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South Africa Pharmaceuticals and Healthcare Report Q1 2010
Business Monitor International, Jan 2010, Pages: 100
Business Monitor International's South Africa Pharmaceuticals and Healthcare Report provides industry professionals and strategists, corporate analysts, pharmaceutical associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on South Africa's pharmaceuticals and healthcare industry.
The analyst expects pharmaceutical spending in South Africa to increase from US$2.34bn in 2008 to US$2.43bn in 2009. A compound annual growth rate (CAGR) of 9.7% will follow from 2009-2014 to give a market value of US$3.86bn at the end of BMI’s five-year forecast period. By 2019, we expect the total drug market to be worth US$4.74bn, with a 2014-2019 CAGR of 4.2% in US dollar terms. In 2014, per-capita drug spending in the country will be US$74.7, with only 0.82% of GDP allocated for medicines at this time.
In December 2009 a new Southern African Generics Medicines Association (SAGMA) was established to drive growth in the region’s pharmaceutical sectors. The SAGMA plans to develop initiatives to encourage further investment in local pharmaceutical firms operating in the region. Membership will be open to selected firms from 14 countries in Southern Africa. BMI believes the harmonisation of regulatory policies still remains one of the greatest barriers for generic drugmakers in the region and therefore will be observing SAGMA as it attempts to fulfil its core aims.
While the establishment of a unified voice for regional pharmaceutical generic firms will be expected to promote knowledge transfer and expand the number of markets drugmakers are exposed to, we caution that it may only have limited influence on regulatory issues. This is partly because the Southern African Economic Development Community (SADC) – a wider economic council which includes many sectors is unable to push forward regional regulatory harmonisation for the pharmaceutical sector, chiefly since each state chooses to implement and interpret a given law in different ways – often after lengthy discussions which can take years to conclude.
The SADC’s impact on the drug industry in its member countries has been minimal and it appears not to be a pivotal factor in African pharmaceutical firms deciding to enter new Southern African markets. The relative shortcomings of the SADC cannot help but cast doubts over how effective the more recently established SAGMA can be. Arguably, the pitfalls of SADC will be offset by a specific regional body like SAGMA. Moreover, pharmaceutical firms are likely to have more financial incentives for regional expansion and therefore promoting regulatory revisions to selected governments to allow for this could become a possibility.
BMI’s June 2009 expectation that South Africa’s Adcock Ingram would look beyond its domestic market for acquisitions has proved correct. Indeed, we specifically said that following the withdrawal of its offer to purchase Cipla Medpro, the Johannesburg-based firm would turn its attentions to Ghana, arguably the most promising pharmaceutical market on the continent. Adcock has offered around US$23.7mn for 51% of the Ghanaian Ayrton Drugs Manufacturing Company (ADMC). As Ghana’s second-largest drugmaker and with 27% year-on-year (y-o-y) growth during 2007-8, Ayrton is an attractive target. BMI elieves that Adcock’s decision to reach out to the western regions of the continent is in line with its growth strategy – generating up to 30% of its revenues outside of its South African base within the next three years.
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