Global pharmaceutical competitiveness

Pre-qualification hurdles to cross

Over the years, the nation's pharmaceutical industry has remained a weak competitor when compared with international firms, following its inability to manufacture drugs that meet international standards. This inability to compete in the global market is hinged on the fact that, as of today, the nation's industry cannot withstand the drugs armada from China and India which have better cost advantages.

The Indian pharmaceutical manufacturers supply 70 percent of drugs consumed locally and also export. Between 2009 and 2010, the industry, made up of thousands of large and small firms, exported $9.1 billion worth of drugs and made a turnover of $21.7 billion.

According to PricewaterhouseCoopers (PWC) in 2010, India joined among the league of top 10 global pharmaceuticals markets in terms of sales by 2020 with value reaching $50 billion. While the domestic market was worth $12.26 billion, sale of all types of medicines in the country is expected to reach around $19.22 billion by 2012.

Globally, India's pharmaceutical industry is ranked 4th and 13th in terms of volume and value. Indian firms manufacture at far lower costs than their counterparts in developed countries. This is one half of its success as India spends $23 billion on Research and Development (R&D), has 160,348 researchers, 40,711 research articles, and 1,234 patents.

With the pharmaceutical industry seen as one of the most valuable economic segments of the global economy, the pharmaceutical industry is considered to have installed capacity that only caters for about 50 to 75 percent of the nation's drug needs.

Annually, millions of patients in resource-limited countries receive life-saving medicines that are purchased by or through international procurement agencies such as World Health Organisation (WHO), United Nations Children Fund (UNICEF), United Nations Population Fund (UNFPA), UNITAID and the Global Fund to Fight AIDS, TB and Malaria.

With WHO Prequalification of Medicines Programme ensuring that selected medicines supplied by these agencies meet international standards of quality, safety and efficacy, the WHO and the Global Fund spends over N20 billion annually in procuring drugs for malaria, TB and AIDS intervention programmes in Nigeria from especially India and Brazil because no pharmaceutical firm in Nigeria is pre-qualified by WHO.

WHO pre-qualification is a prerequisite for any company that wants the WHO and other international agencies to buy their drugs through bulk purchase for distribution for health intervention programmes across the globe.

Prior to prequalification of drugs by WHO, manufacturers apply to WHO to have a product evaluated, providing comprehensive information about the product's quality, safety, and efficacy.

While WHO inspection team visits the manufacturing sites of both the finished pharmaceutical product and its active pharmaceutical ingredients to verify that they comply with WHO good manufacturing practice (GMP), the team, which includes an inspector from a 'stringent regulatory authority' also verify that any contract research organization that conducted any studies relating to the product complied with good clinical and laboratory practices.

When the comprehensive scientific assessment and necessary inspections indicate that the product meets international standards for quality, safety and efficacy, the product is added to the WHO list of prequalified medicinal products.

Most pharmaceutical manufacturers in India, China, United States of America, Germany, etc, produce pharmaceutical raw materials, vaccines, consumables and finished products and in turn export them to boost their foreign earnings.

Surprisingly, pharmaceutical firms in Nigeria are not currently in a position to participate in international tenders for medicines against the three pandemics that require World Health Organisation's (WHO) prequalification.

This has been identified as a major constraint on the local supply of medicines, especially anti-retroviral (ARVs), anti-malarial and anti-tuberculosis agents.

With over 100 pharmaceutical manufacturers in Nigeria, only five local drug manufacturers- -Evans Pharmaceuticals, SWIPHA, CHI Pharmaceuticals, May and Baker and Fidson Healthcare Plc- are currently modifying their production processes with an aim of complying with the WHO prequalification requirements.

In Africa, only South Africa, Morocco and Uganda have prequalified drug manufacturing companies and the right to sell pharmaceutical drugs to other countries.

The experience of East Asian newly industrialised countries with successful manufacturing attests to the fact that efficiency and productivity growth in the manufacturing sector is the key to promoting competitiveness and growth of the industrial sector and the economy as a whole.

Expert view

Speaking with BusinessDay, Azubike Okwor, President, Pharmaceutical Society of Nigeria (PSN), revealed that life-saving medicines are purchased annually by or through international procurement agencies for health intervention programmes globally from pharmaceutical firms that meet internationally standards of quality, safety and efficacy, a situation that has deprived Nigeria from entering into international bidding process for pharmaceutical products, particularly from WHO.

While noting that about five pharmaceutical firms are striving to comply with WHO prequalification requirements, Okwor disclosed that WHO prequalification will help the nation become self-sufficient in the manufacture of essential medicines.

"This would obviously have multiplier effects on the Nigerian economy as it would lead to the creation of thousands of jobs and more foreign exchange earnings for the country. This in turn would reduce the plethora of challenges confronting the pharmaceutical sector such as counterfeiting of drugs and continued dependency on the importation of drugs and pharmaceutical inputs for drug production," Okwor noted.

Lending his view, Nnamdi Okafor, Managing Director, May and Baker Plc, disclosed that the WHO qualification helps to upgrade facilities to global standard. While stating that another leg of it is this huge fund that comes with it, Okafor stated that the fund is meant to help Nigeria take care of certain diseases like HIV/AIDS, Tuberculosis, and malaria.

