OR WAIT null SECS
Despite rising healthcare costs, Algeria, the second-largest pharmaceutical market in Africa, remains optimistic about its pharma sector, which is riding the momentum of recent healthcare reforms. Manufacturing challenges and a growing prevalence of chronic disease, however, offer pause to the bright scenario.
This sponsored supplement was produced by Focus Reports.
Project Director: Chiraz Bensemmane.
Editorial Coordinator: Louis Haynes
Report Publisher: Diana Viola & Julie Avena.
For exclusive interviews and more info, plus log onto www.pharmaboardroom.com or write to email@example.com
With oil revenues tumbling, a hydrocarbon industry experiencing jitters and a fast diminishing public exchequer, one might have expected Algeria's budding healthcare sector to be feeling the pinch. On the contrary, despite ever-rising healthcare costs (public spending on imported drugs increased by 9.96 percent in 2014) optimism remains high. What's more, the government is adamant there will be no adjustment to an ambitious reform package that has already propelled Algeria to second-largest pharmaceutical market in Africa. Underneath the surface, however, a handful of longstanding concerns loom ominously. Local manufacturing has not yet attained the desired effects, chronic ailments such as diabetes and cardiovascular disease are hitting hard and the financial viability of the country's much-prized public healthcare system is being cast into doubt.
"Although the unemployment rate has been steadily declining and a greater portion of the population are contributing to our social security system, pharmaceutical expenditure is increasing at a faster rate than our revenue growth can match," warns Djaouad Brahim Bourkaib, director general of social security at the Ministry of Labor. "Just to speak of one of the chronic diseases afflicting Algeria, incidence of diabetes has risen to point where it has now reached epidemic-like proportions. We are talking about a mega-scale problem affecting millions of people and a rapidly expanding patient group," warns Kåre Schultz, former president and COO of Novo Nordisk, now global CEO of Lundbeck.
This is precisely why investor sentiment both inside and outside the country will be much buoyed by the announcement that there is to be no let up and that a bold agenda is to be rolled out in 2015 with a view to consolidating gains made to date and accelerating further progress.
"2015 will be the year when our health system will be revived," brazenly declares a smiling Abdelmalek Boudiaf, Algeria's minister for health, hospital reform and population. In a move resoundingly welcomed across the industry, the ministry has reaffirmed its commitment to cultivating a powerful and internationally competitive pharmaceutical sector while simultaneously redrawing the rules of healthcare provision. A raft of new measures will include aggressive promotion of local manufacturing, national plans for cancer and cardiovascular disease, the embracement of new treatment pathways, a ramping-up of infrastructure and even a (still to be fully defined and somewhat controversial) price-slashing on certain medicines.
Abdelmalek Boudiaf, Minister of Health, Hospital Reform & Population
Most reassuring of all was the unveiling of a generous annual spending plan that received much praise. "The budget allocation for the supply of medicines in 2015 will be even more than last year: close to DZD 100 billion (USD 1.01 billion), against DZD 85 billion (USD 860 million) in 2014," affirms the ministry's director general of pharmacy and medical devices, Hamou Hafed.
Hamou Hafed, director general of pharmacy and medical devices, ministry of health, hospital reform and population
Expenditure on imports of pharmaceuticals rose by 10.44 percent in 2014, costing the state some USD 2.6 billion against USD 2.34 billion the year before. Against that price escalation, overall volume dipped slightly, declining from 34,142 tons in 2013 to 33,593 tons in 2014 according to official figures released by the National Informatics and Statistics Bureau. This means that although import-substitution policies may be starting to make some headway in terms of quantity, they are seemingly yet to relieve the financial strain on an already overburdened healthcare system that is universal and free-at-the-point-of-delivery.
A closer breakdown of those numbers sheds further light on the main crunch points. Human medicines constitute the bulk of the spending, representing 93.17 percent of total imports of pharmaceutical products. Specific niches display a worrying upward trend. Imported antibiotics, for example, registered a value of USD 68.3 million in 2014, against USD 56.8 million in 2013, a cost increase of over 16 percent.
Short-term circumstantial factors may account for part of the rise. Hikma's general manager Raed Ashhab, for instance, is confident antibiotic imports will be significantly lower next year. "We're talking about seasonal products in a pretty volatile market where there have been some strong brands imported over the past year, but we've now invested in an automated local production line that should supply enough to satiate Algerian demand." Meanwhile Union Pharmaceutique Constantinoise (UPC)'s president Salah Arabet makes a similar case for the hormones segment. " In 2015, we'll be opening the doors on a brand new hormone production facility, the first-of-a-kind domestically and that directly reduces national import dependency," he declares.
