Country Report: South Africa

Feb 01, 2016
By Pharmaceutical Executive Editors
Volume 36, Issue 2

This sponsored supplement was produced by Focus Reports.

Project Director: Valerie Baia

Editorial Coordinators: Zachary Burnside, Jun Wakabayashi

Project Assistants: Maryam Niakouei, Laurent Libano, Roxane Höck

Project Publisher: Mariuca Georgescu

Cover Illustration: Carmen Reyes

For exclusive interviews and more info, please log onto www.pharmaboardroom.com or write to [email protected]

A MODEL IN MOTION

With the roots of its history sewn into a constantly evolving narrative, South Africa, under democratic rule, has undergone a remarkable transition through the implementation of sweeping social and macroeconomic reforms. Institutional advancements have practically touched every fabric of society to produce a truly transformative and growth-driven state. With a population of 54 million and GDP of roughly USD 350 billion, the country is one of the largest economies in Africa—second only to Nigeria—and leads the continent in broad-based industrial development, while also consequently serving as a strategic hub for many companies' pan-African operations.

For pharmaceutical players, the fundamentals have always been present—growing disposable income, eclectic demographics, an aging population, and a diverse disease burden. But, perhaps more in tandem with the country’s evolution are the constant shifts in infrastructure developments, policy amendments, and regulatory frameworks to effectively capitalize on those fundamentals. In some respect, the government has succeeded, now with a ZAR 39.5 billion (USD 2.8 billion) pharmaceutical market, the largest in Sub-Sahara Africa, growing at a CAGR of 7.4 percent from 2014 – 2019 according to the latest IMS Health data, and a world-class private healthcare sector that’s on par with any developed country on the globe. But in other respects, its efforts have fallen short given the nation’s heavily overburdened public healthcare system catering to a vast majority of the population who still lack fluid access to basic medicines and medical treatments.


Aaron Motsoaledi, minister of health

Inheriting the legacy of apartheid, this fundamentally disproportioned two-tiered healthcare model has created its own set of challenges for all players across the value chain. With the hurdles inherent in an ever-changing landscape, many companies are forced to routinely evaluate the viability of their commercial strategies and adapt accordingly. Though, most stakeholders agree: the current state of healthcare is not sustainable, and only by banding together as a collective—public and private—can the sector move forward in a productive fashion.

BACK TO BASICS: A WORK IN PROGRESS

With one of the highest Gini coefficients in the world, a common statistical representation of inequality, South Africa, for the first time in its history, has created a collectively agreed upon roadmap to tackle several of the country’s most pressing problems—called the National Development Plan (NDP). “The NDP is a vision for where the country should be in 2030; a framework for growing the economy while tackling unemployment, poverty and inequality,” exclaims the Minister of Health Dr Aaron Motsoaledi. “With regards to health, it sets a number of key priorities. It says that by 2030 life expectancy should be 70, and that we must produce a generation of under 20s who are HIV-free. It goes on to say that the quadruple burden of disease must be markedly reduced.”


Anban Pillay, executive director, Department of Health

Universal health coverage is also encompassed within the NDP, but while National Health Insurance (NHI), now in its fourth year of implementation, is slated to roll out over a 14-year period by 2025, many other more immediate initiatives have been concurrently implemented to tackle multiple fronts simultaneously. One key area in reducing the strain on government-run facilities is primary healthcare—what the Minster refers to as the “heartbeat of South Africa’s healthcare system.” The Ideal Clinic initiative was created to improve the quality of care in 3,500 primary healthcare facilities across the country, while also encouraging a wider spread of community-based health promotion and disease prevention programs. “Ten elements are at the core of this concept, including how the administration of the clinic should function; what policies, protocol and clinical guidelines should be followed by staff; what service a clinic should offer, as well as infrastructure requirements,” the Minister explains.


