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South Africa has established very ambitious plans to sustain and improve its leadership in Africa through 2020. New governmental policies to boost productivity and job creation, along with increased investments in the pharmaceutical and healthcare industries are paving the path for success. We will investigate the latest developments affecting consumer health in South Africa.
The South African government implemented The New Path to Grow in 2009 aiming to create 100,000 new jobs by 2020. Part of this national policy was set to foster local production of pharmaceutical drugs to decrease the dependence on expensive drug imports that do not create jobs for the local economy.
Alternatively, the single exit price legislation (SEP) imposed by the Department of Health in 2004 has put considerable pressure on the margins of consumer health products. SEP sets strict price controls to secure the accessibility of affordable medicines, especially those that treat communicable diseases such as AIDS/HIV, malaria and tuberculosis.
SEP also applies to basic over-the-counter (OTC) drugs such as analgesics, cough, cold and digestive remedies, but not to herbal/traditional remedies, vitamins and dietary supplements that are not regulated as drugs. Manufacturers, distributors and pharmacies were hopeful that the government would increase SEP in 2011; however, the institution stated that no price increases should be expected during 2011 (government gazette 547, January 2011).
Finally, the Consumer Protection Act (CPA) established in 2008 went into full effect on 31 March 2011. The new legislation makes the supply chain of manufacturers, pharmacies and retailers liable for the safety and efficacy of herbal/traditional remedies, vitamins, dietary supplements and homoeopathic products sold to consumers. This initiative reinforces the use of Good Manufacturing Practices (GMPs) in South Africa.
The significant need for affordable medicines in the past decade has largely benefited the boom of Indian generic drug companies in South Africa. Ranbaxy SA, Cipla Medpro SA and Dr Reddy’s Laboratories (Pty) Ltd are subsidiaries of powerful Indian generic drug manufacturers expanding into Africa. Indian companies find South Africa as an attractive platform for revenue expansion. Their presence has placed considerable pressure on local and multinational firms.
Ranbaxy invested US$30 million in 2010 for the establishment of a manufacturing facility that will supply OTC drugs such as analgesics, cough and cold remedies to the local market. In contrast, Cipla Medpro SA is mostly focused in biotechnology and prescription drugs. It seeks to expand its presence through pharmaceutical operations in oncology and expansion of its OTC business to improve future revenue.
Dr Reddy’s Laboratories established a 60%-40% partnership with Venturepharm (Pty) Ltd, a local financial investment of J&J Group in 2004. In early 2011 it acquired Venturepharm’s stake to expand sales in the areas of central nervous system (CNS), oncology and women’s health. The company also distributes drugs from another Indian company, Zydus Cadila.
In July 2011 the African National Congress (ANC) in South Africa made a call for the creation of a state-owned pharmaceutical company to secure the supply and access to critical and affordable medicines, mostly to help treat AIDS/HIV and other communicable diseases.
South African companies Aspen Pharmacare and Adcock Ingram already supply the government with such drugs. If a state-owned company is established, it can potentially hurt the revenues of South African companies. They will be forced to look into expanding their sales of prescription and/or OTC drugs, or in any case, invest in the geographic expansion outside South Africa to remain competitive.
Looking at the positive side, the South African companies could become partners with the government under this potentially new initiative. Consequently, the partnership could help secure future revenue for the local companies and deter the rising competition from low-priced generic drugs sold by Indian companies.