Nigeria now emerging hub for pharma market expansion in Africa

As growth opportunities continue to move away from traditional pharmaceutical markets and growth patterns in developed markets continue to flatten, many multinational companies (MNCs) like Norvatis, Pfizer, Sanofi, Johnson & Johnson, etc. look toward Africa, including Nigeria for their expanding global footprint.

This is evident following GlaxoSmithKline (GSK) plan to invest over $200million in Africa over the next five years, expanding manufacturing in Nigeria and Kenya and building five new factories-Rwanda, Ghana and Ethiopia given its attractive long-term growth potential.

With a growing middle class of expected annual disposable income in excess of $1 trillion by 2023, increasing awareness of healthier lifestyles, and a combined Gross Domestic Product (GDP) of $2.9 trillion, rising population growth is emerging as a melting pot for pharmaceutical expansion.

Interestingly, of the four MINT countries (Mexico, Indonesia, Nigeria, and Turkey), Nigeria’s population is projected to outstrip other MINT countries by 2050 with population set to hit 402 million people.

Of the four countries, Nigeria and Indonesia have the most consistent Gross Domestic Product (GDP) at around 6 to 8 percent. The two countries-Nigeria and Indonesia- have the lowest GDPs of the four MINT countries, at $1,555 and $3,557 per capita respectively, compared with $9,749 in Mexico, $10,666 in Turkey, and $51,749 in the United States of America, according to 2012 figures from the World Bank.

                                     

While most medicines produced locally consumed domestically, Nigeria is responsible for about 60 percent of medicines consumed in Economic Community of West African States (ECOWAS) by volume, underlining huge sub-regional market, according to Pharmaceutical Manufacturing Group, Manufacturers’ Association of Nigeria (PMG-MAN). 

Though estimates of Nigeria’s pharmaceutical market vary significantly, Business Monitor International (BMI) in 2009 put the size of the industry at $600 million. Furthermore, the African pharmaceutical market is anticipated to achieve a year-on-year growth rate of 10.6 percent by 2020, resulting in pharmaceutical sales of $45 billion in 2020.

A report titled “Pharma Emerging Markets 2.0: How emerging markets are driving the transformation of the Pharmaceutical Industry,” revealed that over the past five years, sales generated in emerging markets (Africa, including Nigeria) have doubled, totalling $191 billion in 2011 (representing approximately 20 percent of global market volume)

The report noted that pharmaceutical firms’ top initiatives to drive growth in emerging markets over the next five years include investing in local research, development and manufacturing, building local sales forces as well as close collaboration with governments.

According to the report “Many consider Africa to be the final frontier of emerging markets. The continent is vast, highly diverse, and full of great potential—but it also presents great challenges. Although sub-Saharan markets are currently embryonic, their expected relative increase in importance is significant and not far behind that of Southeast Asia.

“Top executives are already factoring this development into their business plans. While anti-infectives and anti-virals demonstrate strong short-term growth, they will be overtaken by treatments for lifestyle diseases in the long term. The market for oncological products is not expected to grow as fast in Africa as in other regions during the next five years. Partnerships that involve localized brands are very important in Africa.”

                                 

Despite Nigeria’s dominance within the ECOWAS sub-region in drug manufacturing, Nigeria’s quest to become self sufficient in drug production is bleak as it loses over N1.5 billion annually to the importation of Active Pharmaceutical Ingredients (APIs), raw materials used in finished pharmaceutical products which have direct effect in the diagnosis, treatment or prevention of diseases from India, United States of America, Germany, etc, experts have said.

While pharmaceutical companies in Nigeria do not locally manufacture APIs such as Paracetamol powder, Ampicillin dry powder etc, the non-availability of APIs would significantly cripple the nation’s pharmaceutical sector.

Pharm Olatunji Koolchap, National Secretary, Association of Community Pharmacists of Nigeria (ACPN), said that Nigeria imports over 85 percent of its needs of APIs as it does not have adequate capacity to produce APIs, with no commitment by the Government to encourage investors in this vital sector of the economy.

While stating that facilities required for APIs are high technology equipments and machineries which can only be imported in to the country, Pharm. Koolchap noted that continuous dependence on API importation will not make Nigeria become self sufficient in production of medicines as this would lead to rise in the price of medicines produced in the country.

                                    

“Nigeria can correct this trend of not being able to provide raw materials APIs by encouraging investors to invest in this sector locally in order to compete with the international producers of the APIs such as USA, United Kingdom, Germany, Canada, India, China etc. by reducing taxes on manufacturing sector,” Pharm. Koolchap said.

Pharm. Ola Ijimakin, General Manager, Marketing, Fidson Healthcare Plc, explained that the reason why Nigeria cannot manufacture APIs is because the petrochemical and chemical industries in the country are not developed. 

While noting that Petrochemicals are mostly the starting point for pharmaceutical raw materials, Pharm. Ijimakin said that until the petrochemical industries in Nigeria are developed, the nation may not be able to develop capacity for APIs. 

“As it stands today if one decides to invest in API production, the finished products will be very expensive and will not be able to compete with imports because the necessary supporting industry and infrastructure is not in place. A good chemical/petrochemical manufacturing facility is needed to develop APIs. They are not extremely high tech but the processing is fairly sensitive and risk of accidents with significant environmental impact is high if not properly handled,” Pharm. Ijimakin explained.

Pharm. Ijimakin alleged fear that if something happens today and Nigeria pharmaceutical firms are not able to source APIs, all pharmaceutical production of drugs would stop.

“Cost of finished pharmaceutical products is not in our hands. It is determined to a large extent by the cost of imported APIs. There is the need to develop the chemical/petrochemical industry, provide necessary infrastructure and environment to make locally manufactured APIs competitive in the international market as any local investor might need to export if the local market is not able to absorb the products,” Pharm. Ijimakin added.

Investigations reveal Nigeria and India signed a Memorandum of Understanding on cooperation in Pharmaceutical Sector in March 2011, with India exports pharmaceutical products, including APIs and fine chemicals to Nigeria standing at $307 million as at March 31, 2012.

Explaining India’s contribution to Nigeria pharma sector, Mr. Mahsesh Sachdev, Indian High Commissioner to Nigeria said Indian medicines have traditionally been the largest source of medicines into Nigeria, supplying over a third of the market.

While the surge is not surprising given the trust and faith that Nigerian consumers repose in quality and efficacy of Indian medicines, Mr. Sachdev revealed that Indian exports of pharmaceutical products have gone up by 35 percent and 37 percent annually in the last two years.

According to Mr. Sachdev, “There are more than 30 Indian pharmaceutical companies located in Lagos alone and engaged in manufacturing and/or importing medicines, API and fine chemicals to Nigeria is worth $307 million in year ending March 31 2012. With the industry growing at 13 percent annually, the turnover is expected to grow five-fold by 2020. While Indian Pharmaceutical industry is famous for generics, it is also making fast inroads into branded products especially in biotechnology” 

                                          

Industry experts believe that addressing challenges such as dearth of Intellectual Patent (IP) protection, price pressure, talent issues (e.g., recruitment, development, and retention), compliance challenges, supply chain and distribution issues, as well as lack of reimbursement and public funding will reposition the nation within the global pharmaceutical space.

With few pharmaceutical companies currently prepared to commit themselves to significant investments in local infrastructure, pragmatic partnering approach involving local NGOs, governments, and distributors will further enhance the sector towards achieving its lofty dreams.