Stavros Nicolaou, chairman, PHARMISA & PHEF

“Sequenced approach in terms of treatment is imperative in managing the costs associated with a country’s healthcare system,” affirms head of KPMG’s healthcare and life sciences practice Joubert Krugel. But, with a public system that has greatly deteriorated over time, many general practitioners have actually migrated into the private sector in search of better working conditions and higher rates of compensation. As such, “considering that their role as primary givers of health has largely diluted, many patients bypass family doctors and directly seek hospital or specialist care—further driving the costs of secondary and tertiary health services,” asserts Krugel. According to South Africa’s Department of Health, in March 2012, South Africa saw 165,371 qualified health practitioners in both public and private sectors registered with the Health Professions Council of South Africa—which includes 38,236 doctors and 5,560 dentists. This leads to a doctor-to-population ratio estimated around 0.77 per 1,000, but considering that 73 percent of general practitioners work in the private sector, there is just one practicing doctor for roughly every 4,200 people.


An Overview of South Africa's Healthcare Expenditure

In 2014, World Bank estimates place healthcare expenditures in South Africa at 8.9 percent of GDP. When compared to the other members of BRICS, Brazil leads the pack in terms of healthcare expenditure at 9 percent of GDP, equivalent to the European average, followed by South Africa, Russia, China, and then India. “Yet when we look at the health outcomes, those four countries are all far ahead of South Africa. This is because we are adopting the American model, something not appropriate for a developing country,” claims the Minister.

Despite a roughly 50-50 split in healthcare spending, a disparity is unveiled when public and private sector spending are broken down per capita—USD 194 and USD 784 respectively—a disposition largely attributed to the vast inequalities between the two. But, Dr Anban Pillay, Executive Director at the Department of Health, argues that the poorer health outcomes are strictly a result of the unique set of challenges faced by South Africa. “Most of the developed countries, as well as many other developing countries with similar GDP levels, aren’t faced with this burden. Talking more specifically about HIV and AIDS, South Africa has nevertheless become a regional hub, thanks to one of the most well funded HIV programs in the world, which already provides our patients with some of the most innovative drugs available on the market.”


Bongani Mayosi, head of department of medicine, University of Cape Town

Stavros Nicolaou, chairman of Pharmaceuticals Made in South Africa (PHARMISA), agrees, “In recent times we have received some criticism that the country is not realizing its economic potential. We need to place this in perspective. There are not many countries in the world that have had to contend with the explosion in healthcare needs that we’ve had to as South Africa. While there are numerous remaining challenges, we have achieved much. We now have 3 million people on ARV treatment, around seven times the size of the next large ARV public program, the Brazilian one.” That being said, however, “The challenge remains that of leveraging all of your existing health resource to optimize health outcomes for all South Africans, regardless of whether they reside in the public or private sector,” argues Nicolaou.


Joubert Krugel, head of life sciences Africa, KPMG

Back in 2009, British medical journal The Lancet commissioned a series on the state of healthcare in South Africa. “It recognized that in the first 15 years of the new democratic South Africa, in terms of health and the health system, the country had moved backwards,” details Bongani Mayosi, head of the Department of Medicine at University of Cape Town. The Minister of Health referred to this period as “backpedalling” in which the average life expectancy of a South African at birth decreased by nearly 20 years to age 50. This trend was mainly due to the explosion of HIV/AIDS and TB, but also compounded with three other major health problems including maternal and infant mortality, interpersonal violence and injuries, and a growing prevalence of non-communicable diseases—collectively coined as the quadruple burden of disease—which continues to persist today.


Healthy Heart Africa: Strengthening Healthcare Capabilities

“UBUNTU” – TOGETHER WE ARE MORE

Perhaps the most quintessential example of sector wide collaboration is the Public Health Enhancement Fund (PHEF). A consortium of 23 private sector companies dedicated to improving health conditions in South Africa, this initiative, which launched in 2012, spans multiple industry segments including distributors, funders, pharmaceuticals, medical devices, and hospital groups. “Between 2010 and 2011, a group of pharmaceutical and private health industry CEOs decided the need to sit down with the minister and try to offer collaborative efforts to identify the challenges for the healthcare sector and how they can be addressed,” recounts Ayanda Ntsaluba, group executive director at Discovery Holdings and chairman of the PHEF projects committee. “The initiative between the CEOs and the minister was a very interactive process and led to an agreement on three fundamental projects.” The three areas of focus include:

