Financing Innovation and Industry Development challenges in the African Pharmaceutical Sector

By Mourine Chepkemoi and Moses Owidhi

This blog is based on highlights and discussions held during the ‘Financing Innovation and Industry Development challenges in the African Pharmaceutical Sector’ webinar – AfricaLics Webinar Series No.4, held on 4th May 2023. The keynote speakers of the webinar were Dr. Geoff Banda (University of Edinburgh, United Kingdom) and Dr. Skhumbuzo Ngozwana (Kiara Health, South Africa). The webinar was moderated by Dr. Julius Mugwagwa (University College London (UCL), UK)


Introduction

African nations and regional economic communities need to develop a robust regulatory structure and strengthen their regulatory capacities. There is a need to change, re-engineer institutions and enable them to work for Africa’s current population’s needs.  The dependence on technological capabilities and industrial development has led to technological and industrial stagnation in African nations. The sectoral issues have been directly linked to the colonial extractive economic and political institution setups and mixes that are at the root of this long-running industrial underdevelopment rocks.

The pharmaceutical industry in Africa has been striving to enhance local production since the 1970s. However, the sector has faced limitations due to outdated technologies for many years. The persistent technological and industrial stagnation has primarily been attributed to political and economic factors, which have hindered long-term industrial growth. Institutional persistence, intertwined with financial capacity, underscores the need for the establishment of mutually beneficial local health-industry complexes. It also underscores the need for  creation of backward links for producing Active Pharmaceutical Ingredients (APIs), and the evident consequences of these complexities, namely the underfunding of the African pharmaceutical industry. As a result of these deliberations, it has become clear that African nations and regional economic communities must establish a robust regulatory framework and reinforce their regulatory capabilities.

Dr. Geoff Banda – University of Edinburg, UK


There are at least 29 African countries that manufacture pharmaceuticals drugs, 4 countries manufacture vaccines and with nearly 650 plants in Africa, with only a few countries that have no data in this regard.

Evolution of African Pharmaceutical sector

Pharmaceutical manufacturing in sub-Saharan Africa (SSA) has established itself as an industry with a long-standing history, dating back to at least the 1930s. The local manufacturing of pharmaceuticals experienced a gradual emergence in leading industrial countries within the region, namely Kenya, Nigeria, South Africa, and Zimbabwe, spanning from 1930 to 1960. The origins of local pharmaceutical manufacturing in these countries can be traced back to multinational European companies establishing subsidiaries in their colonies. However, from the mid-1990s, there was a resurgence of industrial investments in new pharmaceutical plants led by local investors across many countries. In some instances, after gaining experience in multinational companies, local entrepreneurs ventured into setting up their own production facilities, reflecting a pattern similar to the evolution of the Indian pharmaceutical industry. African manufacturers predominantly import APIs and excipients from India and China, with only South Africa and Ghana having developed some level of technological capabilities for local API manufacturing.

A striking technological and industrial stagnation has been observed in African countries, raising several pertinent questions. Why do technological and industrial stagnation persist in African countries? What historical events have influenced the path dependencies in technological capabilities and industrial development? How do the colonial political economy roots contribute to the enduring underdevelopment in this sector? What role do colonial extractive economic and political institutions play in exacerbating sectoral challenges? Technological-driven change is a crucial driver of sustainable economic development, necessitating inclusive institutions, inclusive political institutions, and inclusive economic institutions.

During the Industrial Revolution in Europe, Africa served as the center of raw material production, the established institutions persisted even after independence. However, the political and economic institutions did not adapt to the changing imperatives. The presence of colonial extractive economic institutions hindered progress, as they lacked impartiality and instead aligned with the political and economic aspirations of those involved in their design. The institutions created during the colonial era with specific purposes continue to serve those purposes if they are not redesigned, reinvented, or re-engineered.

Given that the political, technological, and economic institutions were never designed to make African industries globally competitive but rather to maintain a subordinate role in global value chains. Innovation systems require a critical reassessment of the concept of institutions, particularly in the context of catch-up economies or industrialization.

The presentation aimed to address four main issues:

Scarcity of policy design capabilities at national level

Due to lack of the required skills, majority of policies are structured or created at supranational and regional levels, which is problematic. It becomes very challenging to put in place all the other arms that will help in developing the sector if you don’t embed the industrial development in economic development, which is rooted in technological change. If a nation has adopted technological change-driven innovation as a policy for economic development, it should search for the pillars that support this change in order to promote economic growth.

Financing and solving institutional challenges for research and innovation, industry development, and entrepreneurship

To support research and evidence-based policies that will contribute to economic and social development in SSA, the science granting council’s initiative (SGCI) is currently leading the charge.  Agriculture and health, which still have ties to the colonial agenda, continue to receive quite a bit of support. Agriculture received support with a focus on supplying the centers with raw materials and the health sector for healthy staff that could work in these industries.   

