Pharmaceutical Industry, National Development and a Fairer Society, By Olu Akanmu
This generation of pharmacists and pharmaceutical industry managers face an historic task. This historic task is how to take advantage of the current challenges of economic recession, scarcity of forex for drugs and raw material importation, that threatens the survival of the pharma industry, to reinvent the industry and build a strong local manufacturing base for pharmaceutical products.
The 89th National Conference of the Pharmaceutical Society of Nigeria (PSN) is happening at a most critical time in the nation, with the Nigerian economy in a recession characterised by the decline in the official naira exchange rate by more than 55 percent over the last one year. In the parallel market, we see an even more significant decline in the exchange rate at more than 90 percent over the same period. While the government would wish otherwise, the fact is that most Nigerians and their businesses cannot source foreign exchange for their business in the official market unless they are well connected. For the Nigerian pharmaceutical industry that is virtually import-dependent, from raw materials to finished products, negative exchange rate movement at the quantum we have seen has meant skyrocketing prices of pharmaceutical products for those who could source forex. It has also meant reduced capacity utilisation for the pharmaceutical companies, who are unable to source foreign exchange for their raw materials. On the demand side, it implies expensive medicines for the Nigerian people, far above their means, and the rationalisation or the contraction of demand from retail to wholesale and the factory gates.
Indeed, the Pharmaceutical Society of Nigeria (PSN) has issued a rallying cry to the government for some form of preferential access for pharmaceutical imports, given public health implications. The challenge, however, for the Nigerian state is that it has to contend with other diverse priority and preferential sectors, such as petrol imports, and cannot satisfy their forex demand at current prices. I believe, as argued in my earlier economic paper titled, “Government Must Let Markets Work”, published in leading Nigerian newspapers, that markets are the most efficient ways to allocate and price scarce resources. Attempts to undo the market, even with patriotic intentions, as we have seen with petroleum product markets, create price distortions; dis-incentivise private provision to complement public supply, which is critical in a period of fiscal constraints. It creates a parallel, rent seeking market for the privileged few to make undeserved profits.
The government must stay committed to a flexible, market-driven exchange rate policy, ensure the effective co-ordination of fiscal and monetary policies and deploy political sagacity in the Niger Delta, to contain militancy and get oil production to recover back to two million barrels a day from the current 1.4 million barrels. At current oil prices of fifty dollars over the coming period, in addition to a market driven exchange rate that eliminates speculation premium and distortion, we should see private capital flows of forex returning. This, along with higher government revenue at fifty-dollar oil price and increased oil production, should improve foreign exchange supply and ultimately help the naira with wide positive spirals across the economy.
The current situation however calls for a deeper reflection on how we would build and develop a pharmaceutical industry that is increasingly less import dependent, and by so doing can absorb the shocks of foreign exchange volatility, which is inevitable in the boom and burst of global economic cycles. In discussing the pharmaceutical industry’s contribution to national development, this paper would be more forward looking on contemporary industry and practice issues, while recognising where the industry is coming from. How do we build a pharmaceutical industry that is competitive, at least in some areas of its value chain, and become a critical local player in addressing the health needs of our people, while also dominating the exports market in the West Africa? Professor Charles Soludo, in his lecture titled “Can Nigeria Manufacturing and Pharmaceutical Industry Compete” at the Nigeria Association of Industrial Pharmacists Conference six years ago, in September 2001, x-rayed these issues. The summary of Professor Soludo’s argument, which I extend further, are as follows:
a) The pharmaceutical industry’s competitiveness cannot be divorced from the competitiveness of the overall manufacturing sector and the Nigerian economy. Nigeria has consistently ranked near the bottom on international competitiveness ratings, such as the recent World Bank’s Ease Doing Business (released last month), where Nigeria ranked 169th out of 190 countries; the World Economic Forum’s Global Competitiveness Index (GCI), also released last month, where Nigeria dropped three places to 127th out of 138 countries and was only better than countries like Serria Leone and Malawi. Also, Mo Ibrahim’s Africa Governance Index (36th out of 54 countries); Transparency International’s Corruption Perception Index (136th), UN’s Human Development Index; Failed States Index, where Nigeria is in the top 15 of the most fragile states in the world.