Firstly, Addressing the shortage of doctors and specialists by supporting the intake of medical students

Secondly, Increasing the managerial capacity of healthcare executives, particularly in public hospitals, through the Academy of Leadership and Management in Healthcare

And thirdly enhancing level of high-level research conducted across different health disciplines by producing up to 1,000 PhD graduates over the next 10 years

“An era emerged where the private sector developed this idea of pooling resources together in order to contribute to the enhancement and improvement of healthcare in general, under the leadership of the Department of Health,” depicts the vice chairman of the PHEF Dr Nkaki Matlala. “We invited all companies active in the healthcare industry…[and] set a policy that a certain percentage of net profit after tax [0.75 percent] would go towards the fund, with some companies deciding to partake, but none being coerced.”


Ayanda Ntsaluba, group executive director at Discovery Holdings and chairman of PHEF projects committee

Essentially, the underlying components of this fund center on addressing the skills shortage in the country, while also building managerial and educational capacities. “In this instance, it’s less to do with history and more about supporting any South African demonstrating a desire and aptitude to succeed in medicine research and other clinical disciplines by enabling them to materialise their ambitions without the associated financial burden”, reasons the country manager of Roche Diagnostics Rajen Bhimaraj. “The PHEF aims to fund those who can’t normally afford post-graduate degrees or medical programs, with the ultimate hope that these individuals reciprocate the investments by eventually practicing in the local environment.”


South African Pharmaceutical Market Breakdown

For industry leaders, this initiative represented the mutual acknowledgement of major challenges facing South Africa today and the shortcomings of its healthcare system. “In the past, many companies have pursued independent initiatives, but the challenge was effectively governing these initiatives from an administrative perspective to materially impact one unified front—which often only served to dilute the results. The PHEF has helped us gain efficiency, but also scale to facilitate greater impact, as a collective,” illustrates Christo Kruger, general manager of AbbVie and chairman of the PHEF marketing committee. “Government support from the Ministry of Health (MoH) has helped the steadfast development of the PHEF so far. But perhaps the most fundamental component of the fund’s success, considering the minimally allocated administration and marketing budgets, is steeped in this voluntary public private cohesion—specifically with the amount of pro bono work donated by the professionals and the companies representing this collaboration.”


Christo Kruger, general manager of AbbVie and chairman of the PHEF marketing committee

As the PHEF approaches the end of its three-year commitment, all stakeholders, especially the ones not currently involved, are looking to see how the scope of this project will evolve and momentum maintained. “At the moment, every single company represented within the PHEF has an obligation to be actively engaged and to lobby for more participation to ensure that we maintain this momentum. We now have tangible results to demonstrate the proof of concept and a solid platform to move forward from. Starting from a grassroots level, we have every intention to broaden the scope and scale of the PHEF in the coming years to effectively pierce through the underlying issues of our healthcare system,” contends Gauta Mavundla, general manager of established pharmaceuticals at Abbott South Africa.


Gauta Mavundla, general manager, Abbott EPD

COLLABORATING FOR A BETTER TOMORROW

Although the clinical needs of the population have grown in parallel with the country’s development, healthcare delivery models have largely remained static. The private sector continues to boast the latest advancements in therapies, equipment, and facilities—made available to roughly 16 percent of the population at an extensive premium. Meanwhile, catering to the remaining 84 percent, public healthcare infrastructure exhibits massive resource constraints and shortages of skilled labor. “Because of the duality of our healthcare system, there is still only limited cooperation between the two sectors. Aside from infrastructure conception, cooperation between public and private sectors remains largely restricted to a just a few areas,” contends Dr Dumisani Bomela, CEO of the Hospital Association of South Africa (HASA), which represents the majority of private hospitals in the country.


