Africa Pharmaceutical Supply Chains

In emerging markets, due to a lack of coinage (change), shop owners often give you some candy or bubble gum to replace small change. Once in a Vietnam pharmacy, I was handed a single antibiotic tablet. When I enquired about the risks associated with this practice, the pharmacist assistant looked at me blankly. While this might have been an isolated case, for any pharmaceutical manufacturer and supplier there are some key challenges to consider prior to entering and operating in emerging markets.  African markets hold enormous potential, but there are a number of issues to consider prior to entry.

Counterfeit and parallel imports – In fragmented emerging markets there are sometimes poor control over first time buyers of drugs as well as limited visibility and quantification. Distributors, selling to the private sector, often sell drugs from manufacturers that have not been pre-approved. For many organizations, including government health departments, counterfeit and parallel imports are a major concern, as drugs often enter through poorly controlled borders. A good example is the Nigerian border with Benin where “porters” are hired to take pharmaceutical drugs across the border.

Idumota Market, Lagos

