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Drugs distribution in Africa, the role of the private sector

PIEX Group - blog - Rôle du secteur privé dans la distribution de médicaments en Afrique

Paris, 9 March 2022

For several decades, Africa has entered in an era of accelerated economic development, and we can see the emergence of a middle class who has the capacity to pay for health and care and gives a particular attention to its health.

Life expectancy has been rising since 2015 across sub-Saharan Africa, and health coverage systems have been expanding. In the largest countries-Kenya, Côte d’Ivoire, and Senegal-there is an already well-developed insurance sector, primarily for employees of large companies and the public sector.

To support sustainable and inclusive growth, UN (United Nations Organisation) member countries want to achieve Universal Health Coverage (UHC) by 2030. In Africa, Ghana, Rwanda, Mali, Kenya, and Nigeria are the first to have implemented it, but the hidden economy in many countries are factors affecting the principles models through a direct contribution on revenues. These efforts will undoubtedly have an impact on the growth of the commercial private sector and is already a booming economy.

What is at stake? Emergence of local manufacturing

Local production units are gradually developing (Ghana, Nigeria, Kenya, Ivory Coast, Senegal, Cameroon), often supported by North African players, particularly Moroccan, and Indian players who have been able to build manufacturing lines but still face problems of costs, reliability of supplies, and above all the availability of skilled labor, which still have consequences in terms of quality. Their business model is not yet fully viable, and it will take time, especially in French-speaking West Africa, which lags behind the English-speaking countries of Central and Eastern Africa.

These delays could overcome by boosting local production, for example by applying import restrictions for the simplest products to manufacture, as Ghana and Nigeria have done, or by applying customs barriers on consumer drugs such as Paracetamol.

Aligning the regulatory framework step by step

The regulation for marketing authorizations (MA) is moving towards gradual harmonization between countries, as in East Africa with the East African Community (EAC) and in West Africa, where the process is now almost the same from one country to another, based on a common text of the ECOWAS.

A project for an African Medicines Agency is currently being set up. It should bring an additional dynamic, by removing the obstacles inherent to the delays of local administrations for the health-care products market authorizations.

Today, it is only a conceptual project, but it has just received significant funding to initiate its concrete implementation in the countries that joined the founding treaty in 2019.

Structure a quality product offering with an increasing share of Asian manufacturing

While the large Western multinationals are opting out and focus their developments in Europe, the United States and Japan, with extremely costly innovative products, this development presents new opportunities in Sub-Saharan Africa for new players: smaller companies who continue to operate traditional products that populations require, generic manufacturers introducing the latest molecules which are now in the public domain, and Asian laboratories, mainly Indian and Pakistani, some of which have entered the market with quality products.

Relevance of the private pharmaceutical distribution sector: a continuous growth

The private pharmaceutical distribution sector is growing by 6 to 10% per year. In 2021, this market in West Africa represented 1.3 billion Euros. In 2021, this market in West Africa represented 1.3 billion Euros.

A pharmaceutical network with international quality and compliance standards

The private sector has structured itself over the years and now offers an important network of pharmacies in line with pharmaceutical standards: authorities’ agreements, trained professionals, processes in line with international standards, and unions taking effective actions against counterfeiting.

In French-speaking West Africa (15 countries), there are approximately 6 to 7,000 pharmacies for a total population of more than 280 million inhabitants, therefore an average of 2 drugstores per 100,000 inhabitants, with Senegal and Mauritania being the best performers with 6 drugstores per 100,000 inhabitants (compared to 3 drugstores per 10,000 inhabitants in France).

Wholesalers and distributors have also aligned themselves with the highest quality standards, audited by international laboratories to comply with Good Distribution Practices.

In this totally private market, there is little or no risk of corruption and, unlike the public sector, the private sector is not subject to geopolitical uncertainties.

For example, the Malian market, despite the turbulence linked to the coming to power of the military junta, the closure of borders and the gradual withdrawal of French military forces, continues to have a momentum by +10% in 2021 compared to 2020.

Real long-term stability

The development of the middle class is driving the growth of health care needs, with the wish to consume quality products.

With its profitability and stability, which have been amply proved during the Covid crisis, the private drug sector in sub-Saharan Africa offers investors fertile ground to invest with confidence, with relevant performance indicators, but also to reduce corruption and the fake drugs market, which are the scourges that Africa urgently needs to get rid of, to accelerate its development.

PIEX Group positioning

To provide the appropriate pharmaceutical products to African populations on these private markets, laboratories must rely on distribution actors who are most often responsible for organizing the entire supply chain value: marketing authorizations, promotion to health professionals and making products available in pharmacies.

There are three types of players serving this market in Francophone West Africa. The large multinationals, among the pioneers of the sector, now diversified in the automotive and general retail sectors, and which have contributed through their storytelling to the development of a secure and professional sector.

Other companies are now allied with powerful foreign multinationals such as the South African group Imperial, a major Anglo-Saxon logistics player acquired in July 2021 by Dubai Ports World, the World’s third largest port operator, whose services can be valuable for transporting all types of products to the continent in countries that are more complex to access. As another example, the Chinese group Fosun bought a company in 2017 in France, which is part of the strategy to penetrate African markets within the general framework of the “New Silk Roads” plan.

Finally, there are less and less independent companies, such as PIEX, owned by private investors, dedicated solely to health products, and whose sole today’s objective is to provide the African population and its partners manufacturers the best possible service to make quality products available to the greatest.

Vision by 2030

We believe that equitable access to health care on the continent will be achieved through the development of a group that will integrate a distribution activity for Africa, representing a broad portfolio of manufacturers and health care products, while at the same time integrating the design and deployment of innovative Retail solutions to promote a localized customer journey adapted to the populations.

This group will have to propose all the tools necessary for the deployment of a portfolio of products adapted to the continent – regulatory registration, marketing and promotion, distribution, covering all the sub-Saharan Africa, from East to West and up to Southern Africa.

It will also be able to develop its own products to meet needs that are not covered by international laboratories, and it could eventually have its own production units in Africa.

That is exactly PIEX Group’s mission, backed by established and solid financial partners, that will be ideally suited to contribute and provide quality health products to the greatest number of African.

Marc Letellier

Director of Business Development & New Projects