Konji Sebati, CEO, IPASA

“Private sector has so much to offer in terms of knowledge, education, and skills, and we absolutely want to contribute to the overall improvement of South African healthcare. However, we would like the government to review the current policy constraints,” insists Dr Bomela. “Talking about the low-hanging fruits of this partnership, we could easily create a training platform for doctors (undergraduates or specialists), but unfortunately doctors’ education strictly remain a prerogative of public authorities. Private hospitals could also contribute to the training of a larger number of nurses, which is also currently limited by the legislative constraints. This kind of training initiative would be very useful in tackling the shortage of nurses and doctors currently facing the South African healthcare system.”


Dumisani Bomela, CEO of the Hospital Association of South Africa (HASA)

Serving the interests of research-based pharmaceutical companies, the CEO of the Innovative Pharmaceutical Association of South Africa (IPASA) Konji Sebati further urges the importance of having all stakeholders across the sector work together for a stronger impact. “My biggest priority over the last ten months has been to rebuild trust with the Department of Health, our biggest stakeholder, with our patients and the physicians. It is essential for us to project ourselves as part of the healthcare value chain, moving on from the ‘us versus them’ mentality.”


Two Sides of the Same Coin

This collaborative sentiment has been felt amongst many industry players—both local and multinational—operating in the South African landscape. Luciano Marques, CPO head and country president of Novartis South Africa, believes that “dialogue and teamwork amongst public and private actors is crucial, especially for an emerging market that is undergoing a transformation of its healthcare system.” Aside from its efforts in providing affordable medicines to tackle malaria and TB, the company has also sought out public-private partnerships to facilitate a greater impact. “We have recently signed a joint venture with IBM and Vodacom, where we are working on a platform that will help with the management of non-communicable diseases, with a focus on diabetes, hypertension and obesity. We have created a system which allows healthcare workers to better coordinate on the ground and to generate data allowing for better resource allocation in the public system. This platform is currently in a pilot phase; it will make a significant contribution to the development of the healthcare system,” explains Marques.


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“The focus is on collaborating to improve the quality of care on offer in South Africa - there is no commercially driven interest in this partnership. This is not a stand-alone agreement amongst three companies; we are engaged in a pilot scheme with the public sector. By all working together we can have a greater impact in improving the healthcare situation in the country. Companies are ready to engage with the government to see how they can improve access to medicines, in both the private and public healthcare systems,” he says.


Luciano Marques, CPO Head & country president, Novartis

Even on the retail side, companies such as Clicks have leveraged partnerships with the government to improve widespread access to medicines and health services. “In the Western Cape, we have 40 clinics within our pharmacies. We take provincial vaccination stock, and for a small service fee, we will immunize babies. Rather than going to state clinics, patients can now conduct baby immunizations in Clicks clinics—effectively alleviating the pressure on state clinics,” describes David Kneale, CEO of the Clicks Group. Furthermore, within several NHI pilot districts, Clicks stores act as pick up points for patient prescriptions, as opposed to a state facility—saving costly and time-consuming trips for many patients.


Amgen: Fresh vision, fresh mission

British-Swedish multinational AstraZeneca has also tasted the growing fruits of collective empowerment. “Over the last few years, AstraZeneca has received a lot of interest in partnering with governments to tackle the burden of non-communicable diseases,” recounts Karl Friberg, country president of the company’s South Africa & Sub-Saharan Africa operations. “As a global biopharmaceutical company, we know that AstraZeneca can make a meaningful contribution to increase access to healthcare. We are pursuing a range of different initiatives across patient populations to understand what works best and in what context.”


MC Pharma: Local Context, Global Outlook

“Going into the future, the nature of collaboration has to improve between public and private healthcare stakeholders. In the past, although operating in the same space, the two sectors functioned somewhat independent of each other,” illustrates the general manager of established pharmaceuticals at Abbott South Africa Gauta Mavundla. “We’re now seeing the widespread growth of various public private partnerships—the PHEF being one of them. The objectives focus on establishing common ground between the government and the business community, while addressing areas that are critical to the sustainability of our healthcare system—which we are all an integral part of. We are effectively moving towards a direction with more cohesive and seamless collaboration between the two sectors in our market.”


