Incentivising and Investing in Local Pharmaceutical Production
By Kaushal Shah
COVID-19 has greatly disrupted our supply chains. The measures to contain the pandemic have triggered unprecedented measures by national governments that have caused interference in local and global trade. This has threatened not only the management of COVID-19 itself, but also access to essential commodities needed to maintain the health of our populations.
Ms. Kaushal Shah
With imports comprising as much as 70-90% of healthcare products consumed in most countries in Africa, including East Africa, it is important that we consider an increase in local production as a way to create stronger and more resilient healthcare systems. Taking pharmaceuticals as an example of the continent’s reliance on imports, most countries are uncompetitive for local pharmaceutical production and only a small number of African countries have a handful of local companies who produce for the domestic market. The pandemic has highlighted that we need a more coordinated, reliable and self-sufficient healthcare manufacturing and supply chain.
Regional and Continental Integration
Most importantly, we need to have regional and continental integration. Manufacturing is largely about getting economies of scale that provide competitiveness of our products both domestically and globally. It is not possible to be competitive if we depend on small volumes. We need to better apply regional and continental consolidation, whether it’s through free trade agreements or other levers at our disposal, so that the few producers we have (and hopefully new ones that come into the market) will have true market access to reach economies of scale and generate sustainable revenue streams. As an example, the Sino-Ethiopia joint venture in Addis Ababa to produce hard gelatin capsules sells their output to manufacturers across Africa and to certain Middle Eastern countries.
Additionally, regional and continental integration with regards to the standardisation of drug regulations and related intellectual property standards will also work towards creating a stronger market. and expand intra-African trade through better harmonisation and coordination of trade liberalisation and facilitation.
Most importantly, we need to have regional and continental integration. Manufacturing is largely about getting economies of scale that provide competitiveness of our products both domestically and globally. It is not possible to be competitive if we depend on small volumes. We need to better apply regional and continental consolidation, whether it’s through free trade agreements or other levers at our disposal, so that the few producers we have (and hopefully new ones that come into the market) will have true market access to reach economies of scale and generate sustainable revenue streams. As an example, the Sino-Ethiopia joint venture in Addis Ababa to produce hard gelatin capsules sells their output to manufacturers across Africa and to certain Middle Eastern countries.
Additionally, regional and continental integration with regards to the standardisation of drug regulations and related intellectual property standards will also work towards creating a stronger market. and expand intra-African trade through better harmonisation and coordination of trade liberalisation and facilitation.
Well-Coordinated Policies
Furthermore, the healthcare policies that are at our disposal are not well-coordinated. We need to make full use of flexibilities within the Trade and Related Aspects of Intellectual Property Rights (TRIPS) and Doha Declaration on TRIPS and Public Health to boost the local production of generic medicines. We need to work on policies and regulations that will strengthen local manufacturing capabilities (especially for essential generic medicines, vaccines and medical commodities). Our continent is left to the devices of one- or two-year tenders, and a significant amount of donor funds. Donor funds might be well intentioned, but they’re not great for creating industries and they are largely part of the problem that perpetuates the deindustrialisation or lack of industrialisation on the continent. So we’ve got to provide local entrepreneurs the certainty and predictability that any investor in any sector would expect – such as advance purchase commitments with preference to local manufacturers. As an example, in Uganda, the government guaranteed the purchase of output for antiretrovirals manufactured by the Cipla-Quality Chemicals joint venture.
Strong Partnerships
Partnerships at the local, regional, and global levels will be crucial in the effort to advance pharmaceutical manufacturing. Governments should seek to leverage global partners to build up the capabilities of local manufacturers and engage private sector partnerships to boost technical capabilities and innovation and improve quality standards. It is imperative that governments employ investment incentives to help make the case for specific investments – including duty-free or reduced tariffs on the import of raw materials and capital goods, tax holidays and the creation of special economic or industrial zones.
COVID-19 has highlighted the urgency of developing local pharmaceutical manufacturing. We can no longer afford to be so dependent on outside sources for the basic products our populations need to stay healthy. It is important to take advantage of the current momentum and ensure we do not find ourselves in the same dire situation when future crises occur.
