Ethiopian Pharmaceutical Industry-1st draft

Pharmaceutical Industry in Ethiopia

Prepared by Access Capital Staff

Amira Mohammed November 2008

ContentsI. General Overview of Ethiopia Heath sector Development......3II. Overview of the Pharmaceutical Industry...............................4III. Market Situation...................................................................6

3.1 Local Production.................................................................63.2 Import.................................................................................73.3 Export.................................................................................8

IV. Government Incentives.........................................................9V. Opportunity & Treat................................................................9

5.1 Industry wide opportunity..................................................95.2 Industry wide Constraints................................................10

Pharmaceutical Industry Page 2

I. General Overview of Ethiopia Heath sector Development

In Ethiopia, 47% of the population lives below the poverty line.

However, the health coverage service has improved recently reaching

87 percent.

The country is mainly known for frequent medical crises breaking out

such as cholera, malaria, measles, typhoid, and several other medical

crises. Adding to this the age old tuberculosis and HIV/AIDS pandemics that plague

the country.

Indicators 2001/02

2002/03

2003/04

2004/05

2005/06

2006/07

Total Population65,344,00

067,220,

00069,127,

02173,043,

51075,067,

00077,127,

000PHS coverage (%) 61 61 64 72 77 87PHS * coverage (%) 68 71 70 83 92 98EPI coverage (%) 52 50 61 70 76 73No of facilitiesHospital 115 119 126 131 138 143Health center 412 451 519 600 635 690Health stations 2,452 2,396 1,797 1,662 1,206 1,376Private clinic not for profit

434 383 359 379 480 397

Private clinic for profit 1,235 1,229 1,299 1,578 1,784 1,756Health posts 1,311 1,432 2,899 4,211 5,955 9,914Pharmacies 311 302 275 276 246 320Drug shop 309 299 375 381 476 577Rural drug venders 1,856 1,888 1,783 1,787 1,754 2,121Human resource in servicePhysicians 1,888 2,032 1,996 2,453 2,115 1,806Health officers 484 631 683 776 715 1,151Nurses 12,838 14,160 15,544 18,809 17,845 18,146Health assistant 8,149 6,856 6,628 6,363 4,800 3,148Para medical 3,824 4,641 5,215 6,259 5,431 3,863Health extension works 2,337 8,901 17,653Human resource graduates


Specialists 91 103 96 183 57 207General practitioners 152 182 193 309 188 161Health officers 183 181 249 333 247 789Nurses 1,562 1,465 2,384 4,536 1,618 1,846Para medical 656 1,054 999 803 791 789Health extension workers

2,737 7,090 7,136 8,560

Source: Ministry of Health *PHS coverage includes service provided by private

health facilities

The Ethiopian government millennium goal is building a wide

reaching system that focuses on communicative diseases, such as

HIV/AIDS, tuberculosis, and malaria and maternal and childcare

health issues such as immunization and reproductive health

Currently, the government is following a twenty-year health

development implementation strategy, known as the Health Sector

Development Program (HSDP), with a series of five-year investment

programs. HSDP proposes a sector-wide approach to achieve the

government's objectives.

II. Overview of the Pharmaceutical Industry

The pharmaceutical sub sector contribution to the overall economy is

minimal. (Contribution to GDP, foreign exchange, employment).

For long period, the pharmaceutical industry was monopolized by one

government organization till the current government regime came to

power with free market economy in 1991 which introduce private

companies with aggregate investment close to 754 million birr ($76

Million).

However, the sub sector is still highly underdeveloped & dominated

by few manufactures and depends on imported products.

As compared to the population density of the country, the local

industries are insignificant in terms of addressing the public demand.


Currently the local pharmaceutical manufacturing industry consist of

two state run companies and eleven private owned pharmaceutical

companies engaged in the production of human and veterinary drugs

with total capital outlay of 516 million birr( $ 52 Million) . They are

mainly involved in the manufacturing of tablets, capsules and IV

fluids.

Currently these industries are operating way below capacity due to

several factors, mainly shortage of finance.

The pharmaceutical industry is one of the sectors which the

government is giving attention in order to enhance the local

pharmaceutical industries so that they can produce a substantial

portion of the pharmaceuticals and medical supplies required for

domestic consumption and for export. Thus, the government is

developing a strategic plan which will be finalized and put to work

soon.

The total number of pharmaceuticals (human and veterinary) and

medical supply firms that are operating in a country were seventeen

(two public and fifteen private). Only two firms produce and export

veterinary medicine.

Table List of Local Pharmaceutical Manufacturing Companies

S/N Name of the factory Production Type Ownership1 Addis pharmaceutical

factory S.CHuman Pharmaceutical

Public Enterprise

2 Asmi Plc Surgical dressing and antiseptic disinfectants

Private Limited Company

3 Cadila Pharmaceuticals (Ethiopia) PLC

Human Pharmaceutical


4 Dana trading PLC Medical Supply/Absorbent cotton/


5 East Africa Pharmaceuticals

Human & Veterinary pharmaceuticals

PLC/British Sudanese Joint Venture


6 Ethiopia Pharmaceuticals Manufacturing (EPHARM)

Pharmaceuticals and medical supplies Public

Enterprise 7 Fawes Pharmaceutical

PLCPharmaceutical liquid manufacturing/Oral liquid/


8 National Veterinary*/GOV)

Veterinary Medicine /vaccines/

Public Enterprise

9 Pharmacure P.L.C Large volume intravenous /IV /fluids


10 Rx Africa Human Pharmaceutical

Ethio-American Joint Venture

11 Sino Ethiop Associate (Africa)

Pharmaceutical Raw Material /hard empty gelatin capsules/

Ethio Chinese Joint Venture

12 Moab Medical Supplier /Sanitary towels , napkins & cosmetics/


13 Desta Medical Supplier /first aid bandages/plasters/


14 Bethlehem Pharmaceuticals **

Human Pharmaceutical


15 Etab Syringe Manufacturing Medical

Supply/Syringes/


16 Biosol17 Life Line

Note: ** companies currently not operational

Out of these seventeen factories only thirteen factories are currently

operational while four factories have been closed due to financial

problem. And most of the existing companies are manufacturing

below installed capacity and produced a limited number of products.

III. Market Situation The market for pharmaceuticals and medical supplies is obtained

either through imports or from local manufacturers.


Domestic market is highly dependant on imports as the local

manufacturing units cover only a small portion of the requirement for

domestic needs. Drugs manufactured locally only cover 15 percent of

the national demand. The rest is filled through import. At present

local manufacturers on average only produce 23 million birr worth of

products.

There is a huge market gap in pharmaceutical products, i.e. not all

essential drugs for the country is currently produced or under served

by the local pharmaceutical and medial supply industry which is

substituted by import.

It is estimated that the Ethiopian market is around US $200 million,

which can be divided into:

o Purchase/imports through tenders by Ministry of Health and

NGOs (TB, HIV and malaria drugs)- US$ 100million

o Purchases/imports through tenders by PHARMID, Government

owned company (general medicines):- US$ 30million

o Purchase/imports by Trade market (general medicines):- US$70

million

III.1 Local Production The current operational industries are mainly involved in the

production of human medicine (antihistamines and antiallergic, anti-

infective, cardiovascular drugs, central nervous system drugs, drug

used for correcting water, electrolyte and acid-base disturbances,

drug used in musculoskeletal and joint diseases, gastrointestinal

drugs and vitamins); Veterinary medicine (veterinary boli &

veterinary vaccines) and medical supplies (bandages & adhesive

plasters).

All of the drugs produced in Ethiopia are generic.


The local manufacturers are highly dependant on imported raw

materials and other essential inputs as there is no sufficiently

developed chemical industry in the country.

Out of the total 300 (19 pharmacological group of drug) essential

drugs listed prepared by Drug Administration Control Authority

(DACA), only 90 drugs( 9 pharmacological group of drugs) are being

produced locally in a very limited amount which clearly indicates

there is untouched and wide investment opportunity in the sub sector.

Most of the manufactures don’t have GMP certification and only six

companies have GMP certification from DACA.

There are no local manufacturers that produce TB and HIV medicines

and these are totally imported

III.2 Import

Ethiopian imports include products falling under Chapter HS No. 30;

antibiotics vaccines, penicillin, medicaments of other hormones,

anesthetics medicament, medicaments of alkaloids or derivatives,

vitamins, adhesive dressings for medical purposes, wadding, gauze,

materials for surgical suture, absorbable haemostatic, blood-grouping

reagents, dental cements and other dental filling and first aid boxes

and kits. (see Annex 1)

There has been considerable growth in import of pharmaceutical

products and raw materials to Ethiopia. The import market is growing

on average by 36% per annum.

Ethiopia Pharmaceutical Product Import

Year Value in USD

Growth Rate

200240,834,200.

91

200356,914,903.

3439.4%

2004 79,677,179. 40.0%


28

2005112,838,290

.9441.6%

2006136,564,765

.9421.0%

2007172,875,359

.0726.6%

Average99,950,78

3.2533.7%

Source: Ethiopia Custom Authority

During the last three years, there has been considerable growth in

import of pharmaceutical products and raw materials to Ethiopia.

Ethiopia imports US$77.8 million worth of pharmaceuticals and

drugs. About 21% of the total import into Ethiopia is from India. (see

Annex 2)

The value of import drug constitutes 85% of the total drug

expenditure and local production covers only 15% of the total drug

expenditure per annum.

The total drug expenditure of the health institution of the country in

the year 2003/04 to 2005/06 was 4.53 billion Birr which is one

average 1.5 billion birr per year.


S upply of P harmac eutic als P roduc ts in E thiopia ('000 dollar)

0

50000

100000

150000

200000

250000

2003/04 2004/05 2005/06

Imports

L oc al P roduc tion

During the same period the import figure increased by 194 % while

the local production showed insignificant changes which shows the

low contribution of local production.

Assuming total demand is equal to locally manufactured and imported

drugs, the country need to spend over 123 million dollars in order to

satisfy the drug needs of the people.

The major products importers are government body ministry of health

(MOH), non government organizations (NGOs), Pharmaceutical Fund

and Supply Agency (PFSA) and the private sectors.

Currently there are about 48 private drug importers in Ethiopia.

III.3 Export Currently only three drug manufacturers of produce i.e. Sino Ethiopia

Associate Africa, East African Pharmaceuticals and National

Veterinary Institute have made huge strides and are engaged in

export activities.

The country exports insignificant amount of pharmaceutical products

mainly to African countries. The foreign exchange earning through


export showed a considerable growth. The country’s import on

average increased by 46%.

Table Export of pharmaceutical Products Year Value in

USD2003 106,9552004 145,7842005 171,2472006 361,9082007 433,632

Source: Ethiopia Custom Authority

IV. Government Incentives

Currently the government has recognized the importance of the sub

sector. Local manufacturers deserve close policy support and follow

up and also decided that the sub sector to be as one of the five top

priority area that require major focus and support.

Thus, a strategic plan has been developed which makes the sector

more attractive for new investor to fill the gap as well as for the

existing ones to promote capacity utilization.

The local manufacturers will receive up to ten years tax holiday for

special investment in pharmaceuticals, and no tax on locally produced

pharmaceuticals for export.

The Federal Government Investment Commission’s new directive in

which all technologies for manufacturing and for R & D activities will

be exempt from paying duty and related taxes.

V. Opportunity & Treat

V.1 Industry wide opportunity

Huge demand for the products: - great market potential for 77

million people in Ethiopia and 320 million people in East Africa, as

well as substantial efforts by the Ethiopian Government and the


international donor community to reach Millennium Development

Goals make Ethiopia interesting investment location.

Access to regional market:- export from Ethiopia enjoy preferential

access to regional and world markets under a number of special

access and duty reduction (export promotion programmes)

Strategic location: - Ethiopia is strategically located for investors

who want to access the East and Central Africa market.

Stable Political Climate: - the country is stable and peaceful which

could be evidenced by the large flow of investors from all over the

world and also the county hosts many international organization and

foreign embassies.

The current government focus to the sector: it is expected that

once the government finalizes formulating the strategic plan, different

incentives will be presented in order to attract the coming investors

allowing the public to be the beneficiary.

Existence of untapped market for product with large market

potential in Eastern Africa:- Ethiopia didn’t start producing anti-

retroviral, anti-malarial and anti-tubercular which are highly

demanded locally as well as by neighboring countries.

Opportunities exist in the industry in the field of

o Production of medicine:- there is a huge demand and supply

gap for most of the essential listed by DACA

o Production of raw materials: - almost all of the local

manufactures fully depend on imported raw material. So there

is an opportunity to invest on manufacturing of raw material for

local as well as export.

o Production of medial supplies: - large amount of medical

supplies are imported in the county since there is no industry in


the country that produce surgical gloves, disposable syringe,

latex gloves and condoms.

V.2 Industry wide Constraints

Inadequate working capital: working capital requirement to

purchase raw material for pharmaceutical and medical supply

industries is large which couldn’t not be meet by the local

manufacturers.

Highly dependence on import of raw material product: since

there are no companies who are able to produce pharmaceutical

grade input, the industry is highly dependent on imported raw

material. The chemical industry in the country is not yet developed

enough to provide raw material to these industries. These however

have a negative impact on the price.

High duty tax on imported inputs:- the tariff rate for significant

numbers of active ingredients, vital pharmaceutical additives and

pharmaceutical packaging materials is high which makes the products

not to be competitive with imported products mainly from China and

India.

Short pay back period & stringent collateral requirement

Limitation of skill and low level of technology

Inability to comply with Good Manufacturing Practice (GMP)

Lack of supporting procurement system

Absence of interest of NGOs to purchase medicines from the local

manufactures


Annex 1: Total Import

H.S Code Description

2002 2003 2004 2005 2006 2007

Value Value Value Value Value Value

30012000

Extracts of glands or other organs or of their secretions

7,258,085.37 - -

30022000

Vaccines for human medicine

58,791,347.83

47,799,845.98

51,405,707.74144,408,861.8

6194,972,597.24 319,730,806.54

30023000

Vaccines for veterinary medicine

1,327,100.38 436,448.51 521,413.60 1,072,476.24 1,941,668.05 964,687.96

30029000

Human and animal blood; microbial cultures; toxins, etc, nes

1,826,242.171,767,856.0

52,088,483.04 53,533.85 - 0

30031000

Medicaments ofpenicillins... Or streptomycins..., not for retail sale

6,698,921.58 109,196.88 207,440.60 420,435.19 331,404.16 336,695.93

30032000

Medicaments of other antibiotics, not for retail sale

1,953,797.762,105,718.0

328,577,935.67 3,078,455.14 2,919,694.68

30033100

Medicaments of insulin, not for retail sale

1,037,420.12 219,395.46 173,697.08 3,501.73 22,032.24

30033900

Medicaments of other hormones, not for retail sale, nes

1,267,998.8712,551,845.

3519,355,838.09 1,195,547.45 2,544,482.12 2,617,371.34

30039010

--- anesthetics medicam.with >=constituents,not for retail sale

27,142.14 299,619.23 622,861.38 28,849.29 155,898.85 2,231,900.74

30039090

--- other medicaments with..>=2 constituents,not frs,nes(exc.anaesthetic

973,455.672,714,743.3

3717,532.46 1,919,095.64 892,976.56 4,950,964.43

30041000

Medicaments of penicillins... Or streptomycins..., for retail sale

17,240,959.77

29,021,949.41

19,435,613.21 7,401,894.82 13,546,394.14 10,210,732.05

30042000

Medicaments of other antibiotics, for retail sale

32,019,587.59

52,314,808.59

53,493,005.15 22,460,720.47 146,659,849.28 44,159,912.88

3004310 Medicaments of insulin, for 2,374,121.20 9,700,440.5 4,504,564.62 37,359.87 3,938,792.30 991,479.17


0 retail sale 7

30043200

Medicaments containing adrenal cortical hormones, for retail sale

3,680,618.69 - 1,974,523.86 1,917,686.08 4,124,464.13 3,170,366.75

30043900

Medicaments of other hormones, for retail sale, nes

73,478,171.80

56,716,429.74

287,935,489.67

527,524,243.41

546,206,931.37 330,337,688.40

30044000

Medicaments of alkaloids or derivatives thereof, for retail sale

2,149,894.748,897,693.8

98,470,285.16 9,232,020.46 10,236,271.92 6,658,149.85

30045000

Other medicaments of vitamins or other products of 29.36 for retail sale

5,101,477.3415,293,319.

4613,176,574.69 16,775,742.31 8,262,635.08 13,160,539.29

30049010

--- anaestuetics medicaments of mixed/unmixed product frs,nes

767,445.621,299,261.0

3147,255,450.7

37,474,080.36 14,951,045.01 18,615,608.90

30049090

--- other medicaments of mixed/unmexed products,frs,(exc.anaesthetics)

91,087,313.29

221,819,750.32

-124,530,323.9

8164,028,085.67 801,438,583.94

30051000

Adhesive dressings..., for medical... Purposes

1,230,781.223,738,600.5

14,570,339.76 3,565,063.06 2,511,060.21 4,589,689.70

30059000

Wadding, gauze, etc with pharmaceutical substances for retail sale, nes

4,913,247.534,163,919.0

58,115,729.94 3,352,433.02 9,284,926.49 7,747,387.53

30061000

Materials for surgical sutures; laminaria ; absorbable haemostatics

4,018,285.815,817,012.5

86,361,957.47 3,032,508.14 3,815,080.24 2,242,588.73

30062000

Blood-grouping reagents 1,008,163.97 869,717.78 771,216.70 448,702.66 36,520.80 368,705.67

30063000

Opacifying preparations for x-ray examinations; diagnostic reagents...

88,953.97 706,091.48 1,921,478.77 1,396,236.38 173,802.75 656,556.34

30064000

Dental cements and other dental fillings; bone reconstruction cements

65,339.21 38,629.96 840.74 1,736.85

30065000

First-aid boxes and kits 8,007,836.992,650,401.0

11,890,532.33 1,613,514.38 21,179,505.30 22,119,694.97

3006600 Chemical contraceptive 21,992,317.1 4,978,149.0 24,793,190.80 95,938,510.97 47,970,271.94


0preparations based on hormones or spermicides

6 5

30019000

782.91 1,206.45 14,626.17 24,962.49

30021000

4,557,766.12

1,008,950.71 652,780.70 284,289.85 750,296.29

Total350,386,027

.79490,589,39

2.28689,351,019.

68979,549,203.

631,200,991,521.

121,598,077,10

6.74


Annex 2 Market Share in Ethiopian Imports Exporters 2003 % 2004 % 2005 % 2006 % 2007 %

Belgium 12024473.82.5

%

21,671,794.03

3.1%

39,869,160.55

4.1%

127,445,482.53

10.6%

466,242,605.04

29.2%

China 11458051.342.3

%

16,735,962.60

2.4%

14,157,560.23

1.4%

18,121,024.36

1.5%

29,970,460.46

1.9%

Cyprus 10779222.232.2

%

10,610,269.43

1.5%

16,633,851.19

1.7%

13,282,807.48

1.1%

16,446,640.64

1.0%

Denmark 7943490416.2

%

104,008,100.00

15.1%

140,657,525.68

14.4%

95,443,354.30

7.9%

245,059,766.79

15.3%

Egypt 7889764.11.6

% 7,423,064.65

1.1%

11,009,860.72

1.1%

21,575,144.93

1.8%

11,103,244.62

0.7%

France 50689741.910.3

%

66,887,454.15

9.7%

25,435,558.11

2.6%

46,005,114.26

3.8%

43,544,023.35

2.7%

Great Britain 34199989.547.0

%

20,733,855.83

3.0%

1,074,300.49

0.1%

30,989,993.65

2.6%

32,234,641.62

2.0%

Greece 11376424.162.3

%

12,827,180.59

1.9%

19,262,105.33

2.0%

10,526,556.78

0.9%

211,263,597.56

13.2%

India97925428.3

420.0

%

146,409,134.56

21.2%

158,761,609.43

16.2%

308,761,336.90

25.7%

211,263,597.56

13.2%

Korea, Republic Of 13158259.53

2.7%

12,982,330.69

1.9%

9,175,383.31

0.9%

124,057,472.80

10.3%

175,339,271.71

11.0%

Netherlands 29010469.115.9

%

43,789,116.73

6.4%

90,539,548.93

9.2%

29,911,534.60

2.5%

26,184,637.83

1.6%


Pakistan 10445503.612.1

% 6,195,811.75

0.9%

8,644,420.27

0.9%

4,170,837.96

0.3%

30,141,354.05

1.9%

Saudi Arabia 2105305.960.4

% 887,977.73

0.1%

656,090.04

0.1%

6,843,930.51

0.6%

40,765,068.85

2.6%

Switzerland 18437139.333.8

%

25,047,209.93

3.6%

24,937,443.45

2.5%

184,929.58

0.0%

80,995,644.29

5.1%

United Germany 33252815.09

6.8%

31,904,928.48

4.6%

77,565,441.95

7.9%

58,651,880.43

4.9%

36,502,243.72

2.3%

United States 15655402.83.2

%

53,050,164.33

7.7%

216,017,722.12

22.1%

146,378,105.08

12.2%

22,813,858.64

1.4%

Total Import

490,589,392.28

689,351,019.68

979,549,203.63

1,200,991,521.12

1,598,077,106.74


Documents

Ethiopian Pharmaceutical Industry-1st draft