Industry Trend Analysis - Weak Regulatory Standards Perpetuate A Challenging Drugmaker Environment - NOV 2017


BMI View : Regulatory inefficiencies are characteristic of Sub-Saharan Africa's pharmaceutical markets, which will continue to present a key market access barrier for innovative drugmakers. Nuances exist at the country level, and the gradual establishment of regulatory agencies is yielding a slowly improving regulatory environment in certain markets. However, a lack of enforcement and willingness from the public sector to implement regulatory improvements will ensure that regional standards continue to lag significantly behind developed markets

Sub-Saharan Africa (SSA)'s pharmaceutical regulatory landscape continues to face a number of challenges that shape a decidedly difficult environment for drugmakers. The weakest link is in the implementation and enforcement of laws, some of which are conflicting and encourage counterfeits, creating a major concern for foreign investors. While discrepancies are evident across the region, the regulatory infrastructure is generally inadequate in the majority of SSA markets, providing neither meaningful patent legislation nor pricing and/or reimbursement systems. Highlighting the lack of enforcement, Kenya, Nigeria, Cote d'Ivoire, Cameroon and Angola are all official members of the World Health Organization (WHO)'s Programme for International Drug Monitoringbut the amount of active surveillance in place is low, and enforcement of pharmacovigilance is minimal. Here we look at the regulatory landscapes of these five markets in more detail - highlighting the challenges that drugmakers will face.

Kenya

  • The cost of pharmaceuticals and their mark-ups are not regulated in Kenya, instead being controlled by market forces. The government does not impose any tariffs on finished pharmaceutical products, whether locally manufactured or imported. As is the case in many SSA markets, this often results in drug prices becoming overinflated as a result of a liberalised market, with patients unable to afford certain medicines and forced to take incomplete doses. For example, it was reported in 2016 that Eloxatin (Oxaliplatin), used to treat colon and rectal cancer, was being sold at KES29,500 per 100mg vial in the US and Turkey; in Kenya, this is reportedly priced at KES67,244, up to 500% higher. In September 2016, the Pharmacy and Poisons Board (PPB) called on multinational drugmakers and their local sales agents to standardise their medicine prices to ensure that Kenyans do not pay significantly more than patients in other countries, as well as reassessing the drug pricing regulation policy. This fosters an environment for counterfeit proliferation and will create significant concerns among investors in SSA.

  • While Kenya has a well-established drug regulatory body, namely the PPB, the country is viewed as having an overly complicated regulatory environment due to the overlapping work of regulatory bodies, government initiatives, aid agencies and NGOs. For example, the semi-autonomous Kenya Medical Supplies Agency (KEMSA) is responsible for supplying essential drugs to public facilities, but it competes with the Mission-based Medical Supply Facility (MEDS) and private wholesalers.

  • On the face of it, a large plus for patented drugmakers is that Kenya's Intellectual Property Act is deemed to be fully compliant with the TRIPS agreement. Kenya is also one of just 19 African nations that has full-membership status of the African Regional Intellectual Property Organization (ARIPO). However, Kenya is one of the few SSA countries to make use of the TRIPS agreement flexibilities, alongside South Africa. To this end, the PPB has allowed a select number of local pharmacists to undertake parallel importation of certain drugs in an attempt to increase the flexibility of access to generic medicines and keep prices stable. Moreover, voluntary licences were agreed between local drugmakers and patent-holding companies for the production of antiretrovirals. This has been met with opposition, with the Kenya Association of the Pharmaceutical Industry (KAPI), whose members include agents of international pharmaceutical firms, arguing that allowing parallel importation and voluntary licenses without sufficient regulatory safeguards will be detrimental to the pharmaceutical sector and wider economy. While this has complicated the regulatory environment, it highlights measures in place to balance the emphasis on public healthcare with satisfying international investor needs.

Nigeria

  • Reflected in the lack of regulatory infrastructure, there are significant weaknesses in intellectual property legislation for pharmaceuticals in Nigeria. Despite the existence of few copyright and trademark laws as published by the World Intellectual Property Organization (WIPO), including the 'Patents and Designs Act', enforcement of such laws remains an enduring challenge in Nigeria. There is no evidence of a meaningful reimbursement system.

  • Nigerian drug prices are controlled mostly by market forces, with government tariffs, taxes and distribution mark-ups accounting for a significant proportion of the final price. Medicine pricing has become increasingly complicated in 2017 as a result of the lack of foreign currency needed by local drugmakers for imports. The introduction of a 20% 'Import Adjustment Tax' in Nigeria, which applies to medicines under HS Codes 3003 and 3004, has exacerbated issues brought about as a result of scarce foreign exchange ( s ee ' Near-Term Uncertainty For Local Drugmakers ' , May 19 2017).

  • The impact of a lack of pricing control is still being passed onto local manufacturers and consumers through higher medicine prices. A number of Nigerian pharmacy retailers are reporting up to a 40% rise in the cost of medicines as the combined effects of the naira's devaluation and import tariffs are in full flow. Three of the dominant players in the industry, namely Union Diagnostic/ Clinical Services, Pharma Deko and Evans Pharmaceutical, have also reported a downturn in production in 2017.

