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Out of Africa? Or into Africa?

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Former chief executive and registrar of the Royal Pharmaceutical Society(RPS) of Great Britain Jeremy Holmes emphasises the need to encourage more foreign direct investment (FDI) in pharmaceutical manufacturing, distribution and dispensing to address the medicines supply gap in East Africa.

By Jeremy Holmes

Last autumn I spent two months researching medicines supply in East Africa. Earlier in the year GSK had announced it was pulling production of its prescription medicines out of Kenya. That followed Sanofi doing a similar thing in Uganda, with both manufacturers moving to a distributor-only model.

East Africa is a huge, growing market, with a population that’s living longer and starting to experience “first world” conditions such as hypertension and type 2 diabetes. But many drugs just aren’t available, and 90 per cent of drugs that are available are imported, mostly from India. So what’s going on?

The lengthy supply chain can break down at innumerable different points. The ship could get delayed by a storm in the Indian Ocean. The importer’s stock could suddenly dry up because he hasn’t paid a bill. Or the supplies could get stuck in Mombasa because the right money hasn’t changed hands to move them on.

On the way, they’re unlikely to be kept in controlled storage either, in temperatures frequently in the upper 30’s. I heard stories of capsules blistering and precipitate appearing in IV fluids.

And we think we’ve got supply problems in the UK!

If a community pharmacy does get a delivery, then they’re in intense competition. There are so many pharmacists which neither the state nor the private or NGO sectors can afford to employ, there are often six or eight pharmacies in one short street.

And that’s not counting the less regulated but official drug shops and the completely unofficial ones which often have products from the grey or counterfeit markets. In Kenya it’s estimated there are probably 20,000 pharmacy outlets in the country, but only 9,000 are registered. That’s after the Kenyan Pharmacy and Poisons Board closed down over eighty unlicensed chemists in 2018.

But demand is there. And, as more people adopt Western diets and live longer, many commentators believe there are huge populations with undiagnosed diabetes and hypertension across all of East Africa. It’s a storm waiting to break.

In fact, it’s already breaking. In Rwanda, infectious diseases have been the leading cause of mortality for generations, but they’ve now been overtaken by cardiovascular conditions.

The state-backed insurance funds have an interest in identifying patients with cardiovascular risk factors, to try and avoid the consequences if diabetes or hypertension go untreated. As insurance coverage expands, that’s potentially a huge opportunity for the pharmacy sector. The middle class is also growing fast everywhere, so there’s more disposable income as well.

Kenya is the largest market in the region and has the most developed manufacturing sector.  Manufacturers like Laboratory & Allied, Cosmos, Regal and Dawa produce a wide range of generics, including antidiabetics, antihypertensives, antibiotics and analgesics. But they can’t do it at the scale and the price point that’s needed.

One of the leading pharmacy chains, Good Life Pharmacy with 130 branches in Kenya, believes the sector’s consequent reliance on imports makes the supply chain especially vulnerable.

So what can be done?

One strategy is to encourage more foreign direct investment (FDI) – in pharmaceutical manufacturing but also in distribution and dispensing.

Rwanda has had some recent success in attracting greenfield FDI – notably BioNTech to build a vaccine plant outside Kigali, and Cooper Pharma, a Moroccan producer of IV fluids and antibiotics – but most FDI is based on merger or acquisition. In 2023 Harleys, one of the leading pharmacy distributors in Kenya, was acquired by the Mauritius based IBL Group.

Two other Kenya-based distributors, Surgipharm and Abacus Pharma, have also been acquired by foreign investors in the last few years. But the UK seems mostly blind to both the need and the opportunity in East Africa.

This is in the context of a population of nearly 480 million, which is growing fast and forecast to experience the highest economic growth of any region globally over the next two decades. The East African Community (an economic bloc of seven countries) might also finally be getting its act together on regulatory harmonisation.

As well as manufacturing and distribution, better dispensing and inventory management systems at the pharmacy end would do a lot to close the medicines supply gap – and that expertise could well come from a foreign investor. In community pharmacy, there are clear business opportunities in ethical, professional dispensing for the growing middle classes.

The investment promotion agencies in Kenya, Uganda, Tanzania and Rwanda haven’t yet had the pharmaceutical or pharmacy sectors high on their priority list. But they should and will, and maybe pharmacy investors in the UK should have them in their sights as well.

The full report of Jeremy Holmes’ recent research “Healing the Great Rift: Investing in the East African Pharmaceutical Sector to close the medicines supply gap” is available at https://www.abhi.org.uk/resource-hub/file/17375

 

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