Karl Friberg, country president, AstraZeneca

BY SOUTH AFRICANS, FOR SOUTH AFRICANS

In its seventh iteration, the Department of Trade and Industry’s (DTI) Industrial Policy Action Plan (IPAP), which details key actions and time frames for the implementation of industrial policy, has once again delineated pharmaceuticals as one of the eight priority sectors. Although only attributed to just 0.4 percent of the global pharmaceutical market by value, South Africa’s pharmaceutical market is by far the largest in Africa, with the largest ARV program in the world—providing treatment to roughly 3 million people in the public health sector and 150,000 in the private sectors as of December 2013. Despite this, though, the DTI describes the country’s manufacturing profile as skewed, ’bottom-heavy,’ with technologically advanced yet often under-utilized formulation capacities, including triple fixed-dose ARV tablets, and disproportionately smaller API manufacturing. “Indeed, less than 5 percent of APIs are manufactured in South Africa, as they are mostly imported from India, the EU and China. This helps build up the BRICS, but on the back end of it, the majority of pharmaceutical revenues leave the country and that is not sustainable,” details the managing director of MC Pharma Group Henk Krebs.


David Kneale, CEO, Clicks Group

“I implore the government to increase its financial support for locally produced drugs, rather than massively funding imports of foreign drugs,” asserts the CEO of Proudly South African, Leslie Sedibe. “If we continue to import drugs without ensuring that in the medium to long term we will be able to produce them locally, our money will always support overseas job creation rather than addressing South African unemployment.”


Strategic Review of Stephen Saad's Aspen

With the hopes of stimulating more domestic value creation, “In December 2011, the National Treasury amended the Preferential Procurement Policy Framework Act for public tender calls—designating local procurement for certain designated industry sectors as compulsory. Furthermore, the Local Procurement Accord was also signed in October 2011 by the private sector, organized labor, communities, and government. This progressive and incremental movement will help fulfill the aspirational target of 75 percent local procurement content and create a platform for five million new jobs by 2020,” holds Sedibe.


Leslie Sedibe, CEO, Proudly South African

Coupled with mandatory offers of generic substitution, these mechanisms have fueled the rise of domestic manufacturers such as Aspen and Adcock, while also driving the exponential growth of generics—which continue to erode originators in both volume and value. For local generics manufacturer Pharma Dynamics, the company has shown a consolidated annual growth rate over 5 years of 28 percent—quickly becoming the fourth largest generic pharmaceutical company in South Africa and a natural acquisition for Lupin. “Given the large number of generic pharmaceutical companies present in the country,” depicts Pharma Dynamics CEO Paul Anley, “another key to our success has been our focus on marketing and sales. We invested heavily in this area, with a marketing and sales infrastructure of over 110 people. We are not merely relying on pharmacists to substitute original prescriptions, or other generic prescriptions, with our products, but are encouraging the doctors to prescribe Pharma Dynamics products. As a result, pharmacists feel comfortable dispensing or substituting with a Pharma Dynamics brand.” He goes on further to highlight, “One of the advantages we have over some of our competitors is that having been independent for most of our history, we developed strong relationships with a number of pharmaceutical companies who were not represented in South Africa. This provided us with access to numerous different pipelines and this now includes the Lupin pipeline.”


Paul Anley, CEO, Pharma Dynamics

But despite such a forthcoming environment, the prevalence of local manufacturing has been lackluster at best—especially with medical products, i.e. pharmaceuticals, medical devices, and medical diagnostics, jointly as the 5th largest contributor to South Africa’s trade deficit. Anley offers several insights behind this singularity: “My belief, and this view is shared by most global pharmaceutical companies, is that the benefits of economies of scale of global manufacturing far outweigh any potential incentives for local production. The inefficiencies of smaller production runs to satisfy local demand are greater than the incentives provided by government. Of course, there would be a strategic advantage to produce locally with incentives to supply a global market. Of particular concern though, is the time taken to get regulatory approval for manufacturing changes, which preclude a greenfield production project.”


