India on African Safari

While Europe and US still figure on the priority list of the Indian pharmaceutical companies, there is Africa which is not high in the list. But it is not a market small enough to be ignored either. Nandini Patwardhan finds out what Indian pharma is up to in Africa.

Indian pharmaceutical companies have trained their sights to conquer Europe and US when they still have other markets, like Africa, deeply etched on their agenda. While Africa might not be too big and lucrative, a market like the former, neither is it too minuscule to be ignored by Indian pharma, which is set to dominate the world pharma space.

Zoom on Africa

While figures on the African market are not easily available, Hyderabad-based Cygnus Research states (in its report Trade with Africa released in 2005) that Nigeria is the most lucrative market within the African continent followed by South Africa. According to the report, Nigeria is the major export destination for formulation products exported from India and almost one-fifth (20.48 percent of the total exports to Africa) of the exports to Africa can be attributed to the country. Next major countries as export destinations for the Indian pharmaceutical and other related products are South Africa, Kenya and Congo People’s Republic with a share of 10.37 percent, 6.50 percent and 4.08 percent respectively.

"As far as volumes go, Nigeria is a big market, but there is no patent law existing in that country. Also not the sales that happen there are systematic. So even though the size of the market is big, it still has its own ways of doing business," explains Ashwin Thacker, Chairman and Managing Director, Flamingo Pharmaceuticals. "As against this, South Africa is by far a regulated market and is another big market. But from Flamingo perspective, Kenya is a big market for us and we have 115 odd products already registered in that country," he adds.

Business environment

S V Veerramani, Chairman, SME Committee, Indian Drug Manufactures Association (IDMA) and Chairman and Managing Director, Fourrts (India) Laboratories

Currently, the pharmaceutical scenario in Africa is focused on imports, while local production mainly focuses on generics. Also, most of the African nations are identified as under-developed, hence, a quantum of health care funding is being channelled through organisations such as UNO, WHO and the World Bank. "Apart from this, HIV has been identified as a major threat to the continent and some of the leading Indian manufacturers are supplying Anti-Retroviral (ARV) formulations at lowest possible price as a part of humanitarian service," states S V Veerramani, Chairman, SME Committee, Indian Drug Manufactures Association (IDMA) and Chairman and Managing Director, Fourrts (India) Laboratories.

In addition to ARVs, Indian companies also export anti-infectives to these countries. "25 percent of the African population i.e. every one person out of four has an HIV incidence. So of the many battles there, Africa's own desire to get cheaper drugs is centred on these HIV drugs. So that is one of the biggest pieces to look at," reveals Sujay Shetty, Associate Director, PricewaterhouseCoopers. Then there are sanitation issues, which have resulted in a disease profile that is pretty similar to India. However, the domestic (African) industry is not very well evolved and India is the most preferred country to source pharma products because of its quality and its competitiveness. According to the Cygnus report, in 2004, amoxicillin was the first majorly exported formulation product from India with the export value of Rs 49.90 crore. In addition, products whose exports to African countries grew drastically included anti-ulcer drugs like cimetidine, rantidine, nizatidine and roxatidine followed by haematinics and erythropoietin. The report also states that in the same year formulations of rifampicin and quinine derivatives recorded a stupendous growth and there was an increase in ciprofloxacin and ibuprofen exports. Among the top 10 products, anti-infectives alone contributed to more than seven percent of the overall formulation exports. Latest anti-malarials single and multi-dose combination, as approved by WHO and ARVs, also witnessed a huge demand.

Indian endeavours

Amar Lulla, Joint Managing Director, Cipla

Indian pharma companies, big and small, have been focussing for long on the African markets. Some of the Indian players have acquired companies in South Africa. Some other companies are now into JV to have a unit in Ghana. "On part of Export Promotion Council, delegations have been arranged to visit many African countries to explore the market and support Indian manufacturers to tap the vast potential," states Veerramani. "In Africa, we are present in 22 countries. Antibiotics and anti-malarials are driving products in Africa for Flamingo," states Thacker. "For instance in West Africa, we have a Red Iron syrup, which is doing exceedingly well because we are doing the promotions through the local team in all the 10 West African countries. In Uganda Ofloxacin tablets have good sales and in Ethiopia we have Ceprofloxacin, which is the brand leader," he adds.

The company has a specialised sales and marketing arm in each of the countries that has resulted in an impressive performance. Flamingo has local teams in these countries who distribute their products. The local sales team has a country manager from India or one that is selected over there. These people undertake market research when Flamingo wants to register a new product. They approach the doctor community, hospitals, conduct CMEs, etc to promote the product once it is launched.

Cipla too has its sights trained on the African markets. "We are present in all the 53 markets of Africa. We have our AIDS drugs supplies to these markets. In addition to the AIDS drugs, we supply asthma, malaria, anti-cancer, cardiac, antibiotics and a variety of other products to these countries," states Amar Lulla, Joint Managing Director, Cipla. "WHO is one of our customers. We also supply to various other bodies, including NGO's, UN agencies and Health Ministries. We are also involved in technology transfer agreements with companies in Uganda, Nigeria, Gabon, Egypt, Morocco & Algeria," he adds.

"Ethical promotion by qualified personnel to the medical professionals, own representative offices, Country Managers with dedicated sales force are major activities undertaken apart from JVs and acquisitions done by Indian pharma companies to tap the African market," reveals Aditi Kare Panandikar, Director, Business Development and HRD, Indoco Remedies. Recently, Ranbaxy Laboratories acquired Be-Tabs Pharmaceuticals, the largest manufacturer of penicillin formulations in South Africa. Be-Tabs also markets and manufactures a portfolio of ethical and over-the-counter solid-oral and liquid formulations in South Africa. According to the company's press release, the deal is valued at 500 million Rand ($70 million) and is expected to make Ranbaxy the fifth largest generic pharmaceutical company in South Africa.