Djaouad Brahim Bourkaib, director general of social security, Ministry of Labour, Employement & Social Security
Government policy to promote generics over branded products should also ultimately help to control costs. So too should biosimilars, when expiry dates on patent protection for expensive blockbusters start to enter into force, but all of this will take time to embed. In the words of Diphaco's general manager, Seddik Amry, "regulation on biosimilars in Algeria is still in its infancy: currently registration of these products fall under the jurisdiction of exactly the same law as for other drugs, just with a few extra footnotes and memos in the margin. Much greater clarification and definition will be needed if they're to take off." "It's true that we sometimes find ourselves standing in a bit of a legal swamp with one regulation erasing another, and a paucity of guidelines which impedes investors, including local ones, from investing in areas that ideally they'd like to… regulatory reform doesn't always match the speed of maturity of the market," concurs Generale Pharmaceutique Services (GPS)'s general manager, Brahim Bakhti.
Meanwhile many opinion leaders suspect the existing system itself may be unsustainable over the long run and that Algerian healthcare provision requires a radical rethink. "We need to review our overarching health policy and determine whether it is feasible to continue with universal coverage that is free for all and we need to critically analyze the workings of the social security system," advocates Senator Louisa Chachoua, president of the Commission for Health in Algeria's upper house, the Council of the Nation.
Kåre Schultz, former president and COO of Novo Nordisk, and now global CEO of Lundbeck
Domestic production has tripled over the past five years and is today worth USD 1 billion. Latest figures demonstrate that 48 drug importers have now established local production facilities and operate 75 manufacturing units. Plans for new projects continue unabated with 101 registered in the space of four years. There can be no doubt, therefore, that market actors have been heeding the government's call to boost national production capacity.
Raed Ashhab, general manager, Hikma
Despite these impressive achievements, however, a proliferation of in-country facilities doesn't seem to be reducing the import bill with the speed and efficacy that the authorities had originally hoped for. Official targets demand that local products satisfy 70 percent of Algerian drug requirements by 2017. With less than two years to go, demand fulfillment languishes between 35 and 40 percent. What explains this discrepancy?
Salah Arabet, president, UPC
"Domestic production is lacking structure and organization and that's why it's only limping along. Today we have 20 different local factories producing variants of the same product and that doesn't provide any benefit to anyone; it just serves to exacerbate cut-throat competition," affirms HUPP's CEO, Toufik Belhadj.
Seddik Amry, general manager, Hikma, Diphaco
Some call for the government to do more to assist what can still be considered an infant industry. "The government would do well to deregulate pricing in favor of domestic production of complex forms, which require hefty investments. This should be complemented with a lowering of exemptions on imported goods," urges UPC's Salah Arabet. "When Renault committed to constructing their cars in Algeria they were handed a 3 year concession of virtually guaranteed sales, why not apply that sort of respite to local pharma production to allow it to put down roots and develop a solid foothold?" wonders GPS' Brahim Bakhti.
Brahim Bakhti, CEO, GPS
On the face of it, the Algerian healthcare sector today looks great: a market valuation of USD 3 billion, double-digit sector growth, a population of 38 million and a unique brand of public sector healthcare characterized by state reimbursement and guaranteed patient coverage, all covered by a state budget that is propped up by the country's oil and gas revenues. But now, the time has come for Algeria to discuss its future: the country must find a way to access more innovative treatments, accommodate existing local players in an ever-expanding market, and push government priorities, which currently include a massive expansion of Algeria's domestic production capabilities. PharmaBoardroom recently conducted a round table event with the key opinion leaders of Algeria's healthcare sector, and below is a transcript of the conversation that took place about Algeria's future.
1. Algeria's Healthcare Reform: finding the right model
Frederic Boucheseiche, moderator & COO, Focus Reports: There are differences – based on development level or population for instance – between the health systems of various European countries. In some systems, the industry is happy, in others, the state is happy, and in others still, the patient is happy. Can you provide us with an example of a system that works, in your opinion?
Senator Louisa Chachoua, President of the Commission for Health in Algeria's upper house, the Council of the Nation
Richard Torbett, Chief Economist, EFPIA (The European Federation of Pharmaceutical Industries and Associations): It's a very difficult question. I might answer Denmark because I think it's a good example. The industry gets good prices for its products. Broadly speaking, there's good access to treatment. The off-patent market is very efficient, very open. Patients can easily access medicine. However, the growth rate of spending on pharmaceutical products is between two and three percent annually, whereas elsewhere this average is higher.
Toufik Belhadj, CEO, HUPP
Habib Bennaceur, North & West Africa regional manager, AstraZeneca: In Algeria we often talk about improving our healthcare system, and when we do we compare ourselves to France, Germany, and other countries, and use them as a barometer for the penetration of innovative products. But we know very well that today in France, for example, the high level of medical service doesn't come from scientific innovation, but from the size of the population and therefore the prices that can be negotiated between CEPS, who set prices, and CNAM, which provides repayment.
