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Algeria: Algeria targets pharmaceutical production

2015/12/26

A drive to attract foreign investment in Algeria’s pharmaceuticals industry, part of a wider bid to diversify the economy and become a major exporter of pharma products, looks to be yielding results.

As the second-major pharmaceutical market on the continent next South Africa, with annual sales of $3bn, hydrocarbons-rich Algeria is a particularly attractive to international drugs companies.

Comparative advantages

Request for medication is growing at double-digit rates, driven by a range of different factors.

One of the biggest contributors to rising sales is 39.5m-person Algeria’s changing demographics, which are characterised by rising numbers of adolescents and the elderly as a proportion of the total people, according to the UN. Algeria’s age dependency ratio, which measures those under the age of 15 or over the age of 64 as a % of the working-age people, stood at 52% last year, as per World Bank figures.

Similarly, as with a lot of emerging markets, as living standards have risen, Algeria has as well witnessed a shift from infectious diseases to non-communicable or lifestyle-related conditions, such as diabetes, which require additional complex and costly treatments.

Pharmaceutical consumption is further boosted by Algeria’s public health system, which offers near-universal coverage free at the point of delivery. Algerians as well have direct access to medications, thanks to the personalised CHIFA smartcard, introduced in 2007, which enables third-party payment from the social security system to a network of additional than 10,000 participating pharmacies.

Out-of-pocket payments account for just 20.9% of total health spending in Algeria, according to the Euro-Mediterranean think tank Mediterranean World Economic Foresight Institute, much lower than Tunisia (39.8%) or Morocco (53.5%).

Domestic focus

Government regulations prohibiting the import of drugs that are by presently being produced locally, initial issued in 2008 and expanded in 2012, are playing an significant role in driving increase.

“The key impact of the measures to reduce imports will be an acceleration in the local production of pharmaceuticals,” Habib Bennaceur, north-west Africa president for multinational drug company AstraZeneca, told OBG.

Imports of pharmaceutical products fell by 24.7% to $1.37bn in the initial nine months of 2015, Algeria’s National Statistics Office reported.

Prices of imported drugs are as well down, according to the Ministry of Health, People and Hospital Reform (Ministère de la Santé, de la People et de la Réforme Hospitalière, MSPRH), following negotiations with drug companies. A new methodology for pricing has been adopted, which is based on international benchmarking and aimed at getting the best deals in Algeria.

Meanwhile, local production has risen significantly, increasing by 41% last year, according to MSPRH data, while the number of pharmaceutical factories and production units operating in the country has reached 132, with an extra 230 projects being developed.

Strategic link-ups

Around 30 major drug manufacturers by presently operate in the local market, according to health IT firm IMS Health, inclunding France’s Sanofi Aventis, the UK giant GlaxoSmithKline, Hikma Pharmaceuticals of Jordan and Denmark’s Novo Nordisk. While French firms have traditionally dominated supply chains, Chinese and Indian companies are presently taking on a bigger role, according to media reports.

Foreign players – which are limited to 49% ownership under current law – are as well required to accept government-administered prices on drugs and medications, inclunding gradually reduce imports and stimulate local production, particularly of generics.

As part of its efforts to boost technology transfer and innovation in pharma and biotechnology, the Algerian government is encouraging companies to set up operations in purpose-built parks, such as the Sidi Abdallah technology park and the industrial park in Constantine, which is by presently home to around 20 pharmaceutical factories.

Local production push

The major local player, the majority national-owned SAIDAL Group, was called on in August by Prime Minister Abdelmalek Sellal to boost its output to at least 30% of national production. Sellal as well noted that partnerships with foreign laboratories, particularly those specialising in advanced medical technology, could help SAIDAL achieve this target.

Announcements from several industry players in recent months of major capital plans for their Algerian operations are expected to strengthen the government’s bid to boost local production and increase market share.

In early June AstraZeneca announced plans to build a new $125m facility to manufacture cardio, cancer, gastroenterology and diabetes drugs as part of a 49:51 joint venture with two local companies, Salhi and Hasnaoui. The factory is earmarked for completion in the initial half of 2017.

Just weeks later, Sanofi said it would invest €70m in a third plant in the country, its major in Africa to date. According to statements from the company, the factory will produce some 100m units per year at full capacity, equivalent to around 80% of the current volume of Sanofi’s local distribution.

Signalling growing interest from non-European players, in October Indian manufacturer Cipla announced plans to establish a 40:60 joint-venture company – with the remainder to be held by an Algerian consortium led by Biopharm – to manufacture respiratory products. The joint venture plans to invest up to $15m in a new manufacturing facility in the country.

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