The competitiveness issues, where Nigeria has consistently scored low include infrastructure, access to finance, security, corruption and governance, quality of education, skilled manpower and labour productivity. This low competitiveness prevents Nigeria from benefiting from the “flying geese” economic theory model that says that when labour cost increases in developed markets, old technologies, factories and production moves from developed countries to lesser-developed countries with cheaper labour cost. China and Japan benefitted from these model, as factories moved production from the US and Europe to China. You will recall that this is one of the electoral campaign issues of Mr. Donald Trump in the recent American presidential election.
It should normally have been expected that as China gets more prosperous, with wages and labour cost increasing, that global factories and production will then also move to Africa, especially Nigeria, given our huge population. This is however unlikely to happen as we do not have the basics in place, like infrastructure, governance, transparency and regulation, and a skilled and vocational workforce to harness this economic dynamic. The extension of this argument is that while we have seen global pharmaceuticals in a flying geese from Europe (Beechams and Wellcomes in the UK) to Asia (in the Ranbaxys in India), unless we deploy the right economic and governance actions, we may not see the pharmaceutical geese flying from Asia to Africa or Nigeria. The geese may be stuck in Asia, in India and China for a long time to come. This is essentially what we have today with the Nigeria pharmaceutical industry, with Western multi-nationals dominating the advance medicines category and the Indian and Chinese companies dominating the manufacturing of basic medicines, leaving our local players to be largely importers of finished products or producers of raw materials.
What must we do to make the pharmaceutical industry geese fly to Nigeria in Africa from India and China in Asia?
a) Nigeria must develop and adopt a formal comprehensive “National Strategy and Plan of Action for Pharmaceutical Manufacturing”. While researching this paper, I was shocked to see that right under our eyes, some smart African countries like Ethiopia have developed such framework and are implementing it, essentially leaving Nigeria behind. The following recommendations on the issues, which the National Strategy and Plan of Action for Pharmaceutical Manufacturing must address, is largely adapted from the Ethiopian framework.
First, we must have improvement of access to medicines through quality local production and implementation of the Good Manufacturing Plan Road Map. Nigeria now has four local companies certified as compliant with WHO Good Manufacturing Standard. We congratulate them on the achievement. We however need to make such standards the norm and not the exception. A formal public and private, inter-sectorial partnership, involving the Federal Ministry of Health, Federal Ministry of Trade and Industry, NAFDAC, PGMAN, PSN and multilateral agencies need to be deployed to make this happen. This is indeed the model that has been deployed in the Ethiopian Plan of Action.
…we must develop our human resources and local technical capacity through relevant education and training. We must build a stronger university-industry partnership to promote technology innovation, entrepreneurship, supply chain and regulatory management to support the progressive movement of the local pharmaceutical industry to higher levels of the value chain.
Second, we must strengthen the National Medicine Regulatory System. We must continue to strengthen efforts and capacity to eradicate fake drugs and medicine in the pharmaceutical supply chain.
Third, we must create incentives to move our local companies progressively along the pharmaceutical industry value chain from importation of finished products to local manufacturing. We must drive import substitution more aggressively. Government must deploy incentives that moves local players increasingly from importation and distribution of finished pharmaceutical products [Level 1 of the pharmaceutical value chain] to the packaging and labeling of imported bulk finished products [Level 2] and then to real product manufacturing, which is the manufacturing of finished products from imported active pharmaceutical ingredients (APIs) [Level 3], and then to local Active Pharmaceutical Ingredient manufacturing in Nigeria at [Level 4] and ultimately Research and Development of new chemical or biological entities [Level 5].
