Pharmaceuticals: India’s Generics Flow Into Africa

Pharmaceuticals remain one of the main Indian exports to Africa, making up around 11.1% of total exported items. They are also behind the great successes of many private Indian companies that have ventured into Africa. Indian pharmaceutical companies are the largest providers of generic medicine in the world, and African markets are a natural fit for these companies, which provide drugs that are often very price competitive. Generic anti-retroviral (ARV) and anti-malarial drugs have helped to make it viable for public health departments to cope with those diseases.

India’s domestic pharmaceutical industry has turned itself around over the past three decades, expanding from being practically nonexistent into being the third-largest industry globally by volume. Today, the Indian pharmaceutical industry represents a market of around $20bn, with exports accounting for around $9bn, and is expected to increase to $55bn by 2020 from its $12.6bn level of 2009, according to the McKinsey report India Pharma 2020: Propelling access and acceptance realising true potential.

PricewaterhouseCoopers (PwC) also predicts that India is expected to join the league of top tend global pharmaceutical markets in terms of sales by 2020, with a total value reaching $50bn, a number only slightly less ambitious than McKinsey’s.

India’s government is keen to promote this sector. At an India-Africa conference held in Addis Ababa in May last year, Prime Minister Manmohan Singh announced that India will create a $700m line of credit to help in training and building new institutions across Africa. The continent accounts for around 16% of the total of India’s pharmaceutical exports.

India’s largest pharmaceutical company, Ranbaxy Laboratories, was the first pharmaceutical company to set up base on the continent in 1977. Since then other big Indian players have followed suit and certain important drugs are nearly entirely supplied by Indian multinationals. This is the case with Cipla, India’s second-biggest pharmaceutical company, which is now the largest supplier of anti-malarial drugs into Africa.

Cipla created goodwill when, in 2001, it announced that it would supply AIDS drugs to Africa at a considerable discount, slashing the per-patient price from more than $10,000 a year to less than $400. It is estimated that there are around 22.5m HIV-positive people in sub-Saharan Africa, indicating the desperate need for increased efforts to provide treatment for all. Because of cheap Indian drugs, the proportion of AIDS patients being treated rose from 2% in 2003 to 37% in 2009.

Of course, Indian companies are also winners, with discount generics being big business. For example, South Africa, home to around 5.6m people living with HIV, launched a tender in 2008 worth $526m to provide its health departments with anti-AIDS drugs for two years. South African firm Aspen Pharmacare won most of this contract, but Ranbaxy’s local joint venture Sonke won 4.5% and Cipla Medpro, Cipla’s local subsidiary, 1.9%.

Ranbaxy, which is now South Africa’s fifth-largest pharmaceutical company, opened a $30m manufacturing facility – its second – west of Johannesburg in 2010. Cipla, South Africa’s sixth-largest player, has announced a $36m upgrade to its plant in the eastern city of Durban. Cipla has made other large investments across the continent, including a joint venture with the government of Uganda and the Ugandan pharmaceutical manufacturer Quality Chemical Industries, for a new $32bn plant that will produce anti-retroviral and anti-malarial drugs.

Medical tourism

India is renowned as a medical tourism destination, with high-quality and relatively low-cost services. This tourism industry is worth around $2bn and manages to attract more than 150,000 tourists every year. Today, more and more of these centres of excellence are investing in Africa.

Companies such as Apollo Hospitals, whose local hospitals are known for attracting patients from around the world, has planned an Africa expansion, aiming to buy hospitals in Tanzania, Botswana and Nigeria. There is also a plan to set up a 500-bed hospital in Dar es Salaam to serve patients from East and West Africa, which will require an investment of $70m. Apollo Hospitals report that around 35,000 African patients have already travelled to India to get treatment in their hospitals. Several Apollo Hospitals in India were the first in the country to receive international healthcare accreditation, being approved by the prestigious US-based Joint Commission International (JCI).

India is also behind the Pan-African e-Network Project, a joint collaboration between the Indian government and the African Union, which is the biggest project for distance education and tele-medicine ever undertaken in Africa. This is a remarkable opportunity to provide affordable healthcare and training. It also provides an interface between specialist doctors in the treatment and diagnosis of patients. With this project, India is offering Africa access to some of its best universities and hospitals.