Healing the Pharmaceutical Industry

Lack of essential medication is a common recurrence facing patients. Mortality and morbidity caused by shortages of direly needed drugs during surgery and other critical points of treatment have become features of the medical industry. The common reason for the prevailing situation facing drugs is mostly tied with forex shortages and lack of sufficient local supply. Even though there are reports of sabotage in the industry, there has not been a consolidated effort to replace imported drugs and avoid the drug-induced chaos in the health sector. Recently, however, there are signs that that might be slowly changing. With the government’s high attention to the pharmaceuticals industry, there are new entrants in the sector coming with massive investments. With growing demand and an ever-expanding market for sector players, Ethiopians can benefit from newly revitalized efforts to increase the manufacturing of drugs within the country, writes EBR’s Eden Teshome.

Abenezer Kebede, a 35-year-old Accountant at a non-governmental organization, has had human papillomavirus (HPV) since age 27. Local injections and other treatments were ineffective and he was terrified of having surgery. Upon the advice of a close friend, he saw another doctor that prescribed imiquimod, a cream that helps get rid of the bumps. Several local pharmacies which he checked with didn’t have the product. Fortunately, after a five-week wait, he secured the medication after paying ETB7,000 to a pharmacist that imported it from Turkey.
“I have tried so many others before, nothing appears to be working,” Abenezer told EBR. “Even though it is good that this one is working, finding it is neither easy or cheap.”

In a nation where lack of medication has caused many to lose their lives, Abenezer’s experience is not as tragic. Mohammed Nuri (PhD) is Owner of Ethiopian Pharmaceuticals Manufacturing SC (EPHARM) and MedTech Ethiopia, as well as Shareholder of Julphar Ethiopia. Even he is a victim of shortages as his mother died because the medication she required after a surgical procedure could not be found. Resultantly, Mohammed became convinced that the country’s pharmaceutical supply had to be changed.

“I recall saying at the time that I needed to start a company that imports important drugs that were overlooked by others,” Mohammed told EBR. Twenty years ago, he envisioned becoming an important player in the drug import sphere. “This is why MedTech was the first firm in Ethiopia to import anti-HIV drugs. We currently provide 20 kinds of drugs at low prescription rates that are difficult to come by in Ethiopia; cancer and dialysis medications are among them,” said Mohammed.

The pharmaceutical industry is a knowledge- and technology-intensive industry playing an irreplaceable role in the health of populations. The need for medicines and medical devices in Ethiopia is mostly met through imports. As a result, guaranteeing timely access to quality and inexpensive medical items continues to be a challenge. One of the prime focuses of the Ethiopian government’s national growth agenda is the development of the local pharmaceutical sector as enunciated in the National Strategy and Plan of Action for Pharmaceutical Manufacturing Development (NSPAPMD). The strategic plan aims to boost local manufacturing to provide access to quality-assured medications while also contributing to the economy.

Ethiopia currently has fifteen factories in the sector, but only four meet local Good Manufacturing Practice (GMP) requirements while none are GMP certified on an international level by the World Health Organization (WHO). In comparison, Kenya with its population of 55.8 million people—less than half of Ethiopia’s—has over a hundred medicine manufacturers, 26 of which are GMP-approved.

The oldest player in the game, EPHARM, was established in 1964 as a joint venture between the Ethiopian government and the British company Smith and Nephew. It has endured boom and crash as well as reform and rebirth in its history as Ethiopia’s first pharmaceutical materials production factory. Teva Jerusalem of Israel took over Smith and Nephew’s share in 1971 before nationalization by the military regime. As private industry investment stagnated owing to communistic policies, EPHARM remained the country’s sole medications manufacturer until 1993. Then, reestablished as a public shareholding company in 1994, it was sold in 2014 for USD25 million to the Ethiopian businessman Mohammed.

The years between 1995 and 2004 were a season of boom and collapse with around ten new pharmaceutical manufacturers coming into play including East African Pharmaceuticals (EAP), Addis Pharmaceutical Factory (APF), and Sino-Ethiopia Associates. However, the new entrants faced significant hurdles as they were not competitive in pricing. Furthermore, the majority of the new factories were inefficiently structured and operating at less than half of their installed capacities. As a result of failure to fulfill loan commitments, four businesses were repossessed.

In the three decades of post-communist life, Ethiopia’s pharmaceutical industry has not made significant progress. “The primary reason for this is Ethiopia’s severe lack of foreign currency,” according to Mohammed. Nearly all of the raw materials must be imported and, yet, sector-actors are expected to cover 50Pct of local demand. Additionally, the sector faces irrationally-high government expectations as well as consumers’ low perception of locally manufactured medications.

Ethiopians struggle to trust the quality of their own locally made products. Particularly among the urban and better-off sectors of the population, there is a belief that expensive imported goods, especially from the West, are more effective and dependable.

According to an article published by BMC Health Services, promoting generic medication substitution in underdeveloped nations such as Ethiopia is a difficult task for a well-functioning and trustworthy medicine regulatory system. There are worries concerning the quality of medications as locally made generic pharmaceuticals, for example, are authorized without proof of bioequivalence, despite its cruciality for successful generic drug replacement. Also a factor is the lack of pertinent testing facilities. Further, inadequate drug regulating systems have detrimental impacts on physicians’ and patients’ perceptions of generic medicines.

Using generic medications of unknown quality risks under-treatment and catastrophic health repercussions. For example, in one reported case, Ethiopian medical authorities halted the production of a locally manufactured drug after receiving complaints from numerous health professionals about its ineffectiveness.