An audit of the distribution of local players in the pharmaceutical industry value chain will suggest that most of our local play is largely between Levels 1 and 3, with about 90 percent of local players largely in the importation and distribution of finished pharmaceutical products in Level 1 and just about 10 percent of local players in packaging and labeling and product manufacturing, according UNIDO Pharmaceutical Sector report on Nigeria in 2011. To encourage local manufacturing, government must deploy incentives that encourage importers to become local producers through the right discriminatory tariffs and tax policies. The current ECOWAS unified tariff model, where tariffs on imported finished pharmaceutical products are lower than pharmaceutical raw materials for local manufacturing, therefore needs to be reviewed. It delivers exactly the opposite of this policy objective. It dis-incentivises local manufacturing, while encouraging the importation of finished products. It kills local jobs in the Nigerian pharmaceutical manufacturing industry, while creating jobs in in China and India.
Other incentives will include the encouragement of pooled procurement of raw materials to get scale and cost benefits for local manufacturers, a firm formal policy to patronise local players and local products by government, where there are local manufacturing capacities, where prices are competitive and there is adequate compliance to Good Manufacturing Standards. Similar policies are being implemented and called “Local Content” policy in the oil industry to encourage local players. Federal, States and local governments should implement such “local content” policy in their procurement of drugs and medicaments.
Fourth, we must develop our human resources and local technical capacity through relevant education and training. We must build a stronger university-industry partnership to promote technology innovation, entrepreneurship, supply chain and regulatory management to support the progressive movement of the local pharmaceutical industry to higher levels of the value chain.
Fifth, we must develop geographic clusters for the production of active pharmaceutical ingredients (APIs). In locations around Lagos, Onitsha and Kano, where the pharmaceutical forward supply chain is well-developed, deliberate pharmaceutical industry clusters or industrial parks could be developed that bring local players and their value chain suppliers together with adequate and shared infrastructure for good pharmaceutical manufacturing and distribution. Industrial clusters development in a country with constrained resources allows resources to be concentrated in fewer geographic locations at levels above the minimum effective threshold, that support industrial development, rather than scattering them uncoordinatedly and ineffectively across the country. Can we, for example, plan a pharmaceutical cluster at the Lekki Free Zone around the petrochemical refineries coming on stream and build geographic, and value chain complementarities to support the manufacturing of Active Pharmaceutical Ingredients? (Igwillo, 2016)
Lastly, we must develop a national system to coordinate health technology research across our universities and research institutes, working closely with industry.
While addressing the above issues, we must continue to put pressure on government to deal with all the issues constraining our broader national development, such as infrastructure, ease of doing business, quality of education, labour productivity and skilled work force, security, governance and the cankerworm of corruption. These issues, as earlier discussed, provide the macro context to support the implementation of the “National Strategy and Plan of Action for Pharmaceutical Manufacturing”. They are the macro level issues that have made the manufacturing geese unable to fly to Africa from Asia as it flew earlier from Europe to Asia.
We should therefore commend the government for its latest move to deal with corruption in the Nigerian judiciary even if by extra-ordinary means. A corrupt judiciary is dangerous for business. A corrupt judiciary means contracts cannot be enforced. A corrupt judiciary means there will be no remedies for the breach of business contracts. It means a rule of the jungle, a state of anarchy, a business market in which there are no rights, rules or remedies. In such situations, business and markets will malfunction or absolutely collapse to the detriment of national development.
Our local pharmaceutical industry in Nigeria seems to be following the glide path of a Brazil rather than an India. We seem to be unable to build a consensus even among ourselves in the Pharmaceutical Society, that for the long term good of the industry and for the creation of local jobs, we should be united in supporting an import substitution policy that encourages local manufacturing.
Lessons from India and Brazil: Ensuring a non-stunted development of the Nigerian local pharmaceutical manufacturing base.
