Promoting Pharmaceutical Industry in Small Developing Countries:
Transcript of Promoting Pharmaceutical Industry in Small Developing Countries:
![Page 1: Promoting Pharmaceutical Industry in Small Developing Countries:](https://reader034.fdocuments.us/reader034/viewer/2022042723/5868d9551a28abd33f8c2199/html5/thumbnails/1.jpg)
Promoting Local Production of
Pharmaceuticals in Sub-Saharan Africa
Sudip Chaudhuri
Indian Institute of Management Calcutta
Fondation Maison des Sciences de l'Homme
Paris, 25 September 2013
![Page 2: Promoting Pharmaceutical Industry in Small Developing Countries:](https://reader034.fdocuments.us/reader034/viewer/2022042723/5868d9551a28abd33f8c2199/html5/thumbnails/2.jpg)
2
41,50%
28,20%
27,30%
3,00%
World Pharmaceutical Market, 2012 $ 1052.1 billion
Americas Europe
Asia/Pacific Middle East/Africa
$ 31.7 billion
Source: BMI/Espicom
![Page 3: Promoting Pharmaceutical Industry in Small Developing Countries:](https://reader034.fdocuments.us/reader034/viewer/2022042723/5868d9551a28abd33f8c2199/html5/thumbnails/3.jpg)
3
343
129,5
49,3 43,3
82,1
26,8 15,7
3,8 0
50
100
150
200
250
300
350
400
USA Japan Germany France China Brazil India South
Africa
$ b
illio
n
World Pharmaceutical Market, 2012
Source: BMI/Espicom
![Page 4: Promoting Pharmaceutical Industry in Small Developing Countries:](https://reader034.fdocuments.us/reader034/viewer/2022042723/5868d9551a28abd33f8c2199/html5/thumbnails/4.jpg)
4
0
0,5
1
1,5
2
2,5
3
3,5
4
African Pharmaceutical Market, 2011, $ billion
Source: African Development Bank presentation in African Pharm Summit
Tunisia, September 2013
![Page 5: Promoting Pharmaceutical Industry in Small Developing Countries:](https://reader034.fdocuments.us/reader034/viewer/2022042723/5868d9551a28abd33f8c2199/html5/thumbnails/5.jpg)
Disease Burden in Africa
12
57
49
85
67
26
88
43
51
15
33
74
0% 20% 40% 60% 80% 100%
Population
Maternal Mortality
Under five mortality
Malaria mortality
HIV mortality
Underweight
Share of the disease burden
Africa Rest of the world
5
Source: African Development Bank presentation in African Pharm Summit,
Tunisia, September 2013
![Page 6: Promoting Pharmaceutical Industry in Small Developing Countries:](https://reader034.fdocuments.us/reader034/viewer/2022042723/5868d9551a28abd33f8c2199/html5/thumbnails/6.jpg)
6
Country Median availability of
selected essential
medicines (%)
Public Private
Burkina Faso 87.1 72.1
Cameroon 60.0 52.5
Chad 31.3 13.6
Congo 21.2 31.3
Congo DR 55.6 65.4
Ghana 17.9 44.6
Mauritius 88.8 70.0
Nigeria 26.2 36.4
Sao Tome and Principe 56.3 22.2
Sudan 51.7 77.1
Tunisia 64.3 95.1
Uganda 20.0 80.0
Tanzania 23.4 47.9
Source: WHO Price Surveys
![Page 7: Promoting Pharmaceutical Industry in Small Developing Countries:](https://reader034.fdocuments.us/reader034/viewer/2022042723/5868d9551a28abd33f8c2199/html5/thumbnails/7.jpg)
Import dependence
Local producers
In existence for quite some time
Relatively simple formulations
Unable and unwilling to undertake investments for growth
7
30%
70%
Tanzania and Ghana
Local production Imports
![Page 8: Promoting Pharmaceutical Industry in Small Developing Countries:](https://reader034.fdocuments.us/reader034/viewer/2022042723/5868d9551a28abd33f8c2199/html5/thumbnails/8.jpg)
Formulations Imports, 2012
8
36,8%
25,4%
6,7% 5,1% 4,8%
3,9% 3,6% 2,9% 1,2%
Tanzania
42,7%
10,7%
7,2% 6,8% 6,8% 4,5% 3,4% 3,1% 3,0%
Ghana
Source: UNCOMTRADE
![Page 9: Promoting Pharmaceutical Industry in Small Developing Countries:](https://reader034.fdocuments.us/reader034/viewer/2022042723/5868d9551a28abd33f8c2199/html5/thumbnails/9.jpg)
Local production: Benefits
Economic benefits:
◦ Employment
◦ Balance of payments
◦ Etc
Access to medicines:
◦ More reliable supplies
◦ Better quality control
◦ Better marketing reach especially in rural areas
◦ Etc
9
![Page 10: Promoting Pharmaceutical Industry in Small Developing Countries:](https://reader034.fdocuments.us/reader034/viewer/2022042723/5868d9551a28abd33f8c2199/html5/thumbnails/10.jpg)
But a huge bias against local production
Influential circles argue that local
production should not be promoted
because:
◦ Costs higher
◦ Higher prices
◦ Hence less access to medicines
10
