In South Africa, innovative pharmaceuticals spend a high value and proportion of sales on R&D compared to other sectors.
In South Africa, innovative pharmaceuticals spend a high value and proportion of sales on R&D compared to other sectors.

WATCH: Exploring the pharmaceutical industry's footprint in South Africa

By Brandstories Time of article published Jan 27, 2021

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In 2019, the Innovative Pharmaceutical Association South Africa (IPASA) conducted a Footprint Study to ascertain the contribution of the pharmaceutical industry to South Africa’s economy.

The comprehensive study analysed the socio-economic contribution made by multinational pharmaceutical companies to the country’s economy, particularly in Research and Development (R&D), clinical research, job creation as well as manufacturing, amongst other contributions.

The study concluded that innovative multinational pharmaceutical companies play a significant role in contributing to South Africa’s economy and provide sustainable and inclusive growth.

In South Africa, innovative pharmaceuticals spend a high value and proportion of sales on R&D compared to other sectors.

However, to ensure that South African patients derive value from this increased investment in R&D, innovative pharmaceutical companies believe that there is an urgent need for policy certainty and consistency, a substantial reduction in the backlog in registration of products by the regulator together with strategic assessments, remedies and incentives to level the domestic playing field.

The latest research measuring the return from pharmaceutical innovation shows that at 21.7%, the global innovative pharmaceutical industry has one of the highest R&D intensities of any sector globally, reflecting the relentless investment in pursuit of innovative therapies which advance the standard of care.

Since 2016, more than 100,000 people in South Africa have participated in interventional clinical trials on drug treatments.

Furthermore, clinical research sponsorships by innovative pharmaceuticals in SA are substantial and show no sign of slowing down. Since 2016, more than 100,000 people in South Africa have participated in interventional clinical trials on drug treatments through more than 380 trials, resulting in significant contributions to local R&D. It is important to note that some challenges have been experienced, which have affected the planned continuation of clinical trials in the country.

These challenges include delays in the issuing of import and export licences, and the difficulty of getting certain medicines into the country during the South African lockdown. As a consequence, IPASA has worked closely with South African Health Products Regulatory Authority (SAHPRA) and the Ministry of Health to mitigate as much as possible.

This will ensure the continuity of over R1bn that is planned for investment in upcoming and ongoing trials, which will benefit patients immensely. An estimated R2.95bn, between 2016 and 2021, will have been spent by the industry in SA. The volume and proportion of clinical research activity in SA sets the country apart from its developing economy peers. With 25% of the world’s burden of disease, only 2% of all clinical trials are conducted in Africa. Boosting R&D on the continent could be a better means of unlocking immense untapped value and improving public health responses to diseases.

VIDEO: The pharmaceutical industry's footprint in South Africa

The pharmaceutical sector also invests in knowledge, skills, and technology transfer accounting for over 4,700 direct jobs in the country and up to 14,000 in indirect jobs. To promote local value addition, generate income and create jobs, the South African government has encouraged multinational pharmaceutical companies to invest in local manufacturing while generating income and creating jobs. However, there remain limited incentives to enable sustainable local manufacturing by multinational companies in South Africa. R&D, namely increased clinical trials are a key building block to the establishment of a thriving biopharmaceutical industry.

In South Africa, approximately 276 companies are licensed by the Department of Health and SAHPRA to manufacture, import, export and distribute pharmaceuticals. Domestic manufacturing pharmaceutical companies almost exclusively produce generic products and South African pharmaceutical manufacturing companies are mostly import-dependent, particularly for Active Pharmaceutical Ingredients (API).

The economic contribution of multinational innovative pharmaceutical companies in South Africa goes beyond local manufacturing. It includes the overall investment in manufacturing and distribution capacities as well as the direct contribution to the country’s national budget.

The value of locally produced drugs from innovative multinational pharmaceutical companies will reach a value of R17.9bn by 2021. In fact, by 2021, IPASA member companies will have generated over R20.6bn worth of revenue, through their local operations, for manufacturing and distribution partners (including other direct business partners).

If the innovative pharmaceutical industry is to remain viable, South Africa needs to continue to obtain access to world-class, innovative medicines. However, there needs to be a balance struck between incentivising the local generic manufacturing industry and recognising the value of multinationals' investment in SA.

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