Round Table in Djenane El Mithak in Algiers
What standards should we use in order to find a satisfactory benchmark? Should it be based on innovation, or rather on prices and budgets? There's a huge gap between the moment when a product is released on the market in the United States and in Europe. This is due to registration delays, but also to phasing. We, as multinational companies, have to deal with phasing in terms of file submissions: we tend to start with the countries where clinical research has been conducted, so by the time our products reach Algeria, for example, we don't have a huge window before the generic equivalents arrive.
Richard Torbett: No single system is perfect: there are advantages and drawbacks in every single one.
Richard Torbett, Chief Economist, EFPIA.
I totally agree with what you said about France. For me, discussions between the industry and those that set prices should be a constant dialog. This is especially true as we begin to introduce new types of products such as personalized medicines – the only way to assess the value of such products is to invest in data for the whole treatment lifecycle, an idea that has already been accepted in the world's best healthcare systems. These products would never work in a reimbursement system where all the medicines in a therapeutic category are assigned the same prices.
Highlights: Algeria's 2015 Healthcare Agenda
Djaouad Bourkaib, director general of social security, Ministry of Labor, Employment and Social Security: We are not likely to hurry to include personalized medicines to the list of refundable medicines, because what we spend on medicines is already huge compared to the health budget and it's not sustainable.
We have to use our remaining resources to improve the other parts of the healthcare system. We have a price grid that is totally outdated. That is why we try to have a list that answers the medical needs of the population but without including anything we have doubts about.
On the other hand, when there's a need that is not covered, we have no other choice. When there is no convincing treatment for an illness, we accept uncertainty. At that point we may think the way you think because there is an uncovered need and because we have no choice. We are in a very particular situation in Algeria: social security has to improve the way it uses its resources, always keeping in mind what people need.
Badra Benkedadra, advisor to Algeria minister of health, population and hospital reform: As a regulator, what we are interested in, amongst other things, is the value of each medicine, and finding an efficient evaluation system. Mr. Toumi, Europe is evolving towards a European Health Technology Assessment (HTA) agency, which will be able to set up evaluations that all countries can share –including those outside of the system like Algeria. What do you think would be the best option for Algeria? Following the French or the British?
Mondher Toumi, professor in public health, University of Aix Marseille, School of Medicine: I think it's better to work on an Algerian way, as each country has its own environment, history, and culture.
Algeria's issue is that its population is decentralized, so access to medicine varies depending on whether you're in a large city or a more remote area. We work with an extremely small budget, but also with extremely reliable but very expensive products knocking at the door. So the true question is how to arbitrate. In order to do so, you need a very well designed public healthcare system.
2. Algeria's Local Manufacturing Laws: what they mean for local and international companies
Frederic Boucheseiche: The government has the ambition to reach 70 percent local production by 2017, from the current rate of 38 percent. How can they achieve this? Are there specific mechanisms at the fiscal level? What is being done to attract investments in the sector?
Hamou Hafed, director general of pharmacy and medical devices, Ministry of Health, Hospital Reform and Population
Hamou Hafed, director general of pharmacy and medical devices, Ministry of Health, Hospital Reform and Population: The pharmaceutical environment in Algeria is changing right now. Measures have to be taken related to approaching the industry, and talking with the pharmaceutical industries. This is the way we can reach our goals.
List of Participants
One very important feature of Algeria's national production strategy is that every time a product has three manufacturers operating locally, imports of that product are banned. Since this was introduced, local production has begun to soar. I believe this will allow us to reach our 70 percent goal.
Habib Bennaceur: AstraZeneca showed that it wanted to invest in emerging markets, including Algeria. Today, local manufacturing investments in China have been completed, and nearly completed in Russia, leaving Algeria as the last market where AstraZeneca will open a new manufacturing unit.
What makes Algeria different from its neighbors is the equality in accessing healthcare with an egalitarian repayment system that has limitations and constraints but that also shows lots of advantages – actually, more advantages than constraints.
In Algeria, we are partnering with Saidal. We are collaborating to transfer knowledge and technologies for now. But for us, and because this is a significant investment in terms of time and money, we think this partnership has to reach another level and unfold as a more concrete collaboration for local manufacturing.
Peter Ulvskjold: Novo Nordisk has been in Algeria for more than 20 years. With our production sites, we can now produce for the whole market. We can also export: within the next three months we'll be ready to export to neighboring countries, which we are very excited about because we can start fulfilling the promise we made to the minister of health about becoming a hub for Africa. And this is our plan not just for our production site in Tizi Ouzou but also in our collaboration with Saidal, working together to produce insulin.
