Health – a changing landscape
Sub-Saharan Africa bears more than its fair share of the global disease burden. The World Health Organisation (WHO) estimated its share at 24% in 2010, at a time when its proportion of the global population was just 14%.
This is partly because of the range of diseases that affect the region but is in large measure due to a lack of financial resources to fight ill-health and insufficient healthcare capacity. The situation is changing as a result of economic growth, but as people become more urbanised, more prosperous and better educated, they are also likely to expect better healthcare.
Although the continent’s 55 economies have experienced varying levels of growth over the past 20 years, there is a steady trend towards rising GDP in most countries. The results have been lower infant mortality and rising life expectancy but this also means that people will develop different illnesses over the course of their lives.
Long lives and lifestyle changes, particularly a shift from agricultural work to service sector employment, will see a rise in non-communicable diseases, such as diabetes and cardiovascular conditions.
Greater uptake of smoking and drinking will also trigger more liver disease and lung cancer. WHO regional director Matshidiso Moeti says that the death rate from cancer in Africa is expected to double over the next 20 to 30 years.
A report on the African healthcare industry by analysts Frost & Sullivan stated: “With communicable diseases such as HIV/AIDS, tuberculosis and malaria present but in decline, and the growing number of cases of non-communicable diseases, it is clear that Africa needs access to the same set of interventions as in more developed countries. These include cutting edge drugs, vaccines and medical devices.”
There is a conflict between the pharmaceutical industry and illness that comes to a head in Africa like nowhere else on earth. Developing drugs, manufacturing them and then organising distribution is an expensive process that is dominated by the private sector because of the sheer costs involved and because innovation is generally best handled by privately owned companies. However, people who are ill, or very young, or very old, are often not in the best position to afford expensive medication.
The friction between these two situations can be eased in prosperous countries where the state can cover the medical costs of those without the ability to pay, either directly or via insurance schemes. Even here, it can cause a lot of problems.
However, switch the conflict to much poorer parts of the world and it becomes even more difficult to reconcile the needs of big business and sick people. The situation is partly eased by the fact that research and development (R&D) in one part of the world can benefit all patients, no matter where they live. The battle for generic drugs, which are produced at very low cost, has helped to bring medicine to many more people than previously.
It could be argued that healthcare provision is slowly improving, although from a generally very low base. According to World Bank figures, between 2005 and 2012, the number of doctors in Africa increased from 484,000 to 500,000; the number of nurses from 1,190,000 to 1,250,000; and the number of hospital beds from 930,000 to 1,000,000.
However, while this was a big jump in the number of hospital beds, the rate of increase in the number of medical professionals hardly kept up with population growth.
Apart from a lack of financial resources, most parts of Africa have a shortage of medical professionals because of emigration to other parts of the world. Despite promises not to poach their doctors and nurses, health authorities in richer countries can offer higher salaries, better working conditions and access to equipment that may not be available in the home countries of many doctors and nurses.
Yet African healthcare does have some demographic trends in its favour. The number of medical students is rising across a continent that will have a very young population for decades to come, meaning that there will be a higher proportion of working age people in relation to the number of more mature residents.
In addition, foreign private sector companies are investing in hospital capacity. Most recently, US investment firm Columbia Pacific Management announced that it would set up a hospital in Nairobi.
Robert Breedon and Tom Gray of Gowling WLG, a law firm that advises healthcare providers in Africa, told potential investors: “Do your research. Look at which countries are offering incentives for investment in healthcare, as well as investment in other areas that are directly linked to healthcare (such as infrastructure, housing and education)…Be prepared to partner. Local businesses will have sufficient knowledge of particular markets and consumers as well as brand recognition, but may lack investment and capacity.”
In some cases, governments offer land for free in return for private sector investors agreeing to serve poorer patients in a form of public-private partnership (PPP).
A range of non-private sector organisations have set up social enterprises and other not-for-profit healthcare services, including the Phillips Africa Innovation Hub in Nairobi, while the International Finance Corporation (IFC) has invested in many projects and companies, including the Hygeia Hospital Group project in Nigeria, for which it arranged and led $70m in investment. Indeed, the World Bank Group is the biggest investor in private healthcare in Africa.
As in so many fields, there are technological opportunities that could have great significance in the medical sphere. In banking, insurance and agriculture, mobile technology is being embraced more readily in Africa than almost anywhere else, so the same process could take place in healthcare, particularly in rural areas where access to medical care is limited.
The best ways of taking advantage of the new financial and technological solutions are still being worked out. Yet the benefits are already becoming apparent: mobile phones are already being used to provide information to patients via public health campaigns and to allow them to order medicines.
Rather than necessarily seek to eventually replicate the same spread of rural medical services as elsewhere in the world, it may make more economic sense to invest in digital services, including carrying out blood tests and health monitoring remotely. Similarly, drones may be used to deliver prescriptions that are ordered via a smart phone.
Building a pharmaceutical industry
Often in the past, those on the continent who require medication have not been able to afford it because it is too expensive, while distribution networks have been limited because suppliers know that the market for selling their products at a commercial rate is limited. Yet the economics of pharmaceutical production are changing.
