Africa rising
pharmafile | March 26, 2013 | Feature | Manufacturing and Production, Medical Communications, Research and Development, Sales and Marketing | Africa, Lunt
Africa has been a byword for poverty, disease and political turmoil for generations, and many people in the most developed nations perceive it to be a continent still mired in problems.
But the last decade or so has seen huge progress in Africa. Countries across the continent have realised rapid improvements with economic, social and health factors. In health terms, the changes in the last decade have been immense: child mortality rates have fallen steeply in most countries, while malaria deaths in the worst-affected countries have declined by 30% and HIV infections have fallen by up to 74 per cent. Use of antiretroviral medicines has increased from just 50,000 in 2002 to five million people today.
Public health problems are still extremely grave for some, but great improvements mean that some sections of African society are increasingly requiring the same medicines and healthcare as patients from the most developed nations.
Speaking to US publication The Philadelphia Inquirer, GSK’s chief executive Sir Andrew Witty said recently: “Africa is coming. It might not come the same way as India or China or Latin America, but it is coming.”
Meanwhile, Novartis chief executive Joe Jimenez told Reuters recently: “We’re thinking hard about what happens when those emerging markets start to slow, because they are not going to continue growing at the rate that they’re growing forever. And a place where we’re putting a lot of our attention is Africa.”
Pharma sector consultants and data specialists IMS Health recently launched their own in-depth analysis of Africa, and its potential as a growth market for the sector. IMS Health says key pharmaceutical spending in Africa is expected to reach $30 billion by 2016, with continent’s pharma market possibly reaching $45 billion in value by 2020.
Spurred on by this and the continuing movement of growth opportunities away from the traditional pharmaceutical markets, a leading provider of information, IMS Health recently conducted a study exploring what pharma has to do to make the most of Africa’s potential.
The challenges for developing a viable market strategy are formidable. Understanding the dynamics and underlying demographics is key to ensuring a sustainable business model for the future.
Pharma already present
Some of the world’s leading pharma companies are already doing a substantial amount of business in Africa, such as BMS, Sanofi, AstraZeneca and GSK.
IMS Health’s research has lead it to believe that Sanofi, which places significant emphasis on engagement in the market with appropriate stakeholders, as well a collaborative partner approach, is among the firms using best practice in the region.
Matthew Featherstone, principal, Consulting Group, at IMS Health, and one of the authors of its white paper, says the firm had presumed ‘first mover’ status in Africa might be significant.
“At the beginning of our research, we tried to comment about the first mover advantage as a stimulus to make rapid investment in Africa,” Featherstone explains. “After investigation,” he says, “we found that the ‘first mover point’ does not hold on this continent. There are far more important attributes to successful business in Africa than the time of your entry.”
A significant economic force
Growth in Africa’s pharma markets are a reflection of growth across economies. The region of sub-Saharan Africa (SSA), excluding South Africa, is notable in this regard. The Economist Intelligence Unit says economies are growing faster here than anywhere else in the world.
Africa currently accounts for just 3% of the global economy, but its potential for growth is attractive for the industry.
“At the moment Africa as a continent is a small opportunity, in terms of total sales relative to emerging markets and Asia Pacific. However, we expect very strong growth in the African markets to continue through the decade, at a time when it’s possible that some of the big early-growth emerging markets, such as China, may start to see decelerating real GDP growth,” says Featherstone.
Underpinning these prospects is a series of positive economic trends. Greater political and fiscal stability, matched with improvements in pro-business legislation, have led the United Nations to forecast that Foreign Direct Investment (FDI) in Africa could more than double by 2014.
This is despite speculative money leaving the continent following the collapse of Lehman Brothers, and restriction of investment in North Africa following the Arab Spring. Thus, despite being labelled the ‘hopeless continent’ by The Economist back in May 2000, Africa is now being fuelled by both macroeconomic growth and vastly improving access to new technology.
“Factors that have been really powerful for the emergence of Africa from 2002 to 2012 include rising commodity prices, investment from China into its infrastructure, an increase in FDI, an improvement in business legislation and the opening up of trade,” says Featherstone. “They also include the diversification of economies away from dependence on resource extraction, and increase in manufacturing, improved telecoms services and a boom in agriculture,” he says.
“The pharmaceutical industry therefore needs to recognise in a timely fashion that this is a macroeconomic opportunity. Now is the time to help shape the emergence and development of the pharmaceutical industry and landscape at a general African level, as well as at a regional and individual country level, and to engage with key components, stakeholders and, of course, patients.”
A shifting healthcare profile
Alongside increasing economic wealth is a notable rise in healthcare spending which, according to the report, has grown at a compound annual growth rate (CAGR) of 9.6% since 2000 across 49 Africa countries.
Powered by government, non-government organisations (NGOs) and private sector investment, this has largely focused on strengthening health system infrastructure, capacity building, treatment provision and specialised services. With the expected growth of real gross domestic product (GDP) at 5% per annum through 2017 in SSA, this trend of rising healthcare spending is expected to continue.