The evolution of the pharmaceutical industries in Brazil and India can teach us important lessons in how to ensure that the growth of the Nigerian pharmaceutical industry does not become stunted. Today, the world recognises India as an emerging power in the manufacture and export of generic medicines but little is heard of the Brazilian pharmaceutical industry. This is despite the fact that both countries had similar growth ambitions and opportunities of the relaxed intellectual property right protection environment in the pre-TRIPS era of the international pharmaceutical market. TRIPS is the World Trade Organisation (WTO) Trade-Related Aspects of Intellectual Property Rights Agreement (TRIPS), which sets the minimum standards for the protection of intellectual property, including patents for pharmaceuticals. Guennif and Ramani (2010), in their seminal work titled “Catching up in pharmaceuticals: a comparative study of India and Brazil” have identified the following factors for the strong growth trajectory of the local Indian pharmaceutical industry compared to the stunted growth of the pharmaceutical industry in Brazil:
a) A consistent, long commitment and execution by the Indian government, of an import substitution model, relative discriminatory tariffs that incentivise local production, compared to a vacillating commitment of generations of Brazilian governments to import substitution policy. Guennif and Ramani identified the presence of two powerful opposing lobbies in Brazil, of local manufacturers pushing import substitution agenda and a counter-powerful lobby that pushed for an open and unrestrained market for drug importation, actively supported by the multi-national companies (MNC) and the Washington multi-lateral agencies, with the argument that an unrestrained market will attract more Foreign Direct Investments. India put up a more united front and selectively implemented the advice of the Washington Consensus and the MNCs. Guerniff and Ramani (2010) and Nassif (2007) concluded that the vacillating commitment and the poor implementation of import substitution policy by the Brazilian governments had been disastrous for the Brazilian pharmaceutical industry.
b) Role of local players and their different perceptions of opportunities. Whereas Indian local players saw the pre-TRIPS relaxed Intellectual property environment as an opportunity for duplicative imitation of western medicines and mobilise in a series of Schumpeterian innovation, competing among themselves to exploit it for their local huge market and then for export, the Brazilian local players preferred importation of bulk drugs and raw materials. The Brazilian local pharmaceutical firms, copying the multi-nationals, in fact spent more on commercialisation and marketing of products rather than investments in local manufacturing.
Our local pharmaceutical industry in Nigeria seems to be following the glide path of a Brazil rather than an India. We seem to be unable to build a consensus even among ourselves in the Pharmaceutical Society, that for the long term good of the industry and for the creation of local jobs, we should be united in supporting an import substitution policy that encourages local manufacturing. It is important to emphasise that an import substitution policy does not mean a discrimination against everything imported. A country like Nigeria with limited local capacity for production and manufacturing of medicines will in-fact damage public good and healthcare with such blanket discrimination against all drug imports. The critical issue is to collaborate and identify the categories and products where there are local capacity and implement progressive and gradual import-substitution policy in these areas, with clear set goals and timelines, and leave the rest for inevitable and necessary importation. The local manufacturers must also produce to global standards and deliver prices that are competitive. Import substitution should never become a policy to promote and protect local production inefficiency, which will be at the detriment of the consumer and public good.
Pharmaceutical Care and a Fairer Society
Now that we have addressed the pharmaceutical manufacturing issues, let us now address the delivery of pharmaceutical care. Pharmacists globally, led by the International Pharmaceutical Federation (FIP) and with the endorsement and adoption by the Pharmaceutical Society of Nigeria, have embraced the concept of pharmaceutical care, which is defined by the University Of Oklahoma College Of Pharmacy as the “responsible provision of drug therapy for the purpose of achieving definite outcomes that improves the patient’s quality of life. These outcomes are cure of a disease; elimination or reduction of patient’s symptomatology; arresting or slowing of disease process and the prevention of disease or symptomatology. Pharmaceutical care involves the process through which a pharmacist cooperates with a patient and other professionals in designing, implementing, and monitoring a therapeutic plan that will produce specific therapeutic outcomes for the patient.”