  • Notwithstanding this, the establishment of the National Agency for Food and Drug Administration and Control (NAFDAC) does offer some stability to an otherwise unregulated sector. Core functions of NAFDAC include: drug marketing authorisation/registration, pharmaceutical facility inspection, import control, market and quality control, medicines advertising and promotion, pharmacovigilance and clinical trials control. However, given that NAFDAC's regulatory duties are essentially an extension of the government's activities, enforcement of the aforementioned duties continues to come under question as a result of very little policy coherence in the sector.

  • It is worth mentioning that despite the lack of enforced regulation in many sectors of Nigeria's pharmaceutical market, it continues to stand out as a destination for clinical trials in SSA. An established regulatory and ethical authority environment means that conducting a clinical trial in Nigeria is a relatively easy procedure in comparison with its regional neighbours. Regulated by the Federal Ministry of Health (FMoH) through NAFDAC and the National Health Research Ethics Committee (NHREC), the approval process takes a maximum of three months - a reasonable timeframe considering the six to 12 months it takes in Brazil and China.

Cote d'Ivoire

  • There is currently no meaningful reimbursement programme in place in Cote d'Ivoire, while market forces are responsible for setting drug prices. The Directorate of Pharmacy and Medicine (DPM) does have control over the pharmaceutical pricing regime; however, there is a fair amount of variance in consumer prices as drug distributers can vary the costs added on to the drugs. This is a common theme in SSA, where fragmented supply chains often result in the consumer paying a higher price than originally set by the manufacturer.

  • Cote d'Ivoire has some intellectual property regulations in place under the jurisdiction of the Office of Industrial Property; however, as in Nigeria, they are inadequately enforced. The country is also a member of the African Intellectual Property Organization (OAPI) and applies the provisions of the Bangui Agreement concerning intellectual property. At the institutional level, the Ivorian Intellectual Property Office (OIPI) acts as the National Liaison Structure (NLS) for liaising with the OAPI - responsible for administering the industrial property system in Cote d'Ivoire. While the country is a member of several organisations and regulatory agreements, our outlook for the West African nation's regulatory environment is largely uncertain as there is limited evidence to suggest any notable improvements will be made over the coming years.

Cameroon

  • Cameroon suffers from a highly underdeveloped regulatory system, with minimal evidence to suggest that an established pricing, reimbursement and/or patent regime exists in the country.

  • Posing some upside, the OAPI's new headquarters in Yaounde could yield some intellectual property improvements in Cameroon over a longer timeframe. Despite this, enforcement issues will need to be addressed, with little or no enforced regulation of the sale of prescribed medicines, which are distributed by a variety of sources in Cameroon with or without a prescription from a doctor.

  • The prices of pharmaceuticals in Cameroon do not appear to be regulated. Of the available data, the average private wholesaler mark-up is 13% and the average retail mark-up is 35%. In a study by the WHO of 24 markets globally, it was found that Cameroon's median price ratio varied significantly between different types of medicine, as well as the median price ratio being notably higher than its neighbouring markets at the time of the study. For example, the availability of Prozac (Fluoxetine) in Cameroon for both the patented medicine and generic drug combined, was below 16% in private retail pharmacies, while Elavil (Amitriptyline) was below 1% in public facilities [1].

Angola

  • There is an absence of state reimbursement schemes for anything but the most basic of drugs in Angola, which deters pharmaceutical companies from launching innovative products in the market.

  • Another key issue for patented drugmakers is the lack of intellectual property protection, with medicines not protected under Angolan patent laws. Unlike Kenya, Angola is not a member of ARIPO, though it does have observer status.

  • Pharmaceutical pricing is determined by market forces, although essential medicines are provided free of charge to vulnerable population groups as classified by the WHO: young children, the elderly, pregnant women and the underprivileged.

  • Drugmakers are entitled to a margin of up to 20%, drug wholesalers can take a margin of up to 10% and retail outlets can take a margin of up to 20% - according to the WHO [2].

Outlook

Generally, SSA's regulatory environment will continue to fall behind the levels of technical advancement, and government commitment to it, seen in much of the developed world. The pace of change is likely to be slow and variable across the region, as a reflection on the level of political coherence and economic development. The regulatory environment will remain an important consideration for potential pharmaceutical launches, but should not be considered as a standalone factor by drugmakers. Further considerations, such as market size, demographics, epidemiological and healthcare trends, will also be taken into account before companies make investment decisions.

[1] Gelders S, Ewen M, Noguchi N, Laing R. Price, availability and affordability: an international comparison of chronic disease medicines, (WHO-EM/EDB/068/E), 2006. Available from: http://archives.who.int/medprices/CHRONICANN.pdf

[2] Government of Angola: Trade Policies And Practices By Measure: Trade policy review, Angol a. Page 54, 2007.