracts. In countries like Angola and Zambia, they are able to build health infrastructure with government funds provided by loans secured against resource extraction.

Local Industry
The success of home-grown pharma companies is frequently dependent on their ability to partner with MNCs in R&D licensing arrangements – a strategy that improves their production capabilities. However, while success stories do exist, the majority of local players have struggled to compete for two reasons. Firstly, the high costs of obtaining active pharmaceutical ingredients in Africa have left many unable to contend on price with Asian generic manufacturers that are able to target the most in-demand areas. Secondly, domestic firms are often unable to implement Good Manufacturing Practice standards and ensure quality production. This has resulted in NGOs refusing to buy essential medicines locally, and barriers remain for the International Finance Corporation – part of the World Bank Group – in its search to identify feasible investment opportunities in the region.

Jumping the Hurdles

The key factors behind a successful market campaign in Africa are similar to those elsewhere in the world: choice of location, operational strategy and portfolio selection. But there are three differentiating elements when it comes to assessing what it takes to succeed here. Firstly, any strategy needs to be tailored to different areas within a large economically, geographically and culturally diverse market. Secondly, many African countries have limited market access capabilities, which are manifested in registration, pricing and distribution obstacles – these can affect product accessibility and usability. Finally, local markets are still poorly understood, with medical information and consumption data remaining patchy, fragmented or non-existent.

When it comes to evaluating a viable location for investment, prevailing hurdles in the path to market and path to patient should help guide decision-making. Challenges across both pathways will make some markets less attractive than others, as they will determine the level of investment companies need to make to overcome them. Across Africa, weak regulatory mechanisms and widespread poverty are the main barriers.

Path to Market

Difficulties in the path to market exist at many stages throughout the process, and vary between public and private payer channels.

Registration Process
Common across the region are the lack of available dossier standards and poor clarity when it comes to navigating the differing regulatory bodies and their decision-makers. This can lead to lengthy and disparate timeframes for product registration; regulations across Sub-Saharan Africa vary considerably, and can be time-consuming, opaque and open to corruption. According to recent research, in Rwanda, it may take just two weeks to register a drug; in South Africa, it can be 3-4 years.

Pricing and Reimbursement
Within the public sector, companies face barriers including: absence of pricing strategy; non-transparent tendering and procurement processes; limited opportunity for reimbursement; and lack of tiered pricing levels. In the private market, there is the challenge of managing disjointed payer channels between donors, insurers and employers, as well as access limitations.

Insufficient regulatory oversight, concerns over substandard and counterfeit medicines, plus weak cold chain infrastructure, ordering and transport provisions, are major hurdles to distribution. In addition, expensive credit, variable service quality, poor education and irregular energy supplies, mean moving products from A to B can be a logistical nightmare for pharmaceutical companies operating in Africa.

Marketing and Sales
Limited knowledge among doctors and medical professionals regarding disease states and medical needs can hinder efforts to reach out to the public. Education is weak, and low numbers of clinics and pharmacies mean that distribution of medicines to those who need them is also a challenge. In the private sector, there is often inadequate business experience among staff and talent retention can be difficult.

Although some MNCs conduct their own pharmacovigilance monitoring, the majority of data are not centralised or examined at a national level. Governments have limited means of analysing medicine consumption and there are often poor informatics capabilities at clinics. Furthermore, clinicians are often wary of admitting liability.

Path to Patient

Obstacles in the path to patient are similar across both public and private payer channels, impeding access and use of medicine.

Patient Awareness
Health illiteracy is the main cause of low disease awareness across the continent. With individuals remaining sceptical or suspicious of modern medicines and their benefits, there is little treatment uptake and adherence.

Healthcare Access
Not only do many African countries suffer from a shortage of doctors – for example, Mozambique, Ghana, Gambia and Ethiopia have less than one doctor per 10,000 of the population – but access is hampered at the financing and provision levels. There is a weak healthcare infrastructure, and poorly trained medical professionals add to the complexity. Furthermore, high prices and poverty mean that many patients cannot afford to access the services they need.

Limited numbers of technically trained staff and poor knowledge of diagnostic procedures have led to low levels of diagnosis. Even when staff are trained, the required diagnostic tools are often unavailable. In addition, restricted access to healthcare centres means that many patients will avoid professional diagnosis, instead resorting to purchasing medicine without a prescription or not receiving treatment at all.

Clinician awareness of available treatment options and their required use is often inadequate, preventing patients from accessing correct medicines. With weak product distribution, drug shortages and counterfeit medications entering the system, it becomes difficult to ensure safe and reliable supply. Finally, a lack of resources means that future consultations and patient monitoring is extremely difficult to manage.

Maintaining Commitment

For pharma companies, the first step in securing sustainable operations in Africa is to demand commitment from central headquarters to support business expansion. This commitment relies on a clear statement of corporate intent, sufficient financial support, and acceptance of a different approach that acknowledges the unique challenges and complexities of the African market.

For some, a decentralised decisionmaking structure is the most demonstrative way of showing longterm commitment to the continent. At Bristol-Myers Squibb, key decisionmakers remain at the company’s global headquarters, with product uptake outsourced to local agents or licensed out to other businesses. In contrast, GSK has almost entirely decentralised decision-making activities, creating multiple autonomous business units in a number of countries with direct responsibility for their own budgets and performance. Although this can be human resource-intensive, the combined technical expertise of foreign staff in dossier development and marketing, in addition to the local knowledge of native workers, can help overcome regulatory and access hurdles. This can also help drive an important sense of ownership at the local level.

Partnering with strategic stakeholders can be valuable to pharmaceutical MNCs. Influential stakeholders in Africa differ considerably from those in traditional markets, with NGOs representing patient groups proving powerful allies in market access decisions. At the regional level, religious groups often have a powerful influence over consumer and patient groups, with outreach to some rural communities only possible with their support and cooperation, as well as their established infrastructure. It is therefore important that companies find innovative ways to gain trust among patients; partnerships can help with this, in addition to reducing overall risk in business operations.

Path to Success

There are two dynamics that influence portfolio success in Africa. The first is the degree to which a company can offer in-demand products, and the second refers to the extent to which a firm can take advantage of brand loyalty and awareness.

To identify appropriate products for specific countries, businesses need to understand how their portfolio aligns with the various consumer segments in the market, and then prioritise accordingly based on the various trade-offs between price, reimbursement and coverage. Although firms are often tempted to target the private sector, a significant – and often larger – opportunity exists in the public sector given the scale of the market. Public tenders can be a particularly attractive option, offering larger revenues and long-term commitment for those that are willing to make the investment.

For companies new to the continent, a focus on key therapeutic areas and branded products could be a good starting point in laying the groundwork for future profitability and sustainability. Once a presence has been established, the portfolio can be expanded into other areas, leveraging the relationships and insights forged from initial entry. The growing middle class desires, and is increasingly able to afford, branded products and innovative designs – such as heat-resistant formulations, special illustrations for illiterate patients and anti-counterfeiting measures – can give businesses a competitive market edge.

Window of Opportunity

There are a number of ways to overcome the challenges of market and patient access in Africa. These include:
  • Strengthening the regulatory and approval process by engaging local stakeholders to provide insight into the application process for new drugs
  • Navigating pricing and market access dynamics to optimise the path to market and make the most of preferential pricing models
  • Reinforcing distribution channels through trustworthy partnerships to optimise price without reducing margins – an effective distribution strategy is key to success
  • Enhancing sales and marketing capabilities by applying company expertise locally
  • Introducing anti-counterfeiting measures to minimise supply disruptions, improve health outcomes, generate strong brand loyalty and reduce false competition
  • Improving patient awareness through media engagement, public health campaigns, and stakeholder and religious group involvement, as well as educating medical professionals
  • Expanding healthcare access alongside local organisations to find new ways of reaching out to patients and delivering medicine provision
  • Facilitating diagnosis by improving access to screening tools and encouraging clinicians to counsel and test patients in their communities
  • Supporting treatment through continual medical education and securing reliable access to information among doctors
Pharmaceutical firms from around the world are seeing the opportunity that Africa has to offer. With rising economic strength and a growing middle class, the region could be the success story companies are after, as they look to secure sustainable business models for the future. Although the challenges and complexities are very real, engagement with this market now, and in the long term, will provide a strong foundation for those looking to shape pharma industry dynamics, as well as the healthcare environment of the world’s largest continent.

This article is based on IMS Health’s whitepaper Africa: A Ripe Opportunity. Understanding the pharmaceutical market opportunity and developing sustainable business models in Africa. To read the full paper, visit: deployedfiles/imshealth/global/content/ home%20page%20content/high-growth%20 markets/content%20modules/ims-africa_ wp_101212final.pdf

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