Opportunities, Constraints and Critical Supports for Achieving Sustainable Local Pharmaceutical Manufacturing in Africa: With a Focus on the Role of Finance, Final Report

127 Pages Posted: 28 Mar 2021

See all articles by Frederick M. Abbott

Frederick M. Abbott

Florida State University - College of Law

Ryan Abbott

University of Surrey School of Law; University of California, Los Angeles - David Geffen School of Medicine

Joseph Fortunak

Howard University

Padmashree Gehl Sampath

Harvard University-Berkman Klein Center for Internet & Society; Department of Social Sciences

David Walwyn

University of Pretoria

Date Written: March 18, 2021

Abstract

The Open Society Foundations Public Health Program commissioned an interdisciplinary team to examine the extent to which gaps in financing are an obstacle to more robust local production of pharmaceutical products (including diagnostics, vaccines and treatments (DVT)) and personal protective equipment (PPE) with focus on Africa. The Report is posted here. The Executive Summary and an Addenda compilation (which includes 3 supplemental research reports) are posted along with the Report at the website of Nova Worldwide Consulting.

The overall findings of the study are that gaps in financing pose a constraint on the localization of pharmaceutical production in Africa. The gaps are not mainly due to a lack of financial capital in global financial markets that might be deployed for this purpose. The main problems are associated with the market environment in the sense that sustainable business operations require adequate demand, and market demand for pharmaceutical products in Africa is limited by various factors. In addition, comparatively weak infrastructure (recognizing variation among countries) makes it difficult to compete with large efficient foreign suppliers that are bolstered by foreign government support. Potential investors appear to perceive relatively high risks associated with investing in pharmaceutical manufacturing in Africa.

Transforming political engagement:

The COVID-19 pandemic may serve as adequate impetus to transform local production of pharmaceuticals into a governmental priority. Government commitment at a high level is required to engage the financial levers that will support localization of production.

Sustainable business models:

Particularly outside the vaccine sector, successfully operating a pharmaceutical manufacturing facility means addressing a market with sufficient demand to generate revenue and profits. Alternatively, or as a supplement, governments may provide direct subsidies, guaranteed offtake agreements, tax credits, local production pricing premiums, and other measures to substitute for market demand. These forms of support are commonly used for “infant industries”, and there should be plans to withdraw such support once a business has achieved sustainability.

The social impact investor market:

African governments should consider a program to encourage sovereign wealth funds and other financial asset managers to invest in local production on the African continent as a way to accomplish important social goals. To facilitate this objective, there should be some type of backstop or guarantee of the social impact investments within reasonable parameters. The African Development Bank may be helpful in establishing mechanisms for this purpose.

Opportunities for advocacy:

There is substantial room for advocacy by civil society to move Africa toward greater self-sufficiency in the production of pharmaceutical products. At the high level of political commitment, government authorities should be persuaded to prioritize local production of pharmaceuticals as a matter of public health security, engaging the financial levers to support such a commitment. At the level of industrial policy, the African Union should be encouraged to engage in concrete planning for regional pharmaceutical production hubs, and associated infrastructure and centers of technical expertise. Whether in conjunction with that, or separately, procurement authorities should be encouraged to form regional pooled procurement mechanisms to aggregate demand, allow for more effective bargaining with suppliers, and support regional hub manufacturers.

Support for effective implementation of the African Continental Free Trade Area in terms of reducing barriers to intra-Africa trade in pharmaceutical products would improve the market situation. Similarly, continuing support for efforts to integrate the African regional regulatory structure for pharmaceutical products would accelerate access to medicines. Establishment of a library of available drug master files for reference by manufacturers would significantly lower barriers to manufacturer market entry.

Foundations should be encouraged to develop a transparent platform which could provide information to African manufacturers with respect to opportunities for financing and expertise for pursuing their objectives.

Keywords: pharmaceutical, vaccine, production, manufacturing, local, Africa, finance, impact investing

JEL Classification: G30, H51, H61, I15, I18, O33, O38

Suggested Citation

Abbott, Frederick M. and Abbott, Ryan Benjamin and Fortunak, Joseph and Gehl Sampath, Padmashree and Walwyn, David, Opportunities, Constraints and Critical Supports for Achieving Sustainable Local Pharmaceutical Manufacturing in Africa: With a Focus on the Role of Finance, Final Report (March 18, 2021). Nova Worldwide (2021), FSU College of Law, Law, Business & Economics Paper No. 21-03, Available at SSRN: https://ssrn.com/abstract=3811733 or http://dx.doi.org/10.2139/ssrn.3811733

Frederick M. Abbott (Contact Author)

Florida State University - College of Law ( email )

425 W. Jefferson Street
Tallahassee, FL 32306
United States
850-644-1572 (Phone)
850-645-4862 or 917-591-3112 (Fax)

Ryan Benjamin Abbott

University of Surrey School of Law ( email )

Guildford
Guildford, Surrey GU2 5XH
United Kingdom

University of California, Los Angeles - David Geffen School of Medicine ( email )

1000 Veteran Avenue, Box 956939
Los Angeles, CA 90095-6939
United States

Joseph Fortunak

Howard University ( email )

2400 Sixth Street, NW
Washington, DC 20059
United States

Padmashree Gehl Sampath

Harvard University-Berkman Klein Center for Internet & Society ( email )

23 Everett Street
Cambridge, MA 02139
United States

Department of Social Sciences ( email )

Fredrik Bajers Vej 7E
Aalborg, DK-9220
Denmark

David Walwyn

University of Pretoria ( email )

1 University Road
Hafield
Pretoria, Gauteng 0001
South Africa
0824161534 (Phone)
0001 (Fax)

HOME PAGE: http://www.up.ac.za

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