While the struggle with infectious and parasitic illnesses is expected to continue, the continent is also experiencing a changing disease burden and profile. As many regions of Africa are now putting poverty behind them, greater prosperity brings with it the rise of ‘Western diseases’ such as heart disease and cancer. This shift towards non-communicable diseases (NCDs) is expected to produce increased demand for chronic care drugs.
The proportional contribution of NCDs to the healthcare burden is forecast to rise by 21% up to 2030. Africa is expected to experience the largest increase in death rates from cardiovascular (CV) disease, cancer, respiratory disease and diabetes over the next 10 years, resulting in greater demand for healthcare services and appropriate medicines.
“This is not so much about the change in prevalence but, at the top level, the ability of countries within Africa to focus and provide more care around more chronic conditions, as opposed to having to concentrate on communicable disease such as HIV/AIDS,” Featherstone says.
“If you compare Africa to every other major emerging market, they have all gone through the same transition as individual wealth increases and people’s lifestyle changes. And this remains true for Africa. NGOs are already beginning to realise this and are not just thinking about the burden of communicable disease in Africa, but also about how, in the long-term, non-communicable diseases will impact rural areas.”
That said, a gulf remains between the Western idea of medicine, and that employed in Africa. “There is a big difference in terms of the rate of evolution of the pharmaceutical market in Africa, versus some of the more developed pharma markets around the world,” says Featherstone.
Indeed, the evolution of the African healthcare spectrum could be said to recall the development of healthcare in the US, with its progression from the unlabelled bottles of snake oil of the 19th century and the days of the Wild West, through to the evolution of pharmacies and the formation of the first pharma companies.
“Africa is evolving – it is on the spectrum and is moving faster along it than ever been before,” Featherstone says.
A multi-faceted continent
Africa’s countries are, of course, very diverse in their languages and culture, and level of economic development. This also applies to pharmaceutical growth and trading blocs. Understanding the nuances and navigating the challenges of this heterogeneity is therefore the key to establishing successful and sustainable operations in Africa.
The heterogeneous nature of the region means that while some countries such as South Africa, or those in the Northern African region, benefit from large and well-established pharmaceutical markets, others, such as sub-Saharan Africa, offer the inverse.
“One also needs to be cogniscent of the dynamics between north and south, and of what is driving the differences between regions,” says Featherstone. The combination of economic strength and an expanding middle-class in countries such as Algeria, Morocco and Tunisia: points not only to a rise in wealth but also to the triggering of a demand for chronic medicine consumption.
In Algeria, for example, the chronic medicine to essential medicine ratio increased by 72% from 2002 to 2011, accompanied by a total Gross National Income (GNI) increase of 70 per cent. According to the IMS Health white paper, similar trends are likely to emerge in countries such as Kenya and Botswana, where NCDs have been declared a national priority at ministerial level.
The report also draws attention to the fact that there is vast diversity on an individual country basis. In particular, huge differences lie between rural and remote areas and the cities.
“There is increasing urbanisation in Africa – and it is in the cities where the population that is both wealthy and educated seeks out healthcare,” Featherstone says. “In addition, this is where the infrastructure to provide the healthcare is most likely to exist now or will evolve rapidly.”
Indeed, an IMS Health market prognosis from September 2012 estimates that between 20 to 30%, or $6-9 billion, of Africa’s $30 billion opportunity in 2016 will be driven by the continent’s top 10 cities, defined by the percentage of total country spend on pharmaceuticals.
The Africa top 10 cities include Alexandria, Cairo, Algiers, Casablanca, Algiers, Lagos, Johannesburg, Cape Town, Pretoria, East Rand and Durban. The prognosis ranges from Alexandria, Egypt, with an estimated 11%, or $0.6 billion, of total country spend in 2016, to Cairo, with a 33%, or $1.8 billion, of total country spend by the same date.
These figures, however, are pipped by Casablanca, Morocco, with an estimated 38%, or 1.6 billion, or total country spend by 2016.
“Our findings about the cities contain some quite novel insights. In particular, they point to the need to think about Africa in an urban context, which is much more helpful than viewing the continent as simply a collection of regions or countries,” Featherstone adds.
Other unique challenges
The development of the pharmaceutical industry in Africa presents other unique challenges, according to the IMS Health team. These include the path to market, which is about getting drugs to individual markets, and the path to the patient, which means making sure that patients in the cities or small towns have access to basic healthcare and are also able to access the particular medicine they need reliably.
“Of the many different challenges in existence, one of the key things is regulatory and market access,” says Featherstone. The education of doctors has a vital part to play in terms of the path to the patient.
“The training and development of physicians is not what people had really hoped for and there is a long way to go in terms of increasing their education. Focusing on how to better support physicians could be one of the most appropriate places to start,” he says.
“We argue that there are benefits for pharmaceutical companies in getting involved in overcoming these barriers, for example via continual medical education,” he added.
“This is something that pharmaceutical companies may have done for years, but might not have thought about in terms of overcoming the barriers on the path to patient. It’s about expanding what the definition of industry’s role in the market can be.”
From a patient perspective, patients must pay for most medication out of their own pockets, presenting a challenge in terms of affordability.
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