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India, China cos fast expanding presence in Africa

Our Mumbai, Hyderabad Bureaus
Thursday, November 14, 2013, 08:00 Hrs  [IST]

Indian and Chinese pharmaceutical companies are fast expanding their presence not only in Asia, USA, and EU. Of late they have been actively establishing manufacturing units in African countries also. The expanding presence of Asian manufacturers in Africa has seen the proportion of pharmaceuticals being imported from India and China more than double in value terms in recent years.

According to global import and export data, India accounted for 17.7 per cent of African pharmaceutical imports in 2011 (up from 8.5 per cent in 2002) and China for 4.1 per cent (up from around two per cent in 2002). Indian and Chinese manufacturers have gained market share primarily through competitive prices and simultaneously targeting different markets in the generics space. These manufacturers differ across five areas: mode of entry, countries, use of local talent, target payers and brand image. Chinese firms succeed in markets with low ease of doing business ratings, where they sell or gift medicines such as antimalarials to governments through procurement contracts.

Typically, Chinese companies build health infrastructure with funds from the government which come from loans secured against resource extraction, common in countries such as Zambia and Angola.

For example, in Zambia, where Chinese companies run some of the country’s copper mines, the Jiangsu International Economic Technical Cooperation Corporation, a construction company that also sells pharmaceuticals and nutritional products, built the Lusaka General Hospital with a grant from the Chinese government. The hospital was then supplied with Chinese-made medical devices and pharmaceuticals, presumably from the same company. In such local operations, Chinese manufacturers have a weak record on skills transfer and local capacity building relative to their Indian counterparts and a poor reputation for medicine quality.

 Indian manufacturers distinctly fare better than Chinese in adapting to the local conditions in terms of setting up units and manufacture in Africa.  Indian manufacturers primarily sell medicines through NGOs and government tenders in regulated markets. For example, leading Indian players, such as Cipla, Ranbaxy, the Serum Institute and Dr Reddy’s, have strong market presence, particularly in East Africa. In these predominantly Anglophone markets, Indian companies have a reputation for integrating local talent into their operations and are known for the quality of their medicines, with many having WHO pre-qualification. While they are best known for selling affordable HIV medicines in Africa, they are rapidly broadening their medicine range across therapy areas, opined Krishna Prasad, CEO & MD of Cito Healthcare, Pvt. Limited.

Venus Remedies entered the various markets of Africa in the year 2008. The company exports various products of oncology, cephalosporin, carbapenem, R&D & Pre filled syringe and general categories in the various countries of Africa continent such as South Africa, Kenya, Uganda, Botswana, Ethiopia, Zimbabwe, Sudan, Benin, Niger, Burkino Faso, Togo and Mauritius. The market of Africa contributes significant growth prospects - both in terms of volumes and profitability. The market is lucrative, competitive and quality conscious. The African continent is contributing approximately 10 per cent to the total export revenues of the company. Therefore the growth prospects for the company in Africa are very promising, said Deputy MD of Venus Remedies.

"Despite the rising demand for healthcare, spend per person is very less because of the low income level. It is thus posing a tremendous opportunity for a company like ours, which is research oriented and is dealing with innovative research products that are highly efficacious yet cost-effective. As of now, we have received seven patents from CIPRO for our novel research products Aceclophenac (ACHNIL), Sulbactomax, Potentox, Vancoplus, Tobracef, Amupcare and a novel antibiotic combination of carbapenem and aminoglycoside. The grant of all these patents have opened doors for the rapidly growing market of African continent. Venus plans to enter the market adopting strategic out-licensing route through an appropriate partner," he added.

The competition is beginning to get intense as all major pharma companies are looking at tapping these markets. Product launches and promotion, concerted marketing efforts, understanding the trends in the movement of the pharmaceutical products, strategic partnerships would see most Indian pharma companies to strengthen presence in Africa.

Challenges are strict competition, entry of many generic players, presence of innovator products (doctors have a preference towards them), slow working of the regulatory bodies, huge requirements to comply for registrations, overall the speed of work in the African region is slow. Though most of the doctors are qualified but introducing them to a new product and explaining them the same is time consuming as far as obtaining business is concerned, said the Deputy MD of Venus Remedies.

The African pharmaceutical sector is poised to grow tremendously in the coming years. With a compound annual growth rate (CAGR) of more than 10 per cent and with a pharmaceutical spending expected to reach $30 billion by 2016, Africa is the second most dynamic pharmaceutical market after Asia Pacific.

The pharmaceutical sector is currently one of the best performing in Africa. The industry has been growing at a steady rate over the past few years and this momentum is expected to continue in tandem with overall economic growth being witnessed in Africa.

Major pharmaceutical companies are increasingly looking to harness Africa's opportunity, lured by an emerging middle class across the continent's growing urban centres. Terming Africa as the next frontier for healthcare, some of the experts tell that companies are increasingly turning to Africa due to the opportunities that the continent offers as it is one of the few locations that can still obtain double digit economic growth.

Although the total size of the African market is still small compared to other global regions, analysts say that the continent's big cities hold the key to unlocking the industry's lucrative potential.

According to an IMS report "Africa: A ripe opportunity," pharmaceutical spending on the continent is expected to reach $30 billion in 2016, up from about $18 billion now. By 2020, the market could represent a $45 billion opportunity for drug makers, spurred in part by robust economic growth and demographic changes.

In Africa, the healthcare sector continues to struggle to meet the needs of an increasingly expanding population. Insufficient access to quality health information, inefficient processes along with various geographical challenges continue to pose a threat to adequate healthcare delivery on the continent.

Strengthening the healthcare system is key to improving future growth and developmental prospects in Africa. Population health has a direct and marked impact on economic and social prospects, and has been seen to impact important factors such as country’s GDP.

Several African countries are seeking Indian investment in tertiary healthcare and supply of affordable medicines to its population. According to Hussain Ali Mwinyi, Tanzania’s health minister, the best way to increase abilities was by universal healthcare. ‘We require good healthcare for the middle class.’ He welcomed Indian investment in tertiary healthcare in his country, especially in the sector of telemedicine, which he said would help reduce healthcare costs.

At the 9th India-Africa Conclave in which over 900 delegates from 45 African countries participated, Mwinyi said India is running one such tele-medicine centre in Tanzania. Citing similar needs, Mozambique Health Minister Alexander Manguele said "We encourage Indian pharma companies to support improvement of the health of the people".


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