Is drug sector ready for rebirth?

Dar es Salaam. There were years of glory for Tanzania’s pharmaceutical industry, but now the future of the sector is still unpredictable, experts have explained to The Citizen.

The question that researchers, investors and government leaders are trying to answer now is: Can the local pharmaceutical industry recover from a downfall?

This comes at a time when the country is looking forward to reviving the sector without which, people will continue having less access to vital medications and the country losing billions of shillings.

Every year, Tanzania loses over Sh800 billion on importing medicine and medical supplies, data obtained from the Ministry of Industry, Trade and Investment show.

Investors have told The Citizen that the only game-changer is for the country to invest in major reforms in the local manufacturing of drugs.

Is current policy favourable?

No, it’s not, industrial players and researchers all concur. “The current policy doesn’t really favour locals who want to invest in manufacturing of drugs,’’ says Mr Jayesh Shah, one of the largest investors who formerly owned Shelys, one of Tanzania’s largest pharmaceutical firms.

“I do believe Tanzania must now come up with a policy that makes local manufacturing of drugs mandatory, unlike the current one which favours importation,’’ says Mr Shah, the Group Managing Director of Sumaria Group. History shows that pharmaceutical production had been a Tanzanian industrial success in the mid-90s,says a 2014 report by the Research on Poverty Alleviation (Repoa), titled: Reversing Pharmaceutical Manufacturing Decline in Tanzania: Policy Options and Constraints. But, that success story remains history.

By the year 2014, the industry was already in decline, says the report. Insiders in the industry estimate that market shares of public and private local pharmaceutical producers fell from around 30 per cent in 2006 to less than 20 per cent in 2013, yet not much has been done to rescue the falling industry until to date.

Mr Shah, who later quit from investing in the local drugs industry, maintains that the country has no option but to create a favorable business environment for local manufacturing, with a vision of competing with other countries.

“The cost of production was higher than the profit I was making, that’s one of the reasons I had to move out of the business…’’ says Mr Shah.

President John Magufuli’s recent emphasis that the country must build its capacity for local drug factories, came at a time of great need for major reforms in the local pharmaceutical industry.

“Only 6 per cent of the medicine is produced here…why? We must do something…’’ said Dr Magufuli during a recent Medical Stores Department (MSD) event in Dar es Salaam.

Despite the president’s political will, the road to achieving a well-established local drugs industry is still uncertain. The researchers have always insisted on key aspects that require intervention.

“There is a lack of active public sector support for local firms as compared to other competing countries,’’ says the report published on www.repoa.or.tz.

Although the report was published in 2014, the investment climate has remained unchanged to date, a survey by The Citizen has confirmed through interviews with stakeholders in the industry.

The Repoa report says local firms are moving out of production of basic and affordable medicines because of fears attached to financial risk from the rising payment delays, lack of clear delivery dates, and failure to complete contracted purchases, plus low probability of winning (expensive) tenders.

An expert report review, Making Medicines in Africa,says there is more to be done beyond policy reforms.

“It requires a change of mind-set for policy makers in Tanzania to turn to prioritising and actively engaging in selective support of the sector,’’ suggests the 2016 report, titled: “Pharmaceutical Manufacturing Decline in Tanzania: How Possible Is a Turnaround to Growth?

Despite the challenges that still lie ahead in the pharmaceutical sector, some investors are seeing an opportunity. Mr Ramadhan Madabida, the managing director of Tanzania Pharmaceutical Industries Limited (TPIL), says there are still many unexploited opportunities in the country that local investors ought to grab.

Mr Madabida says the pharmaceutical demand in the country per annum is $550 million (about Sh1.24 trillion)“…locally active pharmaceutical industries in Tanzania which produce medicine are still not enough to curb the shortage,’’ says Mr Madabida.

An exclusive report availed to The Citizen by the Ministry of Industry, Trade and Investment shows that there are only 13 pharmaceutical manufacturing industries in the country. “…but only 5 are actively producing drugs currently,’’ says the report. However, only four are licensed according to the standards of Good Manufacturing Practice (GMP).

Mr Madabida says the government needs to work in collaboration with local investors in filling the gap. But, he suggests, “…the government should formulate policies that enable investors to access funding from financial institutions to encourage more investment funding.”

“It is important now to think of motivating the local investors through tax incentives and opportunities for borrowing. For example, when we buy medicine to sell, as investors, we have to meet the VAT charges; something that kills the local investors’ morale.”

But also, he points out, “There is no letter of credit being given to the local investors to enable them access funding from local financial institutions; as compared to foreigners.”

Following the rising political will to invest in local manufacturing of drugs, over 10 local investors have expressed their intention to put up local drug factories, according to the report from the ministry of Industry, Trade and Investment.

The ministry says that the government is now laying groundwork for National Pharmaceutical Sector Strategy which is expected to ease operations for local investors.

“When it is endorsed by the authorities, this strategy will create a 15 percent price advantage against importation of drugs, come up with a list of medicines to be manufactured locally and the actual country demand, create a pharmaceutical industrial park and scrap tax levies on imported raw materials,’’ says the Ministry of Industry, Trade and Investment.