Therefore, the study suggests ensuring that these less expensive indigenous options are indeed interchangeable and can be used safely. This is required to change physicians’ and patients’ perceptions in Ethiopia. Towards this, it is critical to ensure the availability of quality assurance procedures, such as bioequivalence testing, as well as information distribution.

The Ethiopian pharmaceutical market is growing every year by 15Pct and was expected to reach USD1 billion in 2021. Yet, according to the government’s strategic development plan, NSPAPMD, the majority of firms operate below capacity and supply approximately only 20Pct of local pharmaceutical needs. Their product portfolios are also limited—covering only about 90 of the more than 380 products on the national essential medications list—and approximately 35 to 40Pct of their entire production is sold to private sector players at a 10Pct premium. With a population of more than 110 million people, improved access to health care, and a growing middle-class, demand is expected to skyrocket to USD3.6 billion by 2030.

Pharmaceutical production is a high-tech business that requires a wide range of equipment and facilities, as well as replacement parts. For the operation, installation, qualification, and maintenance of pharmaceutical production equipment, high-caliber professionals are required. As a result, the bulk of the equipment utilized by local pharmaceutical businesses as well as the professionals are from other countries. Ethiopian manufacturers get the majority of their equipment from China, followed by India, Europe, and Middle Eastern nations. However, spare parts import is a struggle owing to forex shortages and a scarcity of skilled local labor.

“In 2021, our government spent around USD1.12 billion. It could have saved at least 35Pct of forex outlays had pharmaceuticals been manufactured locally, in addition to gaining benefits towards technology and skill transfer, as well as job creation,” says Daniel Waktole, President of the Ethiopian Pharmaceutical and Medical Supplies Manufacturers Association (EPMSMA) and Managing Director of YOHA International Pharmaceuticals PLC.

There are now 15 pharmaceutical and four medical equipment manufacturers including large players like EPHARM, Julphar, and Cadila that are primarily manufacturing syringes, capsules, and tablets. Yet, 85Pct of pharmaceutical demand is imported into Ethiopia. In 2020, Ethiopia exported medical and pharmaceutical items worth USD1.67 million, which were primarily veterinary vaccinations made by the National Veterinary Institute and empty hard gelatin capsules produced by Sino-Ethiopia Associates to various African countries. Other local pharmaceutical companies have begun exporting to neighboring countries like Somalia and will soon begin selling to other countries, according to Daniel.

In the first six months of the current fiscal year, the Ethiopian Food, Beverage, and Pharmaceutical Industry Development Institute (FBPIDI) stated that USD1.97 million of pharma products were exported, showing a doubling from the figure of two years back. Further, in 2020/21FY, pharmaceutical imports totaled ETB26.6 billion according to the National Bank of Ethiopia (NBE).

Pharmaceutical manufacturing was identified as a priority sector in the second Growth and Transformation Plan (GTP ll) with Ethiopia being one of the first African countries to adopt such a national plan. It crafted a strategy to grow exports, substitute imports, and improve access to medication to become a pharmaceutical manufacturing hub in Africa. The ambitious 10-year national strategic plan covering 2015 to 2025 was unveiled to improve local pharmaceutical manufacturing capacity and expand access to locally made, quality-assured medications. The WHO, in partnership with the European Union Commission and the Bill and Melinda Gates Foundation, assisted the Ethiopian government in developing this plan.

While giving an overview Tsige Gebremariam, Professor at Addis Ababa University School of Pharmacy, highlighted the seven primary objectives of this ambitious plan: improve access to medicines through quality local production, create incentives designed to move companies along the value chain, strengthen the national medicines regulatory system, develop human resources through relevant education and training, encourage cluster development and production of active pharmaceutical ingredients, create a research and development platform, and attract foreign direct investments (FDIs) in the pharmaceutical sector.

However, according to Daniel, this policy is yet to be meaningfully implemented six to seven years on, perhaps preventing the nation from becoming a hub of medical manufacturing. More recently, under the Ten-year Perspective Plan, the production of quality and competitive pharmaceutical products for export and domestic markets has been one of the key manufacturing focus areas of the government between the years of 2021 and 2030.

The Kilinto Industrial Park (KIP) on the outskirts of Addis Ababa is expected to be a massive attraction for pharmaceuticals as operators there are expected to be fully specialized in the sector. With its capacity to accommodate over 1,000 firms and fitted with necessary facilities including wastewater treatment and a dedicated power substation, the site recently began productive operations with the Indian-owned Glocare Pharma. The USD5 million investment looks to produce 600 million pills and 7 million capsules annually.

“The park is a government-owned site dedicated entirely to the manufacture of medical products, with the goal of replacing 50 to 60Pct of pharmaceutical demand with locally made medicines in the next three to four years,” said Lia Tadesse (PhD), Minister of Health, while stating that the modality of the site is just on a cost recovery and not-for-profit basis. Prospective businesses are offered preferential land lease rates for a duration of 40 years.

Other governmental perks include preferential access to public procurement, i.e., a 25Pct price preference and advance payment of 30Pct for firms manufacturing in Ethiopia. There’s also a potential for long-term procurement guarantee.

For Abenezer, life continues with the new cream he secured from his pharmacist as HPV is not curable. Sustainable access to the cream is not reliable and he hopes the pharmacist will accommodate him even at unfair prices going forward.

The sector has continued to be a priority of priorities for subsequent administrations. Yet results are insufficient. It remains to be seen if KIP will be a cure-all for the ailing industry. The past two years under the pandemic have only directed more attention to the sector. According to industry insiders, few things need to be addressed. These include the availability of skilled labor, finance, and forex for spare parts; installment of supportive regulatory frameworks; and exertions to reverse consumers’ negative outlooks on locally manufactured medications.

EBR 10th Year • Apr 2022 • No. 106