"When this funding comes in, Nigeria is expected to have counterpart funding in it. We are told that unless we have WHO prequalification, we cannot participate in it. This disqualifies all Nigerian companies from participation. What that does to us is that other factories in other parts of the world are producing products that are demanded globally.

"In Nigeria, most factories are producing at less than 45 percent capacity and cannot meet the pre-qualification. For Nigerian companies to do this, government assistance is needed to achieve this feat," Okafor hinted.

The Indian experience

The emergence of Indian pharmaceutical industry on the global landscape as a strong generics player was due to 1970 Indian Patents Act which allowed only process patents in pharmaceutical products.

This move also kept the cost of medicines at affordable levels by enabling domestic pharmaceutical firms build technical expertise in reverse engineering of existing medicines by modifying the manufacturing process and, thus, becoming efficient producers of generic drugs.

Although India shifted to the product patent regime in 2005, the capabilities developed during the past two decades became a competitive advantage for the Indian pharmaceutical industry in the 1990s when rising healthcare costs in many developed countries forced them to seek the cheaper generic drug option.

The Indian pharmaceutical industry was able to exploit the enormous generic opportunity that was spawned. Interestingly, the share of Indian pharmaceutical companies in the total pie of approvals for generic drugs (Abbreviated New Drug Applications (ANDA) approvals in the U.S.), has risen steadily.

More than a third of ANDA approvals were by Indian firms. As a consequence, formulation exports from India, essentially generic drugs, have grown at 21 percent compounded annual growth rate (CAGR) between 2005-06 and 2010-11.

With about $150 billion worth of drugs set to lose patent exclusivity between 2010 and 2015, Crisil Research expects the growth momentum in exports to continue over the next five years, with exports growing at 14-16 per cent CAGR.

In the near-term, the generic opportunity continues to lure more companies. With competition intensifying, generic drugs will see greater price erosion. Along with higher competition, the global generic market is set to face another hurdle in the longer term.

Already, R&D productivity of large global pharmaceutical players (innovators) has slowed considerably over the past few years. R&D productivity, a function of cost of new drug development and returns from those new drugs, is of critical importance as global players invest heavily in R&D (about 20 percent of revenues).

Furthermore, the Indian bio-pharmaceutical industry is in its emerging stage and is sized at about $1.4 billion as of 2010-11. The Indian bio-pharmaceutical players largely market vaccines and are yet to make inroads into U.S. and Europe.

Of importance is the fact that the low cost of manufacturing renders India as an attractive destination for contract research, and the availability of a large patient pool makes it appealing for clinical trials, which contributes the most, in terms of revenue, to the contract research segment.

With limited experience and high costs associated with bringing a drug to the market, Indian players have traditionally shied away from drug discovery, or in a few cases, out-licensed molecules to multinational companies at early stage of development.

At present, only a handful of Indian companies (leading the pack are: Piramal Life Sciences, Glenmark and Sun Pharma) are engaged in new drug research. Amid slower growth in the generics space, large Indian players look to enhance their focus in this area. The high-risk high-return field of new drug research holds tremendous potential for Indian players.

Competing globally

Nigeria's pharmaceutical industry has a long and arduous way to go. Experts believe that without clusters (centres of excellence) and well-funded research laboratories that churn patents protected by law, the industry's global ambition is limited. If these enablers are put in place, it could induce local and foreign investment and partnership with foreign firms.

While some Nigerian Pharmaceutical firms are modifying their production processes with the aim of complying with the WHO prequalification requirements, Ola Ijimakin

General Manager, Marketing, FIdson Healthcare Plc, revealed that the company (FIdson Healthcare Plc) has applied for pre-qualification with their facility been inspected by officials from the WHO.

"We are among the five companies selected by the WHO team that they intend to work with to secure the certification. We are putting up a completely new facility that will come on stream in 2013. This facility is designed and built to conform to the latest WHO-GMP standards," Ijimakin revealed.

For Nnamdi Okafor, Managing Director, May and Baker Plc, when a pharmaceutical firm wants to export to countries in Asia and Europe, the pharmaceutical firm need to export products that meet WHO prequalification exercise.

"The first thing we want to do is get our GMP standard so that we can say that our products compare with the rest in the world so that we should be able to export them to other parts of Africa, Asian and even Europe. WHO prequalification process is a long one which could take a year to two to get prequalified.

"From the WHO report, a representative from Who was in Nigeria recently to present a report to Minister of Health Onyebuchi Chukwu on the level of preparedness of Nigerian companies. He was quite positive that within the next one to one and half year, the first product will prequalify Nigeria and we look forward to being one of the companies whose products will be prequalified," Okafor concluded.

Paul Orhii, director general, NAFDAC, believes that once WHO upgrade pharmaceutical facilities coupled with the pharmaceutical intervention fund, Nigeria drug firms can then upgrade to a level where it would be par with other manufacturing companies in the world.

"We believe this would not only ensure that locally manufactured pharmaceutical products in Nigeria gain international acceptance. The nation can then request that drugs donated to Nigeria are purchased locally. This feat would help reduce the challenges confronting the pharmaceutical sector, such as low capacity utilisation, high production cost, drug counterfeiting, and continued dependency on the importation of drugs and pharmaceutical inputs for drug production," Orhii concluded. (businessdayonline.com)