Industry Trend Analysis - Underlying Regulatory Weaknesses to Weigh on Region's Attractiveness To Drugmakers - DEC 2017

BMI View : Sub-Saharan Africa 's (SSA)'s pharmaceutical regulatory landscape continues to face a number of challenges that shape a decidedly difficult environment for drugmakers. Wide dipartites in regulatory procedures, a lack of enforcement of patent laws, and a general lack of transparency ensure the SSA region lags behind other sub-regions globally. Led by South Africa, regulatory reforms and improved harmonisation agreements will gradually improve the pharmaceutical regulatory environment, although the commercial benefits for drugmakers will only materialise over a longer timeframe.

Regulatory inefficiencies are characteristic of Sub-Saharan Africa's (SSA)'s pharmaceutical markets, which will continue to present a key market access barrier for innovative drugmakers. The regulatory infrastructure is generally inadequate in the majority of SSA markets and a lack of willingness from the public sector to implement regulatory improvements will ensure that regional standards continue to lag significantly behind developed markets.

Risks Fall Short Globally

Indicative of this, SSA's pharmaceutical regulatory environment is the least business-friendly globally, as reflected in our Innovative Pharmaceuticals Risk/Reward Index (RRI). The SSA region scores just 32.5 out of 100 in the Industry Risks component of our index, significantly below the global average of 50.0 as well as the other major regions worldwide. In particular, the majority of SSA markets provide neither meaningful patent legislation nor pricing and/or reimbursement systems for pharmaceuticals. Even within the more developed markets in SSA with a well-established pharmaceutical regulatory body, the weakest link is often in the implementation and enforcement of laws, which creates major concern for foreign investors. To give an example of the lack of enforcement, some of SSA's largest pharmaceutical markets in expenditure terms, namely Kenya, Nigeria and Cote d'Ivoire, are all official members of the World Health Organization (WHO)'s Programme for International Drug Monitoring, yet the amount of active surveillance in place is low, and enforcement of pharmacovigilance is minimal.

This is compounded by a lack of a cooperative regulatory environment in SSA. As such, the overlapping work of individual regulatory bodies, government agencies and NGOs makes for a very non-transparent regulatory environment for pharmaceuticals. Weak management structures, shortage of technical regulatory expertise and inadequate funding to improve regulations in individual markets are key market access barriers for innovative drugmakers in SSA (See 'Weak Regulatory Standards Perpetuate A Challenging Drugmaker Environment', 18 Sep 2017). This is a stark contrast to the harmonisation of medicine regulations in the European Union (EU) and other sub-regions globally, including within Latin America and the Asia-Pacific regions, respectively.

within the wider European bloc. In addition to this,

It is worth highlighting that regulatory shortcomings in SSA is not exclusive to the pharmaceutical industry. Our findings are consistent with the global medical device regulatory environment (See ' Weak Regulations Will Remain Industry Barrier In SSA ', 21 Sep 2017), which remains substandard in the SSA region.

SSA Weakest Regulatory Environment
Pharmaceutical Industry Risk Scores By Region
Note: Scores out of 100; higher score = lower risk. Red line represents global average. Source: BMI Innovative Risk/Reward Index

South Africa - Leading The Way

Although regulation in SSA will remain weak, we believe that updating pharmaceutical regulations, in line with industry developments, will gradually improve the regulatory environment. South Africa is leading with regulatory reforms, recently establishing a new regulatory agency, South African Health Products Regulatory Authority (SAHPRA), replacing the Medicines Control Council (MCC). Although the establishment of SAHPRA had been in the legislative pipeline for several years, this represents an important step towards full implementation of a dedicated regulatory framework for pharmaceuticals (and medical devices), which will gradually strengthen the regulatory environment. Other regulatory developments in South Africa in 2017 include South Africa's Department of Trade and Industry (DTI) publishing a draft intellectual property policy in August 2017.

We highlight, however, that it will more likely take some time before local drugmakers can realise the benefits from regulatory improvements in South Africa. To this end, it has been our longstanding view that any major regulatory changes in South Africa are likely to face further delays.

South Africa Is The Regional Outperformer
Sub-Saharan Africa Innovative Pharmaceuticals Risk/Reward Index
Note: Scores out of 100, higher scores = lower risk. Source: BMI Risk/Reward Index

Improved Long-Term Regional Outlook

Ongoing efforts to enhance regional co-operation in SSA will gradually improve the region's medicine regulatory environment and attractiveness to multinational drugmakers. In May 2017, delegates from the East African Communities' (EAC) met with members of the European Medicines Agency (EMA) to share expertise and information regarding the creation of a regional medicines agency. This follows ongoing talks between the WHO, EU, and the African, Caribbean and Pacific Group of States (ACP) regarding the establishment of an African Medicines Agency (AMA) - expected to be launched by the end of 2018.

While the implementation of regional harmonisation initiatives will enhance SSA's pharmaceutical regulatory environment, we caution that underlying regulatory issues will remain, however, and the commercial benefits for innovative drugmakers will only become visible over the long term. Indeed, wide disparities in the regions current regulatory procedures will weigh on progression towards any significant progression.