Drug firms eye Africa as its health needs shift
Elena Berton Paris
Africa is changing for drug companies. Not only is the continent’s economic growth grabbing attention in boardrooms but the shifting nature of its disease burden is luring Big Pharma. Opportunities are opening up for treating chronic diseases afflicting the middle class, rather than just firefighting infection.
European firms in particular hope to reap rewards by investing early in a region where many of them already have historic commercial ties.
Recent violence in Mali and Algeria have put Africa in the headlines. But France’s Sanofi – the international drug company with the biggest sales in Africa – is still pushing ahead with a third factory in Algeria.
“Africa is becoming an extremely interesting market and we’ll continue to expand… there,” chief executive Chris Viehbacher said.
According to IMS Health data, by 2016 drug spending in Africa will reach $30 billion (R267bn), driven by a 10.6 percent annual growth rate that is second only to Asia and in line with Latin America. By 2020 the market will have doubled from current levels to $45bn.
Although it is likely to remain a niche market, the promise of Africa is that it will continue to grow in the next decade as Asia and Latin America start to reach maturity.
It is that potential for the continent to act as a hedge against slowing long-term growth in established emerging markets that appeals to Novartis chief executive Joe Jimenez.
“We’re thinking hard about what happens when those emerging markets start to slow because they are not going to continue growing at the rate that they’re growing forever – and… we’re putting a lot of our attention [on] Africa,” he said.
The growth will be fuelled by increasing economic wealth and demand for treatments for chronic diseases in a more urban, middle-class population.
Non-communicable diseases will account for 46 percent of all deaths in sub-Saharan Africa by 2030, up from 28 percent in 2008, according to the World Bank. It is a major shift for the industry, the main role of which has been supplying drugs for infectious diseases in Africa, often on a humanitarian basis.
It also signals a turnaround from the public relations disaster that followed a 1998 lawsuit by 39 multinational drugmakers against South Africa over the supply of generic versions of patented HIV/Aids treatments. Still, Western multinationals face many hurdles in the form of bureaucracy, corruption and lack of regulation and infrastructure as they try to tap this promising market.
“Drug manufacturing does not happen in a void. And the expertise needed… is often missing in Africa,” said Christoph Spennemann, a legal expert for the UN.
Western firms also have to deal with cut-price competition from drugs imported from India and China. Indian drugmakers have made particular inroads in Anglophone Africa, while Chinese firms have benefited from health projects funded by China across the continent.
British drugmaker GlaxoSmithKline (GSK), whose African presence began in 1971, is addressing the issue by emphasising volume over profits. It aims to lift drug volumes in Africa fivefold in five years by accepting lower prices.
“It’s still very challenging and there are still all sorts of issues, but gradually… Africa is coming,” GSK chief executive Andrew Witty said.
GSK is also betting on growing its over-the-counter (OTC) sales and plans to raise its holding in its Nigerian consumer products unit, which sells painkiller Panadol and Sensodyne toothpaste, to 80 percent in $98 million deal.
The broad approach towards prescription and OTC drugs reflects the uneven structure of the African market.
On one hand, the well-off middle class can increasingly afford to pay for western medicines. But urban Africans are still outnumbered by those in poor rural areas with very limited health-care service.
Lagos and Cairo are two of the highest-growth cities for African drug sales. Another is Algiers, a priority for Sanofi, which has been in Africa since 1953. The French firm already runs two factories in Algeria and is investing e70m (R622m) to build a new plant outside of the capital.
Sanofi’s Viehbacher said he was forging ahead with the investment despite the recent hostage crisis in Algeria as the two existing plants could not meet local demand. – Reuters