Making Medicines in Africa

This is a book about the industrial development of pharmaceutical production in Sub-Saharan Africa. Yet the values that drive this industrial enquiry are rooted in the needs of a subcontinent with the worst health status in the world. The central argument of this book is that industrial development in pharmaceuticals and the capabilities it generates are necessary elements in African initiatives to tackle these acute health care needs. A successful pharmaceutical industry is no guarantor of good health care: India indeed has managed to grow a highly successful industry while leaving many of its people without access to competent care. However, without the technological, industrial, intellectual, organizational and research-related capabilities associated with competent pharmaceutical production, the African subcontinent cannot generate the resources to tackle the needs and demands of its population.

This chapter sets out to show that, contrary to widespread misperception, pharmaceutical manufacturing in Sub-Saharan Africa is an established industry with a long history dating back at least to the 1930s. Data for the industry on the subcontinent are fragmented and incomplete (Berger et al., 2009; UNIDO, 2010a; 2010b; 2011a; 2011b), and this chapter and this book contribute to building a coherent historical picture and evidence base. This chapter presents some illustrative historical evidence, drawn from secondary data, reports and fieldwork by the authors and colleagues, as well as academic and non-academic literature.¹ We show that neither industrial capabilities in pharmaceuticals nor policy frameworks to support local pharmaceutical manufacture are a new phenomenon on the subcontinent.

As Chapter 1 briefly outlined, Kenya has a strong and long-standing pharmaceutical industry. A 2015 Business Monitor report on pharmaceutical manufacturing in Kenya states that the country hosts the largest pharmaceutical industrial base in East Africa. The report also sees a bright future as a ‘potential base for export across East Africa’ (BMI Research, 2015). This chapter locates the Kenyan pharmaceutical industry within the country’s historical context of industrial development and growth.

As Chapter 1 described, Tanzania has a decades-long history of pharmaceutical production, the sector mirroring fluctuations in Tanzania’s post-independence industrial history. By 2004–05, the sector was estimated to be producing pharmaceuticals worth US$32.5 million, supplying around 30% of the local market and exporting about 10% of local production (MoHSW, 2006). The subsequent rise and decline of the sector is analysed in this chapter, locating firms’ sources of both market resilience and vulnerability in local patterns of ownership, finance and management, interacting with the internationalization of firms’ domestic and regional markets. Finally, the chapter examines the ‘turnaround’ challenge facing the local industry. Concerned policy makers are aware, as the above quotation shows, of the health sector insecurity inherent in complete reliance on medicines imports.

Manufacturing of medicines in Ethiopia started in 1964 with the establishment of one joint venture manufacturing company. This company remained the sole producer of medicines throughout the military regime (1974–91). Following the regime change in 1991, several manufacturing plants were established during the period referred to as the ‘boom and crash’ period, since, for reasons described below, some of the new companies were not successful. To respond to the crisis, the government took a mix of initiatives, simultaneously fulfilling its responsibility for health care improvement and industrial promotion. As a result of policy adjustments and attractive incentives, the environment for investment in pharmaceuticals became conducive, prompting private initiative to engage in industrial investment. Joint ventures that were realized have not only contributed to the pharmaceutical industry; they also effectively transferred skill and technology.

Back in 2003, Brazil’s and Mozambique’s presidents, Luiz Inácio Lula da Silva and Joaquim Chissano, agreed to set up the first pharmaceutical factory in Mozambique, to be entirely owned by the national government. The project — widely known as the Brazil-Mozambican anti-retro-viral factory because of its commitment to produce AIDS drugs — still represents the single most expensive and eye-catching project of Brazil’s South-South cooperation programme in the health sector.

African countries, particularly the smaller ones, suffer from various disadvantages that prevent local producers from serving a substantial proportion of their domestic markets for pharmaceuticals. How to take care of these disadvantages to promote local production and to reduce dependence on imports is an important political and economic issue in Africa today. Most of the countries with developed industries have used foreign investments and technology in the process of their development. Is a similar trend likely in Africa? Are foreign companies likely to invest there to undertake manufacturing of pharmaceuticals? Can they be induced to do so? The objective of this chapter is to understand the prospects for foreign direct investment (FDI) in the pharmaceutical industry in Sub-Saharan Africa, particularly in smaller countries such as Ghana.

This chapter discusses raising the technological scope for locally manufacturing active pharmaceutical ingredients (APIs), excipients and biologicals in Africa — a hitherto nascent industry. It also discusses African drug development and manufacturing through the standardized use of ‘reverse pharmacology’ to bring new treatments for neglected diseases to the point of regulatory approvals. Currently there is very modest production of APIs on the African continent, although a few significant projects exist,¹ (such as LaGray in Ghana and Fine Chemicals in South Africa), or are in the planning stages.² Generic producers in India and China supply nearly all of the APIs used in African pharmaceutical manufacturing. Most African companies cannot afford the heavy investment and research and development activities required for API production.

