The COVID-19 pandemic has not only disrupted the ongoing activities aimed at supporting the pharmaceutical industry in Ghana but has heightened the risk to growth outlook for the sector.
Ghana’s pharmaceutical outputs is grossly estimated to be about 70 percent imports whilst the remaining 30 percent is made up of manufactured products.
By and large the sector is dependent on imports for active pharmaceutical ingredients, excipients, equipment and machinery, which raises legitimate policy questions about how to reduce the sector’s exposure to supply chain disruptions emanating from ‘black swan’ events such as COVID-19.
The central policy question is, how can the country build sufficient local capacity as part of a strategy for reducing the sector’s dependence on imports? This is one of many of the questions, we believe, should shape the policy conversation on pharmaceutical sector development.
Indeed, credible policy options may not be far-fetched. Building a strong local pharmaceutical manufacturing base is a starting point. Is it easier said than done? It certainly is, undoubtedly. The plethora of challenges that confronts supply-side actors in the pharma market obviously hampers growth. There are issues of capital inadequacy, management capacity, weak corporate governance and regulatory complexity.
Add to this, the problem of market fragmentation, which poses a challenge from a public policy standpoint. In the pharma sector alone, there are about seven sub-groups organized as associations, all situated at different junctures of the supply chain, playing niche functions. Take for instance the upstream – which encompasses manufacturers and large-scale wholesalers.
There are manufacturers with sizeable balance sheets, forming one association, whilst manufacturers with modest balance sheets belong to a different association. There are also manufacturers with proprietary distribution channels extending downstream, causing them to belong to other associations whose core business are solely distribution.
So, it’s possible to have one company belong to about three different associations, all within the same sector. And these associations, by default of their core mandate, pursue self-interested agenda that may be yield positive outcomes for their members, albeit diametrically opposed to the interest of others within same the industry. Such dilemmas, are few of the manifold development issues that must be resolved if Ghana’s pharmaceutical sector would see double-digit growth, with or without AfCFTA.
AfCFTA and Pharma
The Africa Continental Free Trade Area (AfCFTA) agreement which effectively merges 54 African economies into a single market of 1.3 billion people, is estimated to create an economic bloc with a combined GDP of $3.4 trillion.
Many have touted this agreement as a game-changer, a manifestation of Nkrumah’s vision of African unity. But whether Ghana, particularly the manufacturing sector, will benefit from this immense market opportunity will be determined by how we align with the Rules of Origin under the Protocols on Trade and Investment as per Article 13 of the agreement, which states thus “Goods shall be eligible for preferential treatment under this Protocol, if they are originating in any of the State Parties in accordance with the criteria and conditions set out in Annex 2 on Rules of Origin and in accordance with the Appendix to be developed on General and Product Specific Rules.”
This effectively puts into doubt whether imported products could benefit from preferential treatment under the protocols. We think not.
The sector, through policy support from government, can begin a gradual pivot towards manufacturing. The introduction of Executive Instrument 181 to limit the importation of certain products may be a positive policy action in the short term, but may prove ineffective in the long term if other support measures, financial and technical, are not provided to assist those in the distribution chain re-orient their value chains towards upstream activities.
Of course, not every company can, or should venture into manufacturing, but those that are able (capital + corporate governance) and willing (cultural change) should be supported through various means; back-ward integration, contract manufacturing and credit guarantees, just to name a few.
Undoubtedly, the shift towards manufacturing may take a long time to realize, but the recognition of a need for change by all actors within the pharma space is a first and important step which must form the bedrock of the sector’s development strategy.
The Pharmaceutical Sector in Ghana
In Ghana, the pharmaceutical industry is segmented into various groups spread across the entire chain from up to downstream. They include; manufacturing, wholesale of finished products (which includes the importation of finished pharmaceuticals,) and retail.
There are currently 38 manufacturing companies in Ghana who are members of Pharmaceutical Manufacturers Association of Ghana (PMAG), employing about 10,000 workers. The small-scale manufacturers, numbering over hundred are spread across the country.
There are about 3,140 wholesale and retail outlets employing about 15,700 workers in aggregate. The industry imports raw materials from countries such as India, Germany, China, United States and the United Kingdom, among others.
This situation is due to the underdeveloped raw material base hence the need to secure raw materials from other countries with advanced raw material base.
Actors within the downstream are regulated by the Pharmacy Council (PC) as established under the Health Professions Regulatory Bodies Act 2013 (Act 857).
The Food and Drugs Authority (FDA) regulates the manufacture and importation of finished and active pharmaceutical ingredients as well as the establishment of industries for the manufacture of pharmaceuticals.
The Pharmacy Act 489 and Food and Drugs Law 309, which hitherto regulated the practice and establishment of pharmacy businesses, were repealed by the Health Professions Regulatory Bodies Act 2013 (Act 857).
COVID-19 Support Measures for The Local Pharmaceutical Industry
To help mitigate the impact of COVID-19 on the pharmaceutical sector, The Ghana National Chamber of Pharmacy (GNCoP), with funding from Foreign, Commonwealth and Development Organization (formerly DFID), is providing matching grants primarily for pharmaceutical manufacturers, and for distributors and consulting firms and/or CSOs with footprints in the pharma sector.
The objective of the grant is to:
Provide support to companies to address vulnerabilities in the pharmaceutical supply chain.
Facilitating a pivot to support the production of COVID-19 essential medicines.
Support local companies with COVID-19 prevention measures at the factory floor. The focus will be on large manufacturing units with large numbers of staff.
Support pharmaceutical sector innovation around testing (including rapid testing and other regimes) etc.