With a variety of both local and foreign firms, Nigeria’s pharmaceutical market comprised more than 130 active companies in 2017, including global giants such as GlaxoSmithKline and Procter & Gamble, as well as smaller domestic start-ups. Although there is a heavy presence of drugs producers, the country still faces a significant shortfall in terms of domestic supply, which meets just 45% of demand. With the rollout of wider health care coverage by both federal and state governments – albeit limited to public sector workers – that gap is likely to grow further (see Health chapter).
This situation is providing potential opportunities to boost domestic activity, not only creating employment and expanding the industry, but also reducing imports and the burden they place on foreign reserves. There is a lot of motivation to have local manufacturing capabilities meet local demand, Lekan Asuni, managing director of Lefse Pharmaceuticals, told OBG, especially given the sheer size of the 189m-person domestic market.
BIG POTENTIAL: The value of the pharmaceutical sector was estimated to be $1.4bn in 2016, with 62% of it spent on drugs to treat communicable diseases and 38% going towards non-communicable diseases. A 2017 study by McKinsey & Company estimated that by 2026 growth could range from 41% to 50%, forecasting a value from $3.2bn to $4bn, and the compound annual growth rate could be at least 8%. The opportunity presented by the sector is a regional one – Nigeria already accounts for 60% of manufacturing in the ECOWAS.
GOVERNMENT SPENDING: Nigeria spent the equivalent of 3.7% of GDP on health care in 2014, according to World Bank data, well below the sub-Saharan average of 5.5%. However, given the large low-income population, affordability remains a major hurdle. With over 65% of Nigerians living on less than $2 per day as of November 2016, according to the National Bureau of Statistics, state insurance reforms are a crucial part of sustaining pharmaceutical demand.The federal government introduced its National Health Insurance Scheme in 1999, providing coverage to civil servants. At the state level, Lagos was the first of 36 governments to offer health insurance for its workers, and preparations for its launch were under way in mid-2017.
The plan is to provide coverage worth N40,000 ($141) to a typical family of six people, beginning in November 2017. The Lagos State Health Management Agency is expected to offer subsidies that will increase the affordability of the plan for those in the informal sector. Similar schemes are in development in the states of Ekiti, Oyo, Kwara and Kano, Asuni told OBG.
COUNTERFEITS: However, there are hurdles to overcome. The drugs market in Nigeria has always dealt with high incidences of counterfeit sales, which have had adverse effects on consumer trust. To counteract the sale of fake drugs on the market, the National Agency for Food and Drug Administration and Control made reducing counterfeits a priority, but with mixed results.
The share of fake drugs in the market dropped from an estimated 19.6% in 2012 to 3.6% in 2015, but is thought to have increased to between 10% and 30% by late 2016, according to local press. Companies that discover counterfeit versions of their drugs on the market must endure a long bureaucratic process for redress from the Nigerian court system. “Unfortunately there is no speedy adjudication for these issues,” Asuni said.
In recent years pharmaceuticals companies have also struggled with currency challenges and the resulting price-conscious behaviour from consumers, who are cutting back and seeking cheaper, generic alternatives to the drugs they consume. The most widely used drug categories include antibiotics, analgesics and multivitamins, Asuni said. Raw materials and intermediate goods are currently imported, save for packaging materials, leaving the sector particularly exposed to currency risk. Despite these challenges, though, increased government spending in health care and recovery from currency issues, could mean a more productive and safer pharmaceuticals industry for Nigerian consumers.
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