- Kenyan manufacturers hold only 30% of the local pharmaceutical market of 109.6 billion shillings ($ 1 billion).
- They also sell less of their products locally, while exporting the majority.
- The report criticizes them for attacking low-cost generics, leaving a higher-value drug market of 77 billion shillings to foreign companies.
Local investors lose 110 billion shillings in pharmaceutical sector
Kenyan investors remain shut out of the lucrative drug-making business, denying them billions of shillings, a new report has shown.
The 2020 Pharmaceutical Industry Diagnostic Report notes that Kenyan manufacturers hold only 30% of the local pharmaceutical market of 109.6 billion shillings ($ 1 billion).
Domestic pharmaceutical manufacturers over the years have a strong presence in the categories of anti-infective products such as cough and cold preparations, antiseptics, anti-asthmatics and antibiotics.
The report adds that the majority are competing in these same market segments and therefore fail to tap the lucrative immunological and cardiovascular markets which have a larger share in the region.
The report from the Ministries of Health and Industrialization, Trade and Business Development in partnership with the International Finance Collaboration (IFC) adds that this is a good opportunity, estimated at 76.7 billion shillings.
The report comes at a time when there has been a global disruption in the supply chain of essential health products and equipment due to the Covid-19 crisis.
At the height of the Covid-19 pandemic, pharmacies reported a surge in demand for vitamins, supplements and minerals as consumers rushed to buy them to boost their immune systems and for fear of lockdown measures full.
This has led to stockouts of products in local markets due to disruptions in the global supply chain, as the majority of these products are imported.
The report points out, however, that Kenyan manufacturers sell less of their products locally, while exporting the majority.
Another report released by the Kenya Investment Authority (KenInvest) in October last year indicates that Kenya is the leading producer of pharmaceuticals in the Common Market region of Eastern and Southern Africa (Comesa), supplying around 50 percent, and the third largest exporter of pharmaceuticals in Africa.
The 2020 diagnostic report puts exports to Comesa, the East African Community and the rest of Africa at 6.9 billion shillings ($ 63 million), with total markets valued at 1.000. 49 trillion shillings ($ 13.6 billion).
This corresponds to 4.6 percent of the share of the country’s exports to Africa.
He points out that improved technologies and increased local pharmaceutical production would increase this share by 5% while demand for local products would drop from the current 30% to around 65%.
“A five percent increase in Kenya’s share of this total African market would translate into exports worth 74.3 billion shillings ($ 678 million),” he said.
The growth of this sector has been hampered by factors such as the dominance of foreign multinationals in terms of value, the high cost of utilities – water and electricity, insufficient access to credit for the private sector to finance research and development. product development.
This has resulted in lower average income per local manufacturing company compared to other countries.
Although Kenya has a well-developed health sector and a manufacturing industry capable of supplying both internal and external markets, the KenInvest report points out that most local businesses are disqualified from donor-funded public procurement because the participation is only open to the World Health Organization (WHO) – prequalified facilities.
“However, investors could take advantage of the existing idle production capacity through partnerships such as joint ventures and expand the range of products in the market,” the KenInvest report notes.
Kenya’s pharmaceutical industry relies heavily on the global supply chain for inputs, equipment and even specialist personnel.
Most companies either make simple, non-patented products or rely on technology transfer agreements with foreign multinational manufacturers.
Almost 60 percent of packaging materials are imported from India and China, which is subject to tariffs. This includes glass, plastic bottles and other containers, labels and foils at 80%, 45%, 70% and 100% respectively.
Large and small pharmaceutical companies import about 60 percent and 35 percent of their packaging materials, respectively.
“The industry also imports machinery and equipment for production from Europe and Asia, including skilled labor for equipment installation, maintenance and repair services,” the report says. .
“Pharmaceutical manufacturers also have the impression that local packaging materials are of poor quality.”
The insanity of relying on imports was exposed during the lockdown last year. Kenya was among the countries seeking essential supplies ranging from medical equipment, drugs, diagnostic tools to simple kits such as personal protective equipment (PPE) specially used by health workers.
This dependence, the report notes, risks disrupting the supply of items, undermining the country’s national emergency response to the crisis.
This shortage led to a surge in mask prices from March of last year.
In the first week of March, before the pandemic hit and as the country braced for a coronavirus outbreak in Kenya, mask maker Nairobi Enterprises Limited (NEL) quoted the price for the box containing 50 units of protective equipment having jumped from Sh500 to Sh1,700 in the wholesale market.
Prices have since fallen to Sh5-Sh10 due to increased production from manufacturers, including the Kitui County government plant, Kikotek, and the increased supply of reusable masks made for pieces of fabric. .
The cost of the coronavirus strain, although it still remains high at a minimum of 7,500 shillings compared to 13,000 shillings due to the low supply of test swabs.
Previously, samples were collected and sent to South Africa for testing.
The Covid-19 pandemic has, however, affected the trade in medical products.
During the lockdown, India, a major exporter of pharmaceuticals to Kenya, restricted exports of 26 pharmaceutical ingredients and drugs.
As a result, Kenya’s imports of products from India fell 42% in May 2020 compared to the same month 2019.
“To alleviate supply shortages and reduce its dependence on India and China, Kenyan pharmaceutical manufacturers must identify and assess alternative supply partners or invest in the capacity to produce these ingredients. keys locally, ”the report says.
Limited innovation in the sector has also led to the production of generic products at low prices, boosting the dominance of foreign companies.
The production of drugs by the sector, as the new report shows, is dominated by family businesses that focus on the simpler types of manufacturing.
The 10 largest companies account for almost 80 percent of local production of mostly unbranded generics.
“Local companies tend to produce simple dosage forms, such as simple tablets and capsules. While some are branching out into producing syrups, suspensions and creams, only three companies produce injectable infusions and ophthalmic formulations which require technologically complex processes and strict quality control standards such as sterile conditions, ”says the report.
The production of higher value products has been limited due to lack of technical expertise and funding for investment in advanced technology and exquisite workmanship.
The report points out that the costs of producing and upgrading equipment are high due to borrowing costs, about five percentage points higher than in India or Bangladesh.
The current average lending rate in the country, according to the Central Bank of Kenya, is 12% in January of this year.
2020 diagnostic report says although labor costs in Kenya are lower, local businesses depend on expatriates due to lack of capacity, resulting in increased labor expenditure .
Unregistered retail pharmacies have also increased the risk of substandard products entering the supply chain.
According to the Ministry of Health, the planned roll-out of universal health coverage and increased insurance coverage are expected to increase demand for drugs and spur the growth of the local pharmaceutical industry.
“A coordinated approach is needed across a package of interventions to support the role of the private sector in providing quality and affordable medicines to the Kenyan market,” said Dr Rashid Aman, Chief Administrative Secretary of the Ministry of Health .
“We need to strengthen the framework and investments in industrial infrastructure such as special economic zones, as well as reduce barriers to entry and competition in pharmaceutical manufacturing. ”