How can we incentivize local pharmaceutical manufacturing?

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Data trends indicate that global health expenditure per capita is on a steady increase. Access to treatment for diseases & illnesses and access to affordable medicines are inextricably linked. Drugs account for 20–60 percent of health spending in low and middle-income countries and up to 90 percent of populations in developing countries buy medicines through out-of-pocket payments. Nonetheless, despite the massive opportunity that these statistics present, it is reported that 70 to 90  percent of drugs consumed in sub-Saharan Africa are imported. How can local pharmaceutical manufacturing be increased? What are the possible options? The Scininovent Centre conducted an in-depth study to explore the challenges of domestic pharmaceutical production and the potential opportunities to expand and upscale this industry.

Some of the challenges facing the local pharmaceutical industry include importation of pharmaceutical products, unavailability of skilled labor, shortage of advanced and modern technologies, unreliable energy supply, weak legal and regulatory systems.

African governments and their level of support to the local manufacturing

Active state support for local industries to survive cannot be overstated. This is true in pharmaceutical manufacturing as is any other sector. Although most African governments have adopted policies to regulate pharmaceutical manufacturing and business incentives to encourage production, the industry still grapples with access to technological advancements.  Investment in research and development by African governments is still low, with the governments shying away from using tax credits to support R&D due to weak legislation. In Kenya, for instance, even though the Science, Technology, and Innovation Act 2013 established the National Research Fund which is supposed to receive two percent of the country’s gross domestic product, just about 0.5 percent is allocated to the Fund.

The sector also faces stiff competition from large multinational R&D-based firms or large transnational universal manufacturers.

With the rising demand for pharmaceutical products, harmonizing regulatory procedures and elimination of trade tariffs will strengthen the ease of doing business.

With over 500 local pharmaceutical manufacturing firms in 37 African countries which produce mostly the same range of products, the study suggests that these companies could be merged and form stronger and fewer companies with requisite capacity to compete in the international markets.

Success in the pharmaceutical industry is closely linked to excellent research and development landscape in the universities and research institutes and close collaborations with the private sector firms and this is made possible through forming strategic partnerships for research and innovation.

African governments tend to rely on help and funding from outside and forget to build their internal capacity to respond to emergencies and disasters in the future or in neighboring countries. This therefore raises the question: what is the level of preparedness among African governments in response to national disasters and emergencies to galvanize national institutions and support them to address national challenges?

In a country like Brazil, which is among the leading countries in the pharmaceutical industry, its success in the industry is linked to better income distribution and improved access to health services and medicines as healthcare services ranks top on the list of the most urgent priorities of many citizens in most countries.

The study further notes that forming strategic partnerships for research and innovation will help in building the knowledge base and will help in strengthening the linkages and this comes as a lessons  that the developing countries can emulate from the developed countries as the study suggests.

The government policies and business incentives set in place also determine the level of productivity in the pharmaceutical industry and closely linked to this is the collaborations between universities and pharmaceutical companies in countries that will provide the local industries with the capacity to increase its production.

Download the policy brief here: to get more insights from case studies of different countries that are blossoming in the pharmaceutical sector