We commend pharmacists in Nigeria for the adoption of this much-needed patient-centred rather than drug-centred paradigm in pharmacy practice. You will notice, however, that the definition of pharmaceutical care given above is not situated in any specific socio-economic context. That definition is a western and prosperous society definition of pharmaceutical care that assumes that the patient can afford the medicines, will fully comply with their prescriptions because they can afford them; and all that is left is for the pharmacist to work with the patient closely to ensure that specific therapeutic outcome is achieved.
In reality, this would not work exactly like that, here in Nigeria and in the third world given endemic poverty and acute socio-economic inequalities that fundamentally constrain access to healthcare for the mass of our people. The genuine execution of the concept pharmaceutical care must, therefore, be situated in its broader socio-economic context and reality in Nigeria. Nigeria has one of the highest socio-economic inequalities in the world with a gini coefficient of 0.48, making it the 152nd worst unequal country in the world out of 189 countries in income distribution.
It should be noted that social inequalities has progressively worsened in Nigeria with the top 30 percent of the population controlling more than 80 percent of income, while the rest of the population sank deeper into unemployment, underemployment, poverty and misery. Nigeria is rated as having the third highest concentration of poorest people in the world, according to the World Bank President, Jim Yong Kim in 2014. The Nigerian middle class is no longer rising due to rising unemployment or underemployment. Two percent of customers control 90 percent of bank deposits in Nigeria, according to the Nigeria Deposit Insurance Corporation, a proxy for extreme income concentration and inequality in Nigeria. When society gets more unfair, with a widespread sea of poverty surrounding islands of excessive wealth, genuine pharmaceutical care can only become a mirage for the mass of people who cannot afford medicines.
The contribution of the pharmaceutical industry to citizens well-being and their quality of life far exceeds what is captured by its size and share of national GDP. We must therefore commission a new level of advocacy with government and policy makers to better appreciate the pharmaceutical industry and urgently address the disincentives to local pharmaceutical manufacturing because of its importance to our citizen’s well-being.
The prosperity of many community pharmacists is tied to the prosperity of their communities. If society continues to get more unfair, only pharmacy shops in Maitama in Abuja, Victoria Island in Lagos and Olu Obasanjo way in Port Harcourt will make it and be prosperous. The prosperity of our community pharmacies is therefore tied to the prospect of a fairer society. Pharmacists and the Pharmaceutical Society of Nigeria can therefore not be socially cocooned from the larger society and social injustice issues. It is time to have a PSN that is more concerned about society than the pecuniary interest of its members. It is time to have a PSN that is more like a professional association with a social charter than a PSN that is more like a trade union. It is time to have a PSN that is less insular but have a stronger external orientation to society as its primary stakeholder.
We have made very significant progress in the PSN in this regards, especially under our current leadership. More however still needs to be done to move from the success achieved in commanding a new prestige for pharmacy to becoming a champion of enabling access to genuine pharmaceutical and healthcare for the mass of our people; to align with broader civil society movements to fight endemic poverty, to push for a fairer society and lesser social inequities without which genuine pharmaceutical care will be impossible in Nigeria.
Pharmaceutical Care, Digital Technology and the Pharmaceutical Industry
Let us now discuss another critical subject, the subject of digital technology and how it is disrupting many industries, in which the pharmaceutical industry will not be an exception. It is very good to note that the current president of the Pharmaceutical Society of Nigeria, Ahmed Yakassai leveraged on the social media for his presidential campaign. The social media is becoming the primary information and engagement media for many customers, even on their health needs. Patients post online, and in real-time, their experience of medicines; they go to Wikipedia to search for pharmacological information on medicines, even before they approach the health professional. The new and emerging patient in the modern world of digital media is becoming more informed on medicines, pharmacology and toxicology. When she visits the pharmacy or medical clinic, she has questions already and clarifications to ask the pharmacist and may even be aware of options to her prescriptions based on online conversations with other patients.
The pharmacy profession needs to re-invent itself for this new digital world in which medical information is no longer an exclusive privilege of the health professional. The new generations of patients emerging will put health professionals on their toes to raise their game, to raise their knowledge, to be a several steps higher than their patient, to provide advisory and consulting services to informed patients, rather than just act as mere dispensers of medicines.