Kevin Moodaley, head South African Operations, Hetero Drugs

One company in particular, however, has managed to thrive in the face of South Africa’s import dependency. Head of operations for research-based Indian pharmaceutical company Hetero, Kevin Moodaley contends, “The main issue in South Africa is one of supply. The demand is increasing and Hetero can play a key role given our API and finished formulation capacities. We are one of the leading companies in terms of our large manufacturing capacities. The government and our objective is to make the prices of medicines more affordable. We are a vertically integrated company, from our APIs to our finished formulations. Previously, we used to distribute single molecules but today we have a wide range of fixed dose combinations.” Elaborating further on their ambitions, Moodaley says, “We are continuously working towards broadening our fixed dose combinations portfolio to meet Minister Motsoaledi’s need for making more fixed dose combinations available to patients across the country.”


Vivian Frittelli, CEO, NAPM

ONE STEP AT A TIME

In an attempt to control price inflation and increase transparency, South Africa’s regulatory bodies introduced a single exit price (SEP) in 2004. Only adjusted once a year based on historical exchange rates, SEP is the maximum price that drug manufacturers can sell a product at, irrespective of volumes and net of rebates and discounts. In the last few years, the DoH has set increases below the real increase in costs—creating an added layer of financial risk in the presence of currency volatility. “South Africa has one of the five most highly vulnerable emerging market currencies,” exclaims PHARMISA chairman Stavros Nicolaou. “Within this group of countries you have Brazil, India, Turkey, South Africa and Indonesia. The rand has gone from 8.10 to the dollar in 2012, to almost 14 today. This has placed significant margin pressure on pharmaceutical businesses in the country as most components are imported.”


Manufacturing Excellence with Sanofi South Africa

Moreover, the influx of healthcare consumption and lack of regulatory personnel are greatly contributing to lagging registration timelines with the Medicines Control Council (MCC). “A significant number of companies, including Adcock Ingram, have a substantial amount of products stuck in the regulatory process, some of which have been there for four or more years,” claims Ashley Pearce, managing director of Adcock Ingram’s prescription division. “In order to increase the access to medicines, we would need to have more medicine available, because with competition, prices go down, and there will be more flexibility in terms of product availability and pricing.”


Henriette Viennings director MRA Regulatory Consultants

“Although eventually transforming into a new structure called the South Africa Health Products Regulatory Agency (SAHPRA), the current form of MCC has a severe capacity issue in terms of staffing—with at least half of the staff voluntarily assessing dossiers. The quality of dossiers aside, there is always going to be multiple reasons a registration might be delayed. But, as it is currently, we need to improve the ability of the MCC to speed up drug registration timelines. Mutual recognition of products that are available in other countries—whether that’s in the EU or Singapore—and allowing those products to be fast tracked through registration could significantly help streamline the process,” asserts Pearce.


Jenny Wright, managing director, Galderma

The CEO of the National Association of Pharmaceutical Manufacturers (NAPM) Vivian Frittelli insists that this new agency, SAHPRA, will operate in a more independent capacity that will allow it to solely benefit from any income it receives—acting in a similar fashion to the FDA. He further contends, “The formation of SAHPRA was legislated prior to the year 2000. However there were some technical issues which caused the founding legislation to be repealed and the bill was rewritten and is currently under consideration by the Parliamentary Portfolio Committee on Health.” The official implementation has yet to be determined.


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However, from the more holistic perspective of MRA Regulatory Consultant’s director, Henriette Viennings, there’s a completely separate, more pressing area, that if left unaddressed, can effectively hamper the sector’s steadfast development. “We have a considerable challenge as an industry in that our regulatory and compliance information is still predominantly paper-based. It is a huge burden because digitization can take time, and if it is not done well, poses a risk due to the potential loss of data. We are seeing companies struggle with the management of regulatory information from multiple mergers and acquisitions that have also often lead to incomplete data transfer/on-boarding.” She goes on further to insist that “Many companies have not yet changed their focus and investment strategy from marketing to the implementation of compliance systems which places a considerable strain on the quality management and regulatory teams within these organizations.”