Finance for industry is expensive- the dominant financial institutions are the commercial banks, set up to defer to finance industry development and entrepreneurship. High interests and short-term financial support offered by the financial institutions were issues that the pharmaceutical industry did not fully understand. Many pharmaceutical companies might not be aware of the proper funding sources for the pharmaceutical industry’s development institutions both inside and outside of the continent.

Importance of building new institutions that support and de-risk early stages of innovation and industry development.

The United Kingdom’s regenerative medicines sector is currently supporting various agencies like the lifeline health systems, universities, etc. This is aimed at reducing the risk the early stages of any commercialization.  The aim of these new institutions should be to address the technological, policy, infrastructure, and entrepreneurial challenges for the emerging technologies.

Building strong local regulatory capabilities for emerging technologies.

Regulatory capabilities in the drugs sector are more developed than for vaccines, with only 4 countries with manufacturing capabilities.  African countries still have high reliance of the European standards although the local regulatory agencies are being involved. There is need to build capacity for African regulators and mentoring especially during these inspections and interlinked exercises going on. Local medical regulatory agencies have experience dealing with local companies and although certain conditions may not be met, there are existing roadmaps for improvements. 

Dr. Skhumbuzo Ngozwana – Kiara Health South Africa


Challenges facing the pharmaceutical sector from a private sector perspectives. 

Health Ministries in African Countries have not been given the appropriate attention. The governments have a narrow lens to healthcare and are merely seen as social issues and expenses. This is an economic growth issue and directly affects investments and value-based procurement. There is need to build resilience and sustainable health system that can supply a minimum priority essential medicine to the African countries. 

Industrial development Challenges

Generally, there is a need for the provision of supportive policies and investment by ensuring that the environment is favorable for business, that incentives are tailored, that registration procedures are simple and straightforward, and that regulators are effective to validate a product’s quality.   

  1. Incoherent government policies and lack of income industry or coordination– This may be very difficult to accomplish unless the highest levels of government coordination and leadership take the initiative. An illustration would be Bangladesh, which went from importing 90% of its necessities to only about 4% at the moment.
  2. Access to markets – competition from Indian/ Chinese manufacturers. There is a preference for products that come primarily from India, and increasingly also from China.
  3. Requirements for WHO-PQ (World Health Organization Product Quality) for funded markets – it’s a great initiative but an unintended result of that is that it has excluded African manufacturers from the international market and the tragedy of this tragic disease.
  4. Lack of access to finance/patient capital – Access to technology & Products becomes difficult. The high interest rates for loans and the long registration processes (strict sector) to enable entrepreneurs to join the market.
  5. Shortage of technical skills – there are skilled personnel in the continent, they are very few.
  6. Access to reliable quality assured APIs – The industry needs the skills, educational system and access to reliable production in its primary API. Competition here is very high and the alternative sources might not have the proper requirements.
  7. View of health and Pharma-expenses vs- significant driver of economic activity– National leadership is increasingly becoming a requirement. Building local capacity is now a moral obligation as well as a matter of health, security and resilient health systems.

Interventions to develop a local man.

Building a global coalition for global advocacy and leadership in health security in Africa has become imperative. Africa possesses sufficient capacity to produce its own essential medicines, making the development of local capacity not only crucial for health security and resilient health systems but also a moral imperative. This entails the creation of supportive policies and investments, customized incentives that align with current situations and objectives. It also involves and the establishment of efficient regulatory frameworks such as Good Manufacturing Practices (GMP) and WHO-PQ certification support for funded markets.

Support for product development and access to products and technologies, along with the implementation of a manufacturer development program for priority essential needs, is essential. Additionally, facilitating market access and preferential procurement for locally manufactured products are vital steps that require bold decisions and a willingness to take risks in pharmaceutical manufacturing investment.

Skills development and technology transfer are also of paramount importance. This includes not only enhancing managerial skills but also technical skills, marketing skills and addressing other critical developmental issues. Access to affordable and appropriate financing instruments, including patient capital, must be prioritized, along with ensuring reliability and competitiveness in production input costs. Consideration should also be given to initiatives such as pooled API procurement.

By focusing on these measures, a global coalition can effectively promote health security in Africa, enabling the continent to produce essential medicines, bolster its pharmaceutical manufacturing capabilities, and ultimately contribute to the overall well-being of its population.

