Indian firms in Africa point the way

Perhaps the biggest driver for improved access to medicine has been India’s emergence as the pharmacy of the world. Indian companies, such as Cipla and Ranbaxy, have produced cheap and effective generic drugs for sale at a fraction of the cost of their European, Japanese and North American competitors. This has generated substantial opposition from the industry’s established giants, who claim with some justification that developing new drugs costs billions of dollars and that they need to recoup this outlay through sales in order to fund the development of new pharmaceuticals.

However, Indian manufacturers and opponents of vested interests in the pharmaceutical industry argue that there is a huge need for these medications among the millions of Africans who have little ability to pay. Manufacturing is actually relatively cheap; it is R&D that is expensive. International patents and intellectual property law form the battleground of this debate, which often becomes subsumed in wider trade agreements between India, the EU and North America, particularly now that India has joined the World Trade Organisation (WTO).

The WTO currently gives pharmaceutical patent protection for 20 years. In 2000, Cipla began to market a combination of three drug anti-retrovirals in Africa at $800 per patient for a year’s supply, in comparison with the international going rate of about $12,000 a year. Luminaries such as former US president Bill Clinton have praised the company for its efforts in the fight against HIV-AIDS. Chandru Chawla, the head of corporate strategy at Cipla, believes that Africa resembles India in terms of market potential.

The firm has established itself in Africa by selling its products through local firms but is now setting up its own distribution operations. It is seeking to takeover its South African distribution partner Cipla Medpro, which is assessing the offer of R10 per share, equivalent to a total of R4.5bn ($512m). The company is already the third biggest supplier to the South African drugs market and intends to invest in new manufacturing capacity to supply what it calls “collaboratively identified African markets”.

Cipla chief executive Subhanu Saxena said: “South Africa is an attractive emerging market with strong projected growth for generic drugs of approximately 14% per year for the next several years. This investment is aligned with Cipla’s strategy to ascend the value chain by managing a front-end sales force in a market outside India. Chairman Yusuf Hamied added: “This investment is aimed at further strengthening our commitment to South Africa and the broader African continent. Patients and the healthcare landscape will benefit both from Cipla’s 77-plus years of experience across products, technologies, dosage forms and Cipla’s ethos of striving hard to provide greater access to medicine.”