Colin Sheen, managing director, Adcock Ingram Critical Care

EXPERIMENTING WITH THREE MODELS OF SUCCESS

With such a myriad of market challenges, companies have pursued an array of strategies to maximize earnings potential. Three companies in particular have formulated their business models to circumvent negative externalities, mitigate risks, and ultimately generate exceeding levels of commercial growth:

Galderma’s Diversified Portfolio Structure

For the international dermatology specialist Galderma, success has been largely derived from diversifying into multiple product segments such as self-medication and medical devices. “Considering the limitations of the Medicines Control Council (MCC), the availability of new pharmaceutical products is relatively scarce on our end. In fact, we’re about to launch a new prescription product early next year—the first in roughly eight years,” illustrates the managing director of Galderma South Africa Jenny Wright. “We currently have a healthy pipeline of medicinal products, but, given the relatively long registration timelines, we will only be able to commercialize these products around 2019—starkly contrasting the regulatory environment for medical devices and therapeutic skincare. Since there are no registration requirements at this time, we’re able to launch these products into the market far more quickly.” Under this business model, the affiliate has experienced phenomenal base growth, with turnover substantially expanding by double digits for the past few consecutive years.


Abrie Hanekom, country manager, BMS

Adcock’s Insightful Partnerships

In an opposite fashion, leading local provider of medical devices, Adcock Ingram Critical Care has sought out a long-standing alliance with internationally renowned healthcare company Baxter. Managing director of the critical care division Colin Sheen describes the underlying motivations behind this arrangement, “South African companies have limited access to technology when it comes to healthcare and pharmaceutical products. As such local businesses are rather dependent on international partnerships to support their offering and pipeline.” The collaboration has thrived over the years and brought about benefits for both companies, as Sheen recounts, “we have been able to build the Baxter brand within South Africa, creating access for them in the country. Through this relationship we have also been able to gain access to the Baxter technology, something we would have been unable to do on our own. There are however many more opportunities for global companies to partner with a company such as ours – the leading supplier to the hospital industry in South Africa. We bring critical mass and years of insight and access to a market where barriers to entry are high. Beyond this we are a fully integrated organization spanning R&D, regulatory, manufacturing, distribution, sales and marketing and governance principles’ aligned to global standards.”


Jennifer Power, CEO, country manager & global established products business lead, Pfizer

The extent of the company’s partnership ties, however, are not only limited to the private sphere, but also public. “We work very closely with government, and are very supportive of their ambitions. There is a huge burden of disease in South Africa, and it is my view that industry has an obligation to assist in tackling it,” asserts Sheen. “I believe that both government and industry objectives can be met through aligned and ongoing engagement. My personal experience with government has been extremely rewarding, not only with regards to the support and cooperation we have received, but equally the enormous gratification in delivering the lifesaving products that we produce.” In conjunction with the company’s only integrated medical grade plastics and pharmaceutical manufacturing facility on the African continent, the combined synergies of both industry peers and the government have allowed Critical Care to become market leader in each of its respective operating segments.


Andrew Eve, general manager and head of prescription medicine, Boehringer Ingelheim

BMS’s Specialization in Innovation

Pursuing an alternative avenue, Abrie Hanekom, country manger of BMS South Africa, has undertaken a first-to-market approach—having launched the first immune-oncology product in South Africa. “We have started incorporating the diversified specialty biopharma model in the South African subsidiary. Of foremost importance is to carry on with good work that we are currently doing. We focus to drive our People Strategy which talks of Engage, Empower & Enrich within BMS and we have taken on several initiatives to institutionalize our People Strategy. The third component is to focus on immuno-oncology in our markets in South Africa. We are the first company to launch an immune-oncology product in the South African market, in January 2015.” Ultimately, Hanekom contends, “Our goal is to bring the new innovative medicines as fast as possible to the South African patients—molecules that will be utilized in Oncology, Immunology and Immuno-Oncology.”