![Page 11: Promoting Pharmaceutical Industry in Small Developing Countries:](https://reader034.fdocuments.us/reader034/viewer/2022042723/5868d9551a28abd33f8c2199/html5/thumbnails/11.jpg)
Local production in Africa
African countries face the same problems
as what other countries faced at
corresponding stages:
◦ higher costs of production and finance
◦ deficiency of technical knowledge
◦ difficulty of competing against foreign
companies
11
![Page 12: Promoting Pharmaceutical Industry in Small Developing Countries:](https://reader034.fdocuments.us/reader034/viewer/2022042723/5868d9551a28abd33f8c2199/html5/thumbnails/12.jpg)
Lessons from history
Industrial policy crucial – government
need to intervene to support local
production and local producers:
◦ Developed countries such as USA and France
◦ Developing countries including BRIC
countries:
Brazil (e.g., aircraft)
China (e.g., telecom equipment)
India (e.g., pharmaceuticals)
12
![Page 13: Promoting Pharmaceutical Industry in Small Developing Countries:](https://reader034.fdocuments.us/reader034/viewer/2022042723/5868d9551a28abd33f8c2199/html5/thumbnails/13.jpg)
What India did in Pharmaceuticals
Invited MNCs – finance/technology etc
◦ Poor response
Public sector company in collaboration with the USSR
Public sector R&D labs
Development financial institutes
◦ Difference between:
Dr Mansoor Daya (Tanzania)
Dr Reddy (India)
Product patent protection abolition
Regulating MNCs
13
![Page 14: Promoting Pharmaceutical Industry in Small Developing Countries:](https://reader034.fdocuments.us/reader034/viewer/2022042723/5868d9551a28abd33f8c2199/html5/thumbnails/14.jpg)
In Africa too
A history of Industrial Policy
But before the industry could develop:
◦ Liberalization and withdrawal of the state
particularly from 1990s
Current government support grossly
inadequate
14
![Page 15: Promoting Pharmaceutical Industry in Small Developing Countries:](https://reader034.fdocuments.us/reader034/viewer/2022042723/5868d9551a28abd33f8c2199/html5/thumbnails/15.jpg)
What Africa can do
Finance
Technology
◦ Situation more complex and difficult today with GMP requirements
◦ Channels:
Public sector manufacturing and R&D
Foreign companies
Informal channels – importing technical manpower: Government and international agencies can play an
important role here
15
![Page 16: Promoting Pharmaceutical Industry in Small Developing Countries:](https://reader034.fdocuments.us/reader034/viewer/2022042723/5868d9551a28abd33f8c2199/html5/thumbnails/16.jpg)
What Africa can do
Ensure market for local producers: ◦ Markets with supernormal profits:
If import prices are high then despite cost disadvantages, local
producers can survive and contribute
◦ Competitive markets:
In the case of competitive import prices, higher costs mean
lower profit margins
Lower profit margins can be compensated by larger markets
How large a market is required to make local production
viable in small African countries?
.
16
![Page 17: Promoting Pharmaceutical Industry in Small Developing Countries:](https://reader034.fdocuments.us/reader034/viewer/2022042723/5868d9551a28abd33f8c2199/html5/thumbnails/17.jpg)
Market and Industry structure and
prices of medicines
17
![Page 18: Promoting Pharmaceutical Industry in Small Developing Countries:](https://reader034.fdocuments.us/reader034/viewer/2022042723/5868d9551a28abd33f8c2199/html5/thumbnails/18.jpg)
18
Pharmaceutical Market
Patented Generics
Institutional Retail
Prescription OTCs
Donor funded Own
![Page 19: Promoting Pharmaceutical Industry in Small Developing Countries:](https://reader034.fdocuments.us/reader034/viewer/2022042723/5868d9551a28abd33f8c2199/html5/thumbnails/19.jpg)
19
Pharmaceutical Manufacturers
Local Foreign
MNCs Generics companies
Indian Others
![Page 20: Promoting Pharmaceutical Industry in Small Developing Countries:](https://reader034.fdocuments.us/reader034/viewer/2022042723/5868d9551a28abd33f8c2199/html5/thumbnails/20.jpg)
20
WHO Price Survey in Tanzania, 2004
![Page 21: Promoting Pharmaceutical Industry in Small Developing Countries:](https://reader034.fdocuments.us/reader034/viewer/2022042723/5868d9551a28abd33f8c2199/html5/thumbnails/21.jpg)
21
WHO Price Survey in Ghana, 2004