A recognition that the demand patterns and investment incentives generated by health care and health policies constitute an ‘implicit’ industrial policy for manufacturers of medicines and medical supplies is not new. In a European context, Thomas (1994) argued that post-1945 UK health care pricing and regulation policies drove a shift to global competitiveness in the locally based pharmaceutical industry, while French post-war health policy did not. Reich (1990) has argued that Japanese success in pharmaceuticals was nurtured, not by the MITI’s industrial policy, but mainly by government regulation and funding of the health sector and manipulation of pharmaceutical pricing.

In a book exploring the scope for mutually supportive integration between addressing health care needs and promoting industrialization, Brazil’s experience offers an important case study. ¹ This chapter presents Brazil’s main strategies to ensure access to medicines to tackle the population’s principal health problems. It particularly aims to show how the principle of the universality of care has influenced industrial policies and production in the pharmaceutical sector. Although more than 25 years have passed since Unified Health System (Sistema Único de Saúde : SUS) was established, and much progress has been made, a great many challenges remain. This chapter focuses particularly on those related to access to health technologies.

Despite the heightened interest in the African pharmaceutical market, there are constraints and challenges that continue to affect access to medicines. One of the key constraints is the high prices of medicines. In the private sector, wholesale and retail mark-ups have been found to range from 2% to 380% and from 10% to 552%, respectively (Cameron et al., 2011). A later study found wholesaler mark-ups between 25% and 50% (IMS Health, 2014a; 2014b), and retail mark-ups between 25% and 500% (Rosen and Rickwood, 2014). Local manufacturers and importers alike have expressed concern over the high mark-ups in the distribution chain, as the exorbitant prices are believed to limit patients’ access and sales.

This chapter discusses standards, an elusive term and concept. For the African pharmaceutical sector especially, the term is used by the manufacturing sector, regulators, technical experts, procurement agencies, health system actors and policy makers to mean different things. There is a dearth of systematic studies that address what standards are, their classification and the logic behind their set-up and operation, and this has contributed to a huge asymmetry in understanding. The socio-economic, technical and political issues and how they have an impact on local production and industry development, including their effects on access to markets, have also not been systematically explored.

Part II of this book has demonstrated that building synergies between health systems and industrial development is a complex process of reshaping the politics and political economy of the two systems. A key tool for building and sustaining health-industry relationships, as Smita Srinivas observes above and as some Part I chapters also emphasized, is procurement. Yet procurement remains under-researched and over-simplified as a technical, linear, ordering and delivery process (see Chapter 8), rather than an exercise in deepening and strengthening the domestic economy through market and non-market relationships building.

The making and delivery of new medicines is not only a process of science and technology, of production and marketing, but also a process that is inherently political. As such, the relational and political interactions between industry and government are key to shaping regulatory environments that either promote or constrain an industry’s ability to collectively learn, innovate and grow (Malerba, 2002). Often critical to the governing of these relations over time are intermediary actors such as industry associations and various advocacy groups that through processes of conflict, negotiation and collaboration promote knowledge exchange and institutional capacity building. In developing and emerging countries, such intermediaries are likely to play a particularly prominent role in filling institutional knowledge gaps towards shaping regulation and subsequent industry development (Kshetri and Dholakia, 2009). Moreover, these interactions between industry and government can be particularly complex and often contentious when government views an industry as potentially contributing to the public good, as in the case of the pharmaceutical industry and its role in the provision of health care. In such cases, it can be suggested that the strategies employed by industry associations over time will need to address the needs of the government and the civil society it negotiates with in order to effectively advance the interests of the industry it represents.

There is a now a growing international consensus that development of the pharmaceutical industry in Africa can contribute to both economic development and improved public health. This final chapter begins by identifying the striking convergence of thought and initiative that has recently been generated across continental African representative bodies, international agencies and national governments. We outline this emergent consensus and then examine challenges it faces by focusing on the core interconnected policy issues of financing and incentives for industrial development in pharmaceuticals. A sustainable and expanding pharmaceutical industry must reach essential quality standards and also constantly upgrade, moving up the technology ladder while improving cost efficiency. This requires a cocktail of incentives in which finance is key (Chataway et al., 2009). These incentives, in turn, rely on the building up of appropriate financial capabilities within firms and financial institutions as well as within governments. This chapter innovatively traces the interconnections between micro-level financial capabilities and national government policy competences in the design and effective implementation of financial incentives and associated policies to facilitate industrial development in pharmaceuticals in Africa.