Our strategy is to create a production site that mimics what we're doing internationally, allowing us a very high level of engagement in Africa. We believe that in the long-term, we can develop a very strong presence for production and export, together with the local government.
From left: Slim Belkessam, communication director, Ministry of Health, Population & Hospital Reform; Mohamed L'Hadj, director of the health department and hospital reform; Frederic Boucheseiche, moderator & COO, Focus Reports; Mondher Toumi, professor in public health, University of Aix Marseille, School of Medicine
Rafik Morsly, president, ANPP (National Association of Pharmacy Producers): It's important to keep in mind that when we talk about the Algerian pharma industry, we are mostly talking about local manufacturers and family businesses. There are very few listed companies. The Health Ministry helps these companies but banks do not: surely one of our priorities should be to address this, and help speed up our performance. But all stakeholders need to take a seat at the table first.
Salah Eddine Sahraoui, CEO, Clinica Group: The priority should be to encourage manufacturing, not to enforce it. I think the Health Ministry today is working along these lines. The incentives are in place to encourage companies to come and manufacture here.
Mondher Toumi: The authorities are indeed helping to structure the terms of investments and the providing the right incentives, in a very legitimate manner. On a more long-term basis though, some strategies are more efficient than others, and I believe that Algeria's manufacturing strategy is shortsighted: we are already starting to see that the profile of products being brought to Algeria are changing dramatically, including cell therapy and biotech. The amount companies invest in manufacturing today is miniscule compared to the investment that goes into R&D: what investing in manufacturing really means is that we will end up with production facilities that don't manufacture cutting edge drugs, all locked in tight competition with one another and with other countries.
The only way to earn return on investments today is to invest in research. Algeria won't be able to do this on its own. It can only work out if there are real partnerships with real researchers. The more research you can work on and develop, the more value you add. And before you set up a cluster, you need to have a talent pool to recruit from. And this leads us to a second point: the need to develop a strong academic environment.
Hamou Hafed: An additional incentive for manufacturing locally is that the prices of products manufactured domestically receive a 27 percent mark up. We think we can make our offer more attractive than other countries. Security of supply is an important aspect in this for us: we want a list of essential medicines to be manufactured domestically. All the latest developments in R&D are covered by Algerian social security, so as far as we see it, it's up to the industry to fill this need and think regionally, whilst knowing that you will be able to manufacture and sell your medicines in Algeria.
3. Solving Algeria's HR Equation
Arnaud de Rincquesen: People are willing to come to Algeria. It's an interesting market. What matters once again is to have a job market. The biggest issue for a company settling in Algeria is to find people with specialized skills and a good academic level. Handling dry or injectable production sites requires training. Training has a cost – there are technicians to train and schools and universities have to offer such majors.
Frederic Boucheseiche: Mr. Sahraoui, can the industry play a part in this through clinical research? Can clinical research be decentralized to other Algerian cities?
Salah Eddine Sahraoui, CEO, Clinica Group: Our job market for clinical research is hospitals. Every day, we are working with more and more doctors for global studies (phase II and III). It's a real scientific added value for us. It's also a real added value for Algerian doctors, for our healthcare system as a whole, for the success of new therapies. It brings Algeria to a whole new level –a global level. Medicines have to be manufactured the same way in Algeria at they are in the United States or in France. The same is true of clinical trials: they have to be conducted locally but with the same global standards and clinical practices.
There's a real added value for us there, as there's a clear political will. Clinical research is part of the Health Ministry's strategic priorities. We feel great support every day. We have been working on clinical trials here since 2007, during which time we have seen growth in this area of 300 percent, which is fantastic.
Habib Bennaceur: When it comes to localization I feel that it's a bit of a "chicken and an egg" situation, because when you look at investment, you also have to take into account human resources. You have to keep in mind that when you build a manufacturing site it's not only about walls and machines. You also have to be able to afford human resources – even if they have to come from abroad at first so that expatriates can train your staff. And then you can have a 100 percent Algerian management.
Salah Eddine Sahraoui: When we first started the company here in Algeria, in the field of clinical trials, we were the only two people in Algeria that had any kind of background in this area, and the concept was relatively unknown in the country back in 2007 of a CRO.
One of the first questions we had to ask ourselves was how to train and recruit people to come and work with us. Should we train them first and then recruit them? Or should we recruit first then train our new staff? How should we start?
It was at this time that the economic crisis started in Europe, solving a lot of our problems, because Europe started to look a little less attractive to the three million Algerians living and working in France, some of whom decided to come back. And some of these had worked in the field of clinical research.
Today, we are 135 people in the company, all Algerians. After creating our initial network, we worked with the faculty of pharmacy and agreed to recruit the top three in each graduating class in the field of clinical research, and to train them in France and elsewhere in the world.
That's why we shouldn't wait for the people to be there first: we as an industry need to create the need.