For many years, pharmaceutical companies sought to maintain fairly high prices for their products wherever they were sold, but that system has been greatly eroded for key drug classes, including for the anti-retrovirals used to treat people living with HIV-Aids.
Manufacturing costs, including the price of the raw materials, often comprise a very small proportion of the total cost of medicines, with the lion’s share often absorbed by research and development (R&D). As a result, identical copies of many pharmaceuticals, known as generics, can be produced at very low cost.
Indian firms in particular have been able to fill this niche, as Delhi greatly reduced patent protection in 1970, allowing Indian firms to reverse-engineer many medicines.
Global pharmaceutical companies have repeatedly challenged this process through legal action but the generic manufacturers have won a number of high-profile victories, including on the supply of drugs to Africa that combat many of the continent’s biggest killers, including HIV-Aids, and the same process is likely to occur with the distribution of anti-retrovirals.
The AfDB believes: “Africa’s pharmaceutical industry is the fastest growing in the world”. It is generally reckoned that the pharmaceutical market will be worth $40-$60bn a year by 2020. The Frost & Sullivan report argued: “African pharmaceutical market growth presents a ‘win-win’ for companies and patients.”
The cost of medicines could be reduced by more local manufacturing. This in turn could be encouraged by greater funding for pharmaceuticals. Some governments are taking steps in this direction. The Nigerian parliament, for instance, has passed legislation mandating minimum annual expenditure on healthcare in the federal budget, a welcome but surprising move given the country’s current economic difficulties.
At present, Nigeria dedicates just 4.5% of its national budget to healthcare and spends less than 20% of its total health budget on pharmaceuticals, a low proportion even in comparison with other countries in the region.
Eyitayo Lambo, a former Nigerian minister of health, has said: “Nigeria is still heavily dependent on the importation of pharmaceutical products in spite of the existing local capacity. The prices of medicines are unaffordable to the great majority of Nigerians who generally pay for them out-of-pocket.”
With government unable to afford to pay for most medication, the answer may lie in insurance schemes but it is likely to take far more rapid economic growth before incomes rise sufficiently to make this a viable option for most people in Nigeria and elsewhere in Africa.
Imported pharmaceuticals now account for 80% of all pharmaceutical sales on the continent. On pages 33-4 we discuss how the East African Community in particular is attempting to reverse the trend and promote local manufacture. There is certainly a need for more investment. The International Finance Corporation (IFC) calculates that between 2006 and 2016, $25-$30bn in health sector investment was needed to satisfy demand on the continent.
Some foreign investors consider local pharmaceutical plants to be attractive investment targets. In April, emerging markets investor Actis announced that one of its companies, pharmaceutical firm MédiS, had bought Winthrop Pharma Senegal (WPS) from Sanofi. The deal highlights the trend of francophone North African companies buying assets in francophone West Africa, as MédiS is based in Tunisia and WPS has a big factory in Senegal and operates across French-speaking West Africa.
Actis estimates the size of the francophone African pharmaceutical market at more than $2.5bn and anticipates that it will grow at close to 10% a year until 2022. It believes that branded generic penetration in the region is very low and so has great growth potential.
Biopharmaceutical start-up AzarGen plans to set up a plant in South Africa to produce human therapeutic proteins. CEO Mauritz Venter says: “If South Africa is to secure its future medicine supply, the country should invest in building its own commercial bio-manufacturing facility to produce biological drugs that are not just generic copies of the originator biopharmaceutical.”
An interesting development is the presence of companies that are essentially Africa-focused but which manufacture most of their medication in Asian factories. In this, they follow the trend of manufacturing firms the world over in a bid to optimise economies arising from the availability of cheaper skilled professionals, essential inputs and the efficiencies of clustering.
This enables the production of high-quality generics at low cost and, when combined with efficient distribution models and marketing with the use of deep local knowledge, many medicines can be made affordable to the people.
An outstanding example of this trend is Shalina Healthcare, which is based in Dubai and sources pharmaceuticals from its own WHO-approved plant in India, and also from China, before taking products to market in Africa. One of the biggest and most successful pharmaceutical companies operating in Africa today, Shalina plans to set up a manufacturing facility in Africa in the near future.
Shalina Healthcare’s Ghana country director, Prashant Gaur, underlined the company’s core values when he said recently: “We are working in partnership with relevant stakeholders to serve the good people [of Ghana]… with quality and affordable pharmaceutical products, while contributing to the development of the Ghanaian economy.”
It’s not just about the drugs
Apart from tablets, syrups and capsules, African factories manufacture vaccinations, creams and intravenous drips. Most insecticide-treated bed nets are now manufactured on the continent. Pharmaceutical manufacturing can also benefit the wider economy by boosting R&D, technological and educational capacity.
Yet beyond medicines, the range of goods in high demand is incredibly diverse: diagnostic test kits, syringes, needles, gloves, and infection control items; medical equipment such as microscopes, blood pressure machines and glucometers; laboratory supplies such as reagents and slides; bed sheets and medical furniture. There are therefore opportunities for manufacturers in most sectors to supply the healthcare sector.