Addressing COVID-19 While Building Long-Term Capacity: Trends and Opportunities in Africa’s Growing Pharmaceutical Markets
The African pharmaceutical market’s estimated worth is between US $40 – $65 billion, but it remains largely untapped, with a heavy reliance on imports. The market is expected to grow in response to the novel coronavirus (COVID-19) pandemic, a changing disease burden, urbanization, new technologies, health insurance expansion, anticipated continental market integration and industry consolidation. But the ongoing pandemic shows the urgent need to unlock new partnerships and investments to accelerate the local production of medical supplies, medicines and vaccines, which could save lives and create jobs across the healthcare and pharma value chains.
As Africa’s pharmaceutical sector continues to respond to COVID-19 with international partnerships, policymakers, investors and other industry players need to pay attention to the changes spurred by the crisis, along with other major trends shaping the market. In this piece, I highlight some of those trends, and how they have been impacted by the pandemic.
The Need for Greater R&D Spending
Historically, research and development (R&D) has been poorly funded on the continent. Africa’s share of global R&D spending was only 0.9% in 2020, compared to 2.2% in South America and 44.3% in Asia. Among African nations, only Egypt and South Africa are in the top 40 spenders on R&D globally. Evidence suggests that higher R&D investments usually result in innovations, better productivity and higher gross domestic product (GDP) – all of which the continent sorely needs. Yet just 10 African countries are in the top 100 on the 2020 Global Innovation Index, with Mauritius (52), South Africa (60) and Tunisia (65) leading the pack.
The African Union recommends national governments allocate at least 1% of GDP to R&D, to spur innovations that drive economic development. But unfortunately, only a handful of countries are close to achieving this target: Average spending on R&D across sub-Saharan Africa was 0.4% of GDP in 2015. An analysis by the United Nations Economic Commission for Africa shows that current research funding comes mainly from government and external donors, which reveals significant potential for an increase in business-related research expenditure. Within the pharmaceutical sector, investment in 54Gene, an innovative R&D enterprise, and the Drug Discovery and Development Centre holds promise for higher public, private and philanthropic support for pharmaceutical innovation in Africa.
The pandemic has also spurred growing interest in pharmaceutical R&D in Africa. COVID-19 can be a driver of increased spending on research, particularly for health research and pharmaceutical innovation that targets prevalent diseases and uses local solutions. Recent investments by the Nigerian government to support research and pharmaceutical companies in response to COVID-19 (and also to address other unmet health needs) is a welcome development, and one that should be replicated across the region. Governments are major investors in basic science and drug discovery research in developed countries and emerging economies like India: African countries can adapt useful investment lessons from these countries in a way that maximizes the use of scarce public resources. The Alliance for Accelerating Excellence in Science in Africa can also contribute to a change in the research funding landscape.
The Opportunity to Boost Pharmaceutical Manufacturing Capacity
Africa offers ample opportunities to boost pharmaceutical manufacturing capacity via international partnerships and knowledge transfers. The Pharmaceutical Manufacturing Plan for Africa highlights the value of local production, which requires detailed situational assessments, capacity strengthening, access to finance and technology transfers. Although nearly 40 countries in the WHO African Region, which excludes North Africa, undertake some pharmaceutical production, there is heavy reliance on imports of active pharmaceutical ingredients (API) – mainly from India and China. A new funding program by the European Investment Bank aims to accelerate local manufacturing of API in Africa to improve the continent’s COVID-19 response: This approach can be expanded in the post-COVID era to other pharmaceutical products that address unmet needs.
A 2019 report by McKinsey & Company shows that the region’s existing manufacturing capacity is concentrated in North Africa – but this may be changing. Recent efforts to build an industrial park in Ethiopia could expand this manufacturing capacity in East Africa. A 2019 agreement between the United Nations Industrial Development Organization and the West African Health Organization could boost production in West Africa, especially in Nigeria and Ghana. South Africa’s pharmaceutical manufacturing capacity is also expanding, with new partnerships and investments in the production of generic drugs and vaccines. It is also possible for African manufacturers to use emerging technologies that accelerate discovery and manufacturing. This momentum could pave the way for more local manufacturers to meet international standards and obtain WHO pre-qualification, in order to gain access to large markets and international procurement systems.
The Need to Strengthen Africa’s Regulatory System
A strong regulatory system is important to guide the sourcing, production, marketing and distribution of high-quality medical supplies and health technologies. To that end, there is growing momentum for the full operationalization of an African Medicines Agency (AMA), building on progress made by the African Medicines Regulatory Harmonisation and similar initiatives. Heads of states and governments adopted an AMA treaty in February 2019. The AMA will go into force once 15 African Union member states ratify the treaty: Eight countries have ratified it so far. Sustained advocacy is crucial to ensure the ratification process is completed.
