Industry Trend Analysis - Namibia - Q1 2018 - FEB 2018
BMI View : Namibia's weak domestic manufacturing capabilities and strong colonial ties with South Africa will ensure the country continues to import the majority of its pharmaceutical needs over the coming years. Despite a relatively attractive business environment, multinational drugmakers will continue to use South Africa as the main channel trough which medicines are imported into the country, and will be unlikely to establish a direct manufacturing presence. L ocal production of antiretroviral medicines will give a small boost to the country's limited export potential.
While Namibia's business environment is conducive to foreign direct investment (FDI), the country's relatively small pharmaceutical market and below-average per capita spending on medicines both lower the country's competitiveness in the Southern Africa region. These factors continue to act as a deterrent to multinational pharmaceutical company investment in the local production of medicines. As a result, Namibia is heavily reliant on importing the majority of its pharmaceutical needs.
Nampharm, Geka Pharma and Fabupharm are the main local players in Namibia's domestic pharmaceutical landscape. Products are mainly distributed to the Namibian population, while pharmaceutical exports are minimal, with the majority destined for Zambia and Angola. Other local players include Taj Pharmaceuticals and Erongomed.
Namibian manufacturing capabilities are small, predominantly focusing on the production of generic medicines, although these face increasing competition from Indian companies. Domestic manufacturers compete for government tenders, through a process conducted by the Central Medical Store (CMS). This is a similar situation to some other Commonwealth of Nations countries, such as Mozambique, Botswana and Malawi. However, Namibia's CMS also conducts an open, international tender every two years for pharmaceuticals and medical supplies, threatening local companies' market share. In an attempt to secure the lowest possible prices, tenders for antiretrovirals (ARVs) are conducted annually.
Most Namibian manufacturers operate below their capacities and have limited product portfolios, and, as a result, imports represent the majority of the country's pharmaceutical market. The Namibian government has made efforts to achieve self-sufficiency in terms of medicine production by encouraging the local production of ARV drugs, though we expect this is unlikely to be achieved in the foreseeable future given the limited production capacity among domestic companies.
Despite gaining independence in 1990, Namibia continues to have strong colonial ties with South Africa, bolstered by the Namibian dollar being pegged to the South African rand. As such, over three-quarters of Namibia's pharmaceutical imports originate from South Africa, with companies such as Adcock Ingram and Pharmacare dominating medicine trade flows. Multinational drugmakers Pfizer and GlaxoSmithKline supply pharmaceutical drugs to Namibia through their South African facilities, avoiding the need to establish a local manufacturing base in Namibia. Although Namibia's proximity to South Africa ensures a secure supply of medicines, we expect this will continue to discourage foreign drugmakers from establishing a direct presence in the country.
India is the next most popular country of origin, representing just under 20% of imports, with Ranbaxy, Aurobindo Pharma, Cipla, Hetero and Strides Arcolab among the key Indian suppliers. Indian pharmaceutical companies are well placed to provide generic medicines more cheaply to the Namibian population, particularly as patent protection remains weak throughout the country. Ranbaxy's footprint in the Namibian market will continue to grow, following an agreement to jointly supply cheaper ARV drugs to the country. Through this, high-quality low-cost ARV drugs are distributed by governments, aid groups, AIDS management companies and retail pharmacies in Namibia.
Presenting upside potential for future multinational activity in Namibia's pharmaceutical sector is the expansion of the Namibian Essential Medicines List (Nemlist) in recent years to include more high-priced patented drugs. In addition, increased urbanisation and improved healthcare infrastructure, specifically more hospitals and clinics, will also provide opportunities.
Import Reliance Will Persist Despite Local ARV Production
In June 2015, Fabupharm announced its intentions to manufacture ARVs locally. The company signed an agreement with the North-West University in South Africa to collaborate on product research, mainly focusing on the local production of broad spectrum antibiotic azithromycin and ARV drug nevirapine.
Namibia's ARV market is a lucrative one for drugmakers given the high prevalence of HIV in the country (16.0% of the adult population) and the government's commitment to providing affordable treatment. Namibia's government vowed to provide access to treatment to all those who need it, as stipulated in the National HIV policy of 2007. Many drugmakers are looking to take advantage of the high prevalence of HIV and the country's registered medicines list demonstrates a very large number of ARVs available from numerous companies.
Namibia will continue to be reliant on importing the majority of its pharmaceutical requirements despite the domestic production of ARV drug nevirapine by Fabupharm given the manufacturer's limited production capacity and Namibia's reliance on importing the vast majority of all other medicines. Namibia's pharmaceutical import bill totalled NAD1.94bn (USD132mn) in 2016, with exports a mere NAD19.3mn (USD1.31mn) in comparison. By 2021, we forecast imports to reach NAD2.62bn (USD188mn), with exports only increasing to NAD25.5mn (USD1.83mn) by that point.
|Import Growth Will Outstrip Exports|
|Namibia: Pharmaceutical Trade Forecast (NADmn)|
|e/f = BMI estimate/forecast. Source: United Nations Comtrade Database DESA, UNSD, BMI|