Nigeria: Finding the right prescription

While Nigeria’s pharmaceutical industry currently faces a range of challenges, including high import levels and a counterfeit drug trade, efforts by the government and the National Agency for Food and Drug Administration and Control (NAFDAC) to improve regulation should help local manufacturers.

In February 2011 Paul Botwev Orhii, NAFDAC’s director-general, called on the government to establish a N150bn ($950m) Nigerian Pharmaceutical Development Fund to stimulate growth and ensure stability in the sector. Such a fund, he said, would help counter the trend of importing essential drugs, with 70% of the country’s pharmaceutical needs reportedly being met by imports from India and China at present. The success of Chinese and Indian products can be attributed to their low prices, well-designed locally geared marketing strategies and substantial financial support given to Chinese and Indian firms by their governments, which allows them to buy out local companies. In addition, Indian pharmaceutical players also recently sought financial and regulatory incentives – including tax holidays and loosened NAFDAC inspection regulations – from the Nigerian authorities to encourage investment in the sector.

International pharmaceuticals firms – including GlaxoSmithKline, Pfizer and recent arrival Sanofi-Aventis – lead in terms of market share, with GlaxoSmithKline the biggest drug company in Nigeria. The multinationals both import pharmaceuticals – operating through distributors that generally order the drugs internationally – and produce locally.

Local manufacturers are more limited in number, but firms such as Swiss Pharma Nigeria (Swipha) manufacture and sell well-known products such as the antibiotic Rocephin, the sedative Valium and the anti-bacterial Bactrim. Swipha produces 70% of its volume in-country, although infrastructure-related issues have proven to be a challenge for distribution. The firm, however, opened its recommissioned factory in 2009 with the intention of offering local production facilities to multinationals operating in Nigeria.

Emzor Pharmaceutical Industries, a subsidiary of Emzor Chemists, started up in Nigeria in 1984 and is the largest local manufacturer, with over 50 product lines. Also serving other markets across West Africa, Emzor mainly offers over-the-counter products. Evans Medical is another established local manufacturer, producing well-known brands such as Paracetamol, Allenby’s Glucose D and Piriton. Evans Medical is among a number listed on the Nigerian Stock Exchange, and is the country’s 10th-largest chemicals company with market capitalisation of N584m ($3.72m).

Challenges faced by local producers include a tendency among well-to-do Nigerians to opt for products from foreign manufacturers, a trend that is replicated across the health care sector and leads many wealthier citizens to seek treatment abroad as well. Overall growth in the health care and pharmaceuticals industry was estimated at 7-9% in 2008, the latest year for which data was available, but much of this is attributed to major players in the sector, such as the multinationals.

The counterfeit drug industry also causes significant problems – GlaxoSmithKline, for example, estimates that it loses some 25% of business on its highest-volume drugs to counterfeits. The fake products are either made locally or imported from India and China, with many of the latter type difficult to identify.

Orhii’s predecessor at NAFDAC – Dora Nkem Akunyili – led a high-profile campaign against the counterfeit drug industry, which NAFDAC estimated accounted for up to 70% of the market before Akunyili took the position. The share of counterfeits dropped by 15-20% during Akunyili’s tenure, according to the organisation, although other analysts put the figure lower.

While there is room for more stringent enforcement, NAFDAC has launched several new initiatives targeting counterfeit drugs. In March 2011 the agency announced the introduction of SMS verification technology, which allows patients to identify genuine products by checking a pin code on the packaging by text message. Also in March, Orhii announced that NAFDAC had seized nearly N500m ($3.2m) of prohibited or counterfeit pharmaceuticals.

Despite the challenges facing the sector, its potential for growth is undeniable. The expanding population, rising income levels and a strong outlook for economic growth linked to sustained high prices for oil in 2011 provide solid fundamentals going forward. At present, however, it is unclear whether local manufacturers can share in this growth or whether international firms – be they from the West, India or China – will continue to reap the benefits of this large and expanding market.