Regulatory system strengthening at the national, regional and continental levels could help to promote innovation and increase citizens’ access to high-quality health and pharmaceutical products. A new partnership between the African Export-Import Bank, the International Islamic Trade Finance Corporation and the African Organisation for Standardisation intends to promote the harmonization of standards and regulatory policies across the region. Timely efforts to strengthen regulatory institutions, cross-country guidelines and implementation capacity could help to reduce the distribution of poor-quality medical supplies and medicines on the continent.
Improving Supply Chains
However, investment in R&D, manufacturing and regulatory systems will not necessarily translate to access to high-quality, locally produced medicines without robust national, regional and continental supply chains. Here, the African Union-backed Africa Medical Supplies Platform (AMSP) represents an innovative tool for pooled procurement and supply – although it was created to respond to the pandemic, its use should not be limited to the COVID-19 response.
The platform could also help address the currently fragmented market, which undermines market access and bargaining power. While each country can independently negotiate with manufacturers and suppliers, the AMSP could help reduce the price of medical products via pooled purchases from African and international companies.
In addition, the emergence of technology-enabled logistic firms (like Kobo360 and LifeBank), the Africa Resource Centre, and African airlines (like Ethiopian Airways) provide new opportunities for public health systems to work with private sector players on health supply chain management, to ensure that high-quality medical products get to citizens at the right time. This is important for the delivery of personal protective equipment, medicines and vaccines, both for the COVID-19 response and post-COVID systems strengthening.
Integrating the African Pharmaceutical Market
The possibility of an integrated African market provides a significant incentive for progress across the pharmaceutical value chain. To advance that goal, and recognizing the importance of trade for economic development, African Union member countries have agreed to establish a continental market. The African Continental Free Trade Area, created through an agreement backed by all African countries (except Eritrea), is a major initiative with the potential to facilitate new investments in the growing pharma sector. Leveraging useful examples from successful trade agreements from other regions, this agreement can fast-track progress toward an integrated market where Africans can trade more with each other and achieve better linkage with global value chains.
In a related development, COVID-19 is accelerating African countries’ efforts to diversify their economies with increased focus on industrialization. This presents an opportunity to prioritize pharmaceutical manufacturing in specific countries, which can become hubs for increased production for domestic and continental markets. A cohesive continental market could also accelerate new research collaborations, boost investments in manufacturing capacity, and facilitate pooled procurement and distribution.
Ensuring Access to Finance
Access to finance for pharmaceutical businesses is crucial for sustainable investment in research, manufacturing and systems strengthening. To position the private sector to attract domestic and foreign investments, African countries need to improve their political and macroeconomic conditions, conduct regulatory reforms, and increase their access to well-trained pharmaceutical professionals.
For instance, recent funding by the African Development Bank to research institutions involved in the local production of health products could be scaled up to foster a sustainable collaborative network between academia and industry. There is an opportunity for the African Export-Import Bank’s trade finance facility to continue to prioritize pharmaceutical innovation and health supply chain management.
Additionally, a new partnership between major financial institutions to develop a large biopharmaceutical platform could facilitate knowledge transfer and increase access to high-quality generic drugs in Africa. More partnerships of these sorts are needed, both to respond to COVID-19 and to address other prevalent unmet needs.
Advancing Toward the Sustainable Production of Pharmaceutical Products
This analysis shows there are several initiatives across the pharmaceutical value chain that have the potential to expand the market and create jobs. It does not cover all the initiatives happening within the sector, but it does reflect progress. The opportunities in Africa’s growing pharma markets call for political leaders to ensure that there are conducive policy, regulatory and business environments for these enterprises and initiatives. There is also a need for multi-sectoral coordination by designated inter-governmental units which drive policy design and coherent implementation, using a data-driven approach that harnesses health, pharmaceutical and industrial policies to increase access to affordable, high-quality products.
This coordination will require a new type of partnership between policymakers, private sector coalitions, citizen groups and development partners, to invest in skill development strategies that produce a more talented workforce to drive pharmaceutical industrial development on the continent. Despite the unique challenges of individual countries and regional economic communities, there is a great opportunity for African nations to work together on a rewarding pharmaceutical innovation journey. If they do, the continent will advance toward the sustainable production of health and pharmaceutical products.
Biodun Awosusi is a Health Economist at Health Systems and Development Enterprise.
Photo courtesy of International Monetary Fund.