New access models, such as remote consulting of the health professional, will emerge, geographic boundaries of the neigbourhood pharmacy may become irrelevant if an Abuja patient can leverage the power of the internet to remotely access their pharmacist who is based in Lagos. There will be disruption in distribution channels and service models of health and pharmaceutical services. It does look to me from my distant observation of the pharmaceutical society that we are still so much bogged down with old analogue practice issues that we pay little attention to how the future of pharmacy practice will change with digital technology. It will create new opportunities for some, while it will leave others behind.
Let me jolt you a little bit. Imagine if the two biggest successful e–commerce online retail platforms in Nigeria that have disrupted fashion retailing, go into pharmaceutical online retailing. These online retailers have become the biggest retailers of fashion products in Nigeria, driving out many expensive retail shops that used to be located on Allen Avenue and Awolowo road in Ikoyi, Lagos. They are taking business even from the informal fashion product traders in Tejuosho and Balogun markets, as their e-commerce model delivers low prices through scale and supplier aggregation model, while also delivering convenience for customers to shop without leaving their homes. On the global level, we see how Amazon.com has become the biggest book retailer in the world through an e-commerce model, driving incumbent book retailers to the corner. Ladies and gentlemen, because pharmacy is a retail business, though a specialised one, it will not be insulated from the disruptive trend going on in the digital space. If medicines are sold as mere commodities in our pharmacies, like fashion and clothing items, without any form of advisory service, we are creating a perfect condition for disruption of retail pharmacy by scaled e-commerce players.
We must therefore not wait for the online retailers to disrupt us. We must re-invent and disrupt ourselves before others disrupt us by accelerating our appreciation and embracement of the new potentials of digital technology.
This generation of pharmacists and pharmaceutical industry managers face an historic task. This historic task is how to take advantage of the current challenges of economic recession, scarcity of forex for drugs and raw material importation, that threatens the survival of the pharma industry, to reinvent the industry and build a strong local manufacturing base for pharmaceutical products. It is no longer a task that can be postponed for another generation. Paraphrasing Okey Akpa, Chairman of PGMAN in their presentation to the Nigerian Senate; it is a question of national security for a nation to have a minimum level of critical capacity to produce the medicines it needs. There will always be global trade and relative comparative advantages among nations for different products. However, to be absolutely dependent on other countries, to produce very little, to bulk-import most medicines consumed, without a national structured articulated plan, with specific goals and timelines to gradually replace a critical level of imports by local manufacturing is tantamount to a pathological health crisis and perpetual poor access to medicines.
The pharmaceutical industry is unique. Its importance is far bigger than its contribution to the GDP. Nobel prize winner in economics, Joseph Stiglitz has identified that GDP as a measure of economic performance, does not adequately cover and measure real “well-being and the quality of life” of citizens of a nation. The well-being of the people, their quality of life and indeed their health are not necessarily the same thing as production output and consumption data that conventional economics measure in sizing the GDP. The contribution of the pharmaceutical industry to citizens well-being and their quality of life far exceeds what is captured by its size and share of national GDP. We must therefore commission a new level of advocacy with government and policy makers to better appreciate the pharmaceutical industry and urgently address the disincentives to local pharmaceutical manufacturing because of its importance to our citizen’s well-being. We must also become more visible in the advocacy to improve the ease of doing business in Nigeria, to improve our national competitiveness and create jobs for the mass of our youth. We must become champions of a fairer society of shared prosperity, through our policy lobby, for our collective prosperity is tied to the prosperity of our communities and our neighbourhoods.
The Pharmaceutical Society of Nigeria is about ninety years old at this conference. The generations before us recognised their own place and purpose in history and fulfilled their mission. Let this generation too recognise its place and purpose in history and fulfill its own mission.
This is text of a Keynote Address delivered at the 89th Annual Conference of the Pharmaceutical Society of Nigeria.