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South Africa Pharmaceuticals and Healthcare Report Q1 2011
Business Monitor International, Jan 2011, Pages: 110
The 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 analysts pharmaceutical Business Environment Ratings (BERs) for the Middle East and Africa (MEA) reflect the continued attraction of South Africa. The country benefits from a large pharmaceutical market, high disease burden (of both infectious and non-communicable diseases) and low risk investment environment compared with other African countries covered by BMI. Consequently, it is third out of 19 countries in the MEA region, even though it has now slipped below the much smaller market of Qatar. Globally, South Africa ranks 36th out of 83 countries surveyed, indicating its importance to large drug firms.
In 2009, drug spending in South Africa reached ZAR22.49bn (US$2.68bn). In 2010, we calculate that spending will reach a value of ZAR24.56bn (US$3.37bn), posting a year-on-year (y-o-y) local currency growth of 9.2%. Patients are likely to be switching to over-the-counter (OTC) medicines given the current financial downturn, particularly as they are easier to obtain, cheaper and may postpone more expensive treatments by temporarily treating problematic symptoms. Nevertheless, patented medicines represent the largest single segment of the total market (calculated as the sum of patented, generics and OTCs) by value, at just under 62% in 2009, although this share is expected to continue to decline. By 2014, we forecast that drug spending in the country will reach ZAR35.97bn (US$6.14bn), experiencing a 2009-2014 compound annual growth rate (CAGR) of 9.85% in local currency terms and of 18.00% in US dollar terms. Over the extended 2009-2019 forecast period, we calculate that drug spending will reach a value of ZAR57.65bn (US$12.56bn), which equates to a CAGR of 9.87% in local currency terms and 16.69% in US dollar terms. Government policies to encourage the private instead of public healthcare sector will force more people to spend out-of-pocket on drugs. Recovery of domestic demand remains ‘fragile’, which will have a bearing on the availability of public financing for medicines. Domestic difficulties are being compounded by the relative strength of the rand, given its negative implications for the competitiveness of exports and – in turn – revenues achieved in this manner.
Factors other than patent expirations that will be responsible for the shaping of the market include the new set of medicine pricing regulations.
Pharmaceutical product mark-ups are now calculated in a tiered pricing structure. Pharmacists can charge a larger mark-up for lower priced drugs, which incentivises them to dispense more generic drugs. The government is, in the meantime, planning on enacting a longdiscussed National Health Insurance (NHI) reform scheme. The programme is to be introduced from 2012 and will be implemented in two phases over the next 14 years. The entire population will be obliged to join the scheme, with the option to also remain in private healthcare.
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