Discussion

  • There is need to be strategic and purposeful as a country/ continent – Looking into how to be competitive, being deliberate in collaborations and focusing on the industry. Coordination is really needed here to achieve set goals, led by the national government, and going beyond boundaries of support from the developed countries.
  • Local capabilities in African are underrated, this is the place with great knowledge, great understanding, great market for great volumes and not just a recipient of the products. This bottom-up scenario brings in economic advantages and builds resilience that’s required now.
  • Local integration is becoming a necessity in the pharmaceutical sector. Very little information on this locally within a country and little integration regionally. Logistics has limited quick access between African countries. However, there are institutions that can work together within African countries for join product developments, etc.
  • Supranational policies – Supranational policies are still acceptable given the limited capabilities of small countries. However, what are the strategies for economic growth that serve as the driving force? STI policies should be in place to help translate the development of economic policies and address issues facing the nation.
  • There is need for a paradigm shift in the institutions where the economic policies are embedded in technological change driven (incremental and/or radical innovation), re-envisioning these institutions to become globally competitive. This can go back to the curriculum taught in schools, at industrial sector, linkage between different sectors, value chain inclusivity,
  • Low hanging fruits in the industry- includes medications that are about to lose their patent protection, off-patent medications that were still effective after major corporations went out of business, and African nations that can concentrate on these medications. A low hanging fruit could be achieved by nations cooperating to reduce the importation of drugs and by the African Development Bank funding development products.
  • Indigenous/traditional medicine – There are numerous traditional medicines being practiced in various African nations, and this is a field that needs to be investigated.
  • Navigating from ideology to actualization/delivery- Concerns about the pharmaceutical industry can be directly grouped under concerns about national security, industrialization, or health security.

Conclusion

Institutions play a critical role in the innovation system as they recognize the significance of technological change-driven innovation in fostering superior economic performance and competitiveness. However, institutions are not value-neutral; rather, they mirror the social, political, and economic objectives of their creators.

The problematic financial, technological, industry development, innovation brokerage, and regulatory institutional frameworks in Africa can be attributed to the colonial institutions that were established. To transition towards the production of innovative technologies, a radical repurposing of these institutions is imperative. It is evident that Science, Technology, and Innovation (STI), along with the supporting financial and innovation broker institutions, need to be effectively interconnected.

This is an opportune moment to leverage the existing resources on the continent and strategically create an environment that fosters pharmaceutical manufacturing for the African market. The realization of a self-sufficient African pharmaceutical industry is swiftly coming to fruition by capitalizing on available opportunities and driven by the sustained political will and commitment of African leaders.


Invitation for Feedback

Your ideas, research, and any additional information are welcome to add to this conversation, expand it, or give it a new angle. Please feel free if you wish to contribute to the discussion and don’t hesitate to reach us through secretariat@africalics.org.  


About the speakers

Dr. Geoff Banda – University of Edinburgh, UK

Experienced Innovation, Finance, Risk, Regulation and Governance Researcher focusing on life sciences, developing country pharmaceutical sector and emerging technologies with a demonstrated history of working in interdisciplinary research teams. Skilled Corporate Banker with experience in Commercial Lending, Relationship Management, Risk Analysis and Management, Trade Finance, Structured Trade Finance, Structured Export Finance, Transactional Banking, Commercial Banking, and Competitive Analysis. Excellent leadership and management skills in banking and manufacturing sectors with a PhD in Finance, Innovation and Industrial Development from The Open University (UK)

Dr. Skhumbuzo Ngozwana – Kiara Health, South Africa

Dr. Ngozwana is CEO of Kiara Health, a South African based, and Africa-focused internationally GMP compliant pharmaceutical manufacturing, and ISO 13485 certified medical device company. He is the Chairman of the board of Biovac, a South Africa based vaccine manufacturer, and a board member of the Federation of African Pharmaceutical Manufacturers Association (FAPMA), and the Global Action for Fungal Infections (GAFFI). He is an international expert on the African Pharmaceutical industry and has worked in both private and global public health organizations. He consulted to the World Health Organization (WHO), United Nations Industrial Development Organization (UNIDO) and the United States Pharmacopeia Convention (USP). 

Dr. Julius Mugwagwa  – University College London (UCL), UK

Dr. Mugwagwa is an Associate Professor in Innovation and Development at University College London, Department of Science, Technology Engineering and Public Policy (UCL STEaPP). He also serves as the Global Health Thematic Director for the UCL’s Global Governance Institute. He has worked in veterinary research, pharmaceutical R&D, quality assurance and harmonization of medicines regulatory systems in Africa. He is an accomplished scholar and published author in the areas of innovation and development, global health, health innovation and health system strengthening, buttressed by his research and teaching interests in the governance and development implications of technologies and innovations.

Financing Innovation and Industry Development challenges in the African Pharmaceutical Sector

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