Pharmaceutical industry and national development

For the Nigerian pharmaceutical industry that is virtually import-dependent from raw materials to finished products, the quantum of negative exchange rate movement over the last one year has meant skyrocketing prices for pharmaceutical products for those who could source forex. It has also meant reduced capacity utilization for the pharmaceutical companies who are unable to source foreign exchange for their raw materials.

The current situation however calls for a deeper reflection on how we would build and develop a pharmaceutical industry that is increasingly less import dependent, and by so doing can absorb the shocks of foreign exchange volatility, which is inevitable in the boom and bursts of global economic cycles. How do we build a pharmaceutical industry that is competitive, at least in some areas of the pharmaceutical industry value chain; and become a critical local player in addressing the health needs of our people while also dominating the exports market in West Africa?

Charles Soludo in his lecture titled “Can Nigeria Manufacturing and Pharmaceutical Industry Compete” at the Nigeria Association of Industrial Pharmacists Conference six years ago, in September 2001 x-rayed these issues. The summary of Prof Soludo’s argument, which I extend further, is that the competiveness of the pharmaceutical industry cannot be divorced from the competitiveness of the overall manufacturing sector and the Nigerian economy.

Nigeria has consistently ranked near the bottom on international competitiveness ratings such as  the recent World Bank’s Ease of Doing Business (released last month) where Nigeria ranked 169th out of 190 countries, the World Economic Forum’s Global Competitiveness Index (GCI) also released last month where Nigeria dropped 3 places to 127th out of 138 countries and was only better than countries like Serria Leone and Malawi,  Mo Ibrahim’s Africa governance index (36th out of 54 countries), Transparency International’s corruption perception index (136th), UN’s Human Development Index , Failed State Index where Nigeria is in the top 15 of the most fragile states in the world.

The competitiveness issues where Nigeria has consistently scored low include infrastructure, access to finance, security, corruption and governance, quality of education, skilled manpower and labour productivity. This low competitiveness prevents Nigeria from benefiting from the “flying geese” economic theory model that says that when labour cost increases in developed markets, old technologies, factories and production moves from developed countries to lesser-developed countries with cheaper labour cost. China and Japan benefitted from these model as factories moved production from the US and Europe to China.

You will recall that this is one the electoral campaign issues of Mr. Donald Trump in the American elections. It should normally have been expected that as China gets more prosperous with wages and labour cost increasing, that global factories and production will then also move to Africa especially Nigeria, given our huge population. This is however unlikely to happen as we do not have the basics in place, like infrastructure, governance, transparency and regulation, skilled and vocational workforce to harness this economic dynamic.

The extension of this argument is that while we have seen global pharmaceuticals in a flying geese from Europe (Beechams and Glaxos in the UK) to Asia (in the Ranbaxys in India), unless we deploy the right economic and governance actions, we may not see the pharmaceutical geese flying from Asia to Africa or Nigeria. The geese may be stuck in Asia, in India and China for a long time to come. This is essentially what we have today with the Nigeria pharmaceutical industry with Western multi-nationals dominating advance medicines category and the Indian and Chinese companies dominating the manufacturing of basic generic medicines, leaving our local players to be largely importers of finished products or raw materials.

What must we do to make the pharmaceutical industry geese fly to Nigeria in Africa from India and China in Asia?

Nigeria must develop and adopt a formal comprehensive “National Strategy and Plan of Action for Pharmaceutical Manufacturing”. While researching this paper, I was shocked to see that right under our eyes, some smart African countries like Ethiopia have developed such framework and implementing such, essentially leaving Nigeria behind. The following recommendations on the issues, which the National Strategy and Plan of Action for Pharmaceutical Manufacturing must address, are largely adapted from the Ethiopian framework.

Firstly, we must have improvement of access to medicines through quality local production and implementation of the Good Manufacturing Plan Road Map. Nigeria now has four local companies certified as compliant with WHO Good Manufacturing Standard. We congratulate them on the achievement. We however need to make such standards the norm and not the exception. A formal public and private, inter-sectorial partnership, involving the Federal Ministry of Health, Federal Ministry of Trade and Industry, NAFDAC, PGMAN, PSN and the multilateral agencies need to be deployed to make this happen. This is indeed the model that has been deployed in the Ethiopian Plan of Action.

Secondly, we must strengthen the National Medicine Regulatory System. We must continue to strengthen efforts and capacity to eradicate fake drugs and medicine in the pharmaceutical supply chain.

Thirdly, we must create incentives to move our local companies progressively along the pharmaceutical industry value chain from importation of finished products to local manufacturing. We must drive import substitution more aggressively. Government must deploy incentives that moves local players increasingly from importation and distribution of finished pharmaceutical products (Level 1 of the pharmaceutical value chain)  to packaging and labelling of imported bulk finished products  (Level 2) and then to real product manufacturing which is the manufacturing of finished products from imported active pharmaceutical ingredients (APIs)LEVEL 3,  and then to local Active Pharmaceutical Ingredient manufacturing in Nigeria at Level 4) and ultimately Research and Development of new chemical or biological entities( Level 5).

·      To be continued

 Olu Akanmu