![Page 22: Promoting Pharmaceutical Industry in Small Developing Countries:](https://reader034.fdocuments.us/reader034/viewer/2022042723/5868d9551a28abd33f8c2199/html5/thumbnails/22.jpg)
22
India: Median
price
in INR (1
tablet) 2013
Ghana: Median
price
in INR (1
tablet) 2011
Ghana/India
price ratio:
Col (3)/col
(2)
1. Anastrazole, 1 mg 48.50 182.10 3.8
2. Cepacitabine, 500 mg 150.05 267.08 1.8
3. Granisetron, 1 mg 14.05 409.73 29.2
4. Itraconazole, 100 mg 47.50 182.10 3.8
5. Losartan, 50 mg 5.65 12.14 2.1
6. Rabeprazole, 20 mg 2.75 75.88 27.6
7. Risperidone, 2 mg 3.80 75.88 20.0
8. Rosuvastatin, 20 mg 20.36 69.81 3.4
9. Tindazole, 500 mg 5.52 69.81 12.7
10. Sertraline, 100 mg 6.3 98.64 15.7
Source: Chaudhuri and West, 2014
![Page 23: Promoting Pharmaceutical Industry in Small Developing Countries:](https://reader034.fdocuments.us/reader034/viewer/2022042723/5868d9551a28abd33f8c2199/html5/thumbnails/23.jpg)
Competitive markets and size of
viable market
23
![Page 24: Promoting Pharmaceutical Industry in Small Developing Countries:](https://reader034.fdocuments.us/reader034/viewer/2022042723/5868d9551a28abd33f8c2199/html5/thumbnails/24.jpg)
Our method
Started from concrete Indian situation: A team consisting of a cost accountant, two production
executives of an Indian formulations manufacturing company and an economist estimated the actual cost, production and profitability data of the following formulations unit
GMP compliant plant with three compression machines manufacturing five tablets of different ingredient, strength and different sale prices
◦ Amlodipine 2.5 mg
◦ Ofloxacin 200 mg
◦ Ciprofloxacin 500 mg
◦ Amlodipine 5 mg
◦ Metformin hcl 500 mg
24
![Page 25: Promoting Pharmaceutical Industry in Small Developing Countries:](https://reader034.fdocuments.us/reader034/viewer/2022042723/5868d9551a28abd33f8c2199/html5/thumbnails/25.jpg)
Our method
Found out the cost differential between
India and Africa (Ghana)
Simulated the situation in Ghana
Found out the size of viable market in
Ghana
25
![Page 26: Promoting Pharmaceutical Industry in Small Developing Countries:](https://reader034.fdocuments.us/reader034/viewer/2022042723/5868d9551a28abd33f8c2199/html5/thumbnails/26.jpg)
26
India
Ghana:
scenario 1
Ghana:
scenario 2
Total sales revenue (Rs million) 197 271 362
Total sales revenue (GHC million) 7 9 13
Total variable costs (Rs million) 124 161 238
Total fixed costs (Rs million) 42 68 68
Total quantity produced and sold
(million tablets) 152 209 405
Breakeven quantity (million tablets) 89 130 224
Total profits (Rs million) 30 41 55
Profit margin (%) 15.3 15.2 15.3
Viability and profitability of tablet manufacturing
in India and Ghana 2012
![Page 27: Promoting Pharmaceutical Industry in Small Developing Countries:](https://reader034.fdocuments.us/reader034/viewer/2022042723/5868d9551a28abd33f8c2199/html5/thumbnails/27.jpg)
Costs and prices
India: ◦ Indian costs
◦ Cheapest Indian brand prices (among > = 1% market share products)
Ghana scenario 1: ◦ Higher Ghana costs
◦ Cheapest Indian brand prices
Ghana scenario 2: ◦ Higher Ghana costs
Include distribution costs but exclude sales promotion expenses
◦ Median International Reference prices (from MSH)
27
![Page 28: Promoting Pharmaceutical Industry in Small Developing Countries:](https://reader034.fdocuments.us/reader034/viewer/2022042723/5868d9551a28abd33f8c2199/html5/thumbnails/28.jpg)
Policies to ensure larger markets for
local production
Government may prepare a list of products and announce that the imports of these products will be banned if adequate capacities are developed in the country
Insurance agencies may assess the capacities of local firms and where adequate capacities are available, reimbursement may be restricted to locally manufactured products
Restrict public procurement to local firms satisfying capacity and price criteria
Government may intervene to support local manufacturing investments as suggested earlier
28
![Page 29: Promoting Pharmaceutical Industry in Small Developing Countries:](https://reader034.fdocuments.us/reader034/viewer/2022042723/5868d9551a28abd33f8c2199/html5/thumbnails/29.jpg)
Acknowledgements
Benefitted from work done for UNIDO and UNDP. Comments and suggestions from Maureen Mackintosh, Alastair West, Juergen Reinhert and Cecilia Oh gratefully acknowledged.