"The revenue coming from African countries accounts to 11 percent of the total exports of Indoco," states Kare-Panandikar. Indoco has already initiated activity in South Africa and has audited its manufacturing facilities as well as submitted registration files of three products. "We hope to achieve good business in the next financial year from this market," she adds.

Understanding the market

Ashwin Thacker Chairman and Managing Director Flamingo Pharmaceuticals

Africa is very conscious now for better quality medicines at affordable prices. The domestic production in many of these countries is very negligible. So there is a need for imports. Also, all across Africa, each country as a market behaves slightly different from the other. Some of these markets are very much generic and some are branded generic in nature. "In East Africa, Kenya would be a branded generic market. Brand promotion is possible and doctors welcome the medical/promotion executives to come and visit them," reveals Thacker. "In West Africa, Ivory Coast is a branded market. Some other countries like Zambia and Zimbabwe are not that much into brands and they are more of generics markets and work more on the tender business," he adds.

The South African pharma market is considered as the most lucrative market in the African continent. It is also considered as being the most developed economies in the continent with high purchasing power, and with regulations as stringent as in other developed parts of the world.

Regulatory aspect

Different economic conditions, business practices and varying domestic manufacturing capabilities coupled with uneven disease profiles also reflect on the regulatory environment for the pharmaceutical industry. But a number of countries from Africa are laying increasing emphasis on plant inspection and product registration from supplying companies. "Africa is getting more and more regulated thereby reducing chances for unorganised players and fly-by-night operators," states Veerramani.

Now-a-days, products are being accepted only if the factory is pre-approved by the Ministry of Health and the product is registered in the country. The prices are becoming more and more competitive as more and more people get their plants approved. In countries like Kenya, Zambia and Zimbabwe, the process goes like this—first companies have to get their plants approved, following which they can put dossiers for registrations. After the product is registered the companies are qualified to sell those in the countries. Different countries have different regulatory and time scales. But more or less this is how the sales start.

Different countries have their respective Ministries of Health, under which there are regulatory bodies, which are principally also checking the dossiers. "The Ministry of Health is basically the inspection agency," states Thacker. "You pay the fees and when they combine 10 or 15 plants per inspection, they visit them in India, do inspection, give approval and subsequently, then you as a company are qualified to register your product from that manufacturing facility. All the plants which we offer them for inspection would be WHO GMP certified. That's the pre-requisite," he adds.

Current trade practices

Aditi Kare Panandikar, Director, Business Development and HRD, Indoco Remedies

Sales in Africa work on Letter of Credit (sight) or advance payment or 50 percent advance and 50 percent on receipt of goods or depending on the credibility of the importer DP (Documents against Payment) terms (though may opine that LC costs are unaffordable for the importers in the private sector). The market is divided into government procurement agencies and importers and wholesalers in private market. "The ratio is normally 60 percent to 40 percent in most African nations. Banking channels are not very well established and are very costly," states Kare-Panandikar. "Other than government purchases, most transactions are on advance payment (in case of bulk purchases) or on DA (Documents against Acceptance) 90 days–120 days credit terms," she adds. Experts also state that products are registered in the company's own trade marks. Export operations are made through well established importers in respective countries with a sound track record of payments and companies participate in government tenders directly or through the appointed agents.

The hurdles

The African market may seem simple to navigate, but only a seasoned player will be aware of the problems that plague the same. For starters, the economies in most African countries are volatile and one can see a constant fluctuation in the respective currency values. The FDA norms of most countries, except for some, namely South Africa, Uganda, Egypt, Nigeria and Sudan are not stringent, thus enabling small players to enter and spoil the market without following WHO cGMP norms at manufacturing units.

"This is one of the most major problems posed by African markets. There is a need to implement stringent guidelines for registration and plant approvals to ensure quality medicines imports in the country. Other problems like cross-border infiltration of products, illegal imports of medicines through travelling passengers continue to pose a threat," states Kare-Panandikar.

"Companies face problems of thefts at the port, long delays in transit especially for land locked countries, at times, delay in payments for payment instruments that are routed through European Banks and the big problem of counterfeiting, especially if the brand is well established," asserts Thacker. Additionally, there is a law and order issue in Africa. "Economic and political conditions quite change and you cannot be certain that today you are in one market and you will always continue to grow in that market because of import regulations and political situations. If for e.g. there is an election in that country, things go a little slow for that particular year," he adds.

Locked potential

Whatever the problems posed by the continent, it surely does hold potential for Indian pharma and having realised this, Indian companies are going for the kill. Some of the factors that are expected to catalyse growth in the region are increased healthcare allocation expenditures, growing prevalence of lifestyle related diseases and ballooning aged population and epidemics in this region. "Increase in population on one hand and rapid spread of killer diseases like HIV and malaria on the other has stroked drug demand, especially for higher yield pharmaceutical products attracting the attention of pharma companies," states Veerramani.

The governments in the region have favoured healthcare policies focusing reforms on curbing expenditure and encouraging private sector participation in healthcare delivery. Huge demand for not only medicines but also medical equipments is foreseen as governments increasingly expand healthcare delivery systems to match the growing population. "Also with most African nations realising the need to make available quality medicines to its people, the awareness of imposing stringent FDA regulations for registrations followed by plant inspections by FDA inspectors has taken pace and Indian pharma companies are benefiting as it is eliminating competition from ordinary manufacturers from Asia," elucidates Kare-Panandikar.

So as African markets get ready to woo international players, its time for Indian pharma companies to enjoy their African safari.

nandini.p@expressindia.com