Stefan Maron, managing director, Merck

REACHING FOR THE STARS

Widely characterized as a gateway into Africa, South Africa has become a strategic center of excellence ripe with growth opportunities for many healthcare and life science companies that possess local or regional operations, including three of the largest hospital groups in the world—Netcare, Mediclinic, and Life. That being said, however, although the market opportunities abundant and growth potential evident, some argue that South Africa has yet to earn its stripes among its compatriots in BRICS. “At least from a healthcare perspective, the market is too small in scale—making the climate much more difficult for international investors. Despite recent turbulence, the BRICS are a set of countries that deserve the focus of international long-term investors. In terms of fundamentals, South Africa exhibits many of the same characteristics as Brazil, Russia, China, or India, but the market is much smaller,” alleges the general manager of IMS Health Africa Roberto Minetti. “At the end of the day, the most attractive market opportunities lie in the country’s private market, catering to roughly eight million people—the same population as Switzerland, but with lower average income. For example, Brazil is the second largest pharmerging country, compared to South Africa’s status as the 18th largest. Other sectors in South Africa such as mining display much more prominence, but in terms of healthcare, the country requires further development. South Africa has a whole pipeline of issues that need to be addressed first, before it can adequately compete on an international scale against other emerging markets.”


A Crossroad of Business and Research

Deloitte South Africa’s healthcare and life sciences leader Valter Adão elaborates further, “We also could position ourselves far more effectively as a springboard into Africa, especially English speaking African countries, considering the refined nature of our financial markets, which allow for easy capital raising; the Johannesburg Stock Exchange (JSE) has been consistently rated among the best in the world. Although, the country has the potential to offer the infrastructure, the incentives, and the governance as an effective hub for the rest of Africa, we’re beginning to see companies instead base their Africa operations out of the Middle East.” According to Adão, the impetus for dethroning the rainbow nation’s gateway status hinges on two real stress points: the drastic devaluation in currency, which places heavy pressures on imports and local manufacturing, and the shortage of skills in healthcare delivery and research.


Roberto Minetti, general manager Africa and Near East, IMS Health

Though, at least from a stepping stone perspective, South Africa continues to exhibit the essentials to jumpstart any pharmaceutical venture. “For a global pharmaceutical company to be successful in any environment requires two basic elements. Firstly, infrastructure that facilitates the diagnosis and treatment of patients, including a registration body that is efficient, as well as availability of healthcare practitioners to diagnose and treat,” asserts the country manager of Pfizer South Africa Jennifer Power. “Secondly, an enabling environment, an equitable governmental policy, is essential if we are to achieve our ambitions…South Africa already has many of these elements in place.”


Valter Adão, healthcare and life sciences industry leader, Deloitte

On the same note, Andrew Eve, general manager and head of prescription medicine at Boehringer Ingelheim South Africa, further adds, “South Africa, as a leading hub within Africa, a continent with over one billion people, can therefore have considerable influence. The country acts as a springboard for many companies looking to develop their footprint in Africa, due in part to [its] well-developed infrastructure and high level of education. South Africa is the place to be if you have African ambitions.”


Imperial Health Sciences: Dominating South African Logistics

Needless to say, the key in capitalizing on these fundamentals and truly unlocking South Africa’s treasure chest of opportunities is contingent upon putting the right policy levers in place. While many have long relinquished the hope of any paramount and systemic change, Stefan Maron, general manager of Merck South-East Africa, remains optimistic: “Democracy has now developed a strong foothold, the business environment and infrastructure are improving and legislation is increasingly enforceable. It was a strategic decision by [Merck] to take a long-term perspective when investing in African countries, working on CR initiatives and public private partnerships, helping to shape healthcare systems by partnering with governments.” In response to medical, lifestyle, and social issues, Merck has specifically tailored its portfolio to target multiple segments in the market—allowing the company to experience steadfast success over its history within the country. “We are experiencing positive growth in all of our three business sectors. Our Merck Millipore business works on life science products, ranging from laboratory chemicals of very high quality, to micro-filters and water purifications systems, where we are a world market leader. It is a broad portfolio that we are intending to complement by the proposed worldwide acquisition of Sigma-Aldrich. This is a high growth area for Merck South Africa as it supports many industries, such as pharmaceutical and biotech research development, the food and beverage industry, as well as mining and laboratories in general. Our consumer healthcare business is also benefiting from the rising consciousness of health and wellbeing amongst the South African population,” details Maron.

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