In East Africa, local drug producers enjoy a 15 per cent price preference over foreign firms. That means a local production firm still qualifies to win public tenders even if it quotes a price that is up to 15 per cent higher than a foreign drug supplier.
Despite this price advantage, and initiatives such as “Buy East Africa, Build East Africa”, foreign firms still control 70 per cent of the drugs market as public health facilities shun local manufacturers over quality and price concerns.
Under the East African Community’s pharmaceutical manufacturing plan of action 2017-2027, the six states have assigned themselves a target of cutting imports to 50 per cent in the next nine years. The states say they are on course to adopt a policy that requires all public procurement agencies to buy at least 50 per cent of their drugs requirement from EAC firms.
The campaigns will also see the governments take fiscal and regulatory measures to support expansion of product portfolio of regional firms to cover at least 90 per cent of diseases prevalent in East Africa.
“At least five firms will produce more advanced pharmaceuticals such as delayed release of formulations, small volume injectables and double layered tablets,” the action plan states in part. So far, the countries are working on a regional good manufacturing practice (GMP) to encourage small producers in the region to upgrade and attain internationally recognised quality standards.
The region is also working on creating a “sustainable” platform that collects and distributes market intelligence data to industry players. At the moment, market dynamics of the region are a matter of guesswork.
“The market intelligence is not available from regulatory agencies in the region yet this is what every producer needs to make key decisions,” said Mr Rishi Vadodaria, managing director of Kampala-based Rene Industries. The regional action plan also proposes “an affordable” financing scheme for local manufacturers and adoption of uniform regulatory policies in the region. Prohibitive cost of finance and logistics have been cited among the reasons the industry has lost market to imports.
The EAC notes that competition from the Chinese and Indian giants, and to a smaller extent Bangladeshi and Pakistani producers, has been on the rise despite an array of fiscal incentives extended so far by the governments in the region.
“Kenya has the largest pharmaceutical market in East Africa, standing at $75 million (Sh7.5 billion). But most of this market is dominated by Chinese, Indian, Bangladeshi and Pakistani imports,” the EAC medicine manufacturing situational report states
Kenya’s drugs market has recorded the fastest growth in East Africa, the EAC notes, adding the country has experienced an estimated year-on-year growth rate of 15 percent in the last five years.
The bloc wants member states to open up their markets to each other and encourage domestic firms to bid for joint tenders across the 140 million-people market. Kenya exported pharmaceutical products worth $71.2 million (Sh7.12bn) in 2015 to Uganda, Tanzania, Malawi, Zimbabwe and Mozambique in 2015, becoming East Africa’s top exporter. During the same year however, it imported Sh5.8 billion worth of drugs for domestic use, mainly from the Asian states.
“Exports will have to play a significant role for local manufacturers aiming to achieve optimal production,” notes the EAC situational report. “In-country markets are small due to low population sizes coupled with weak purchasing power.”