Seventy percent of government drug purchases will be reserved for SA manufacturers.
Pharmaceuticals Made in SA chairman Stavros Nicolaou, who is also a senior executive at Aspen Pharmacare, welcomes the planned changes. “The local procurement support from government is a significant policy development and one that is set to boost local production.”
Nicolaou says if 70% of tender volume is set aside for local production, he expects a “reasonably material increase in capex investment in what has largely been an undercapitalised industry”.
“This will in part address the current un level playing field, which favours importers, and provide greater volume certainty and domestic scale,” he says.
Government, through the department of trade & industry (DTI), aims to promote local manufacture by way of the amended Preferential Procurement Policy Framework Act .
The initial step to implement this procurement framework in the pharmaceutical sector, through a joint agreement between the DTI, health and treasury departments, will focus on the health department’s tablets and capsules tender.
The tender for tablets (the oral solid tender) is expected to be released in the next few weeks and is to be awarded in favour of companies that make the drugs locally .
The solid medications two-year tender, which includes a range of 70 tablet products , excluding anti retroviral (ARV) and antibiotics medications, is worth R2,5bn. A reference price list for the drugs is being finalised.
Trade & industry minister Rob Davies says the remainder of the state pharmaceutical tender can be met by multi national pharmaceutical manufacturers and local drug makers .
Davies says government’s R1,6bn Ketlaphela joint project between state-owned Pelchem and Swiss company Lonza is an example of how government is strengthening SA local manufacture of active pharmaceutical ingredients .
“There was a time when SA was the leading manufacturer of vaccines, not only locally, but for the African region. Somewhere along the way that capacity was lost. Our vision is to regain that.
“We also understand that no company would have invested in local manufacture without an assurance of large purchases by government,” Davies says.
Though government’s local procurement plans should create jobs in SA , the motivation for a local bias has also been influenced by the high cost of imported medicines.
The DTI says the health department’s trade deficit increased from R5,3bn in 2002 to R14bn in 2010, mostly skewed towards pharmaceutical imports.
For example, SA’s health department is the major buyer of ARVs, buying 25% of world supply annually. In 2010, health minister Aaron Motsoaledi took the opportunity to push drug makers to more than halve the two- year ARV tender price to R4,2bn as the global cost of active pharmaceutical ingredients declined.
Health department director-general Precious Matsoso believes if there were more locally manufactured pharmaceuticals, government could replicate the process and there would be greater security of demand.
Pharmaceutical Industry Association of SA COO Vicki St Quintin says the organisation, which has a mixed membership of multinational and local companies, understands the thought process behind the amended act . She says the system should be administered to ensure that access to quality medicines does not increase prices.
“It is likely that local pharmaceutical manufacturers are already significant suppliers of government tenders,” she says. “It will be an individual company decision as to how they respond. If necessary, companies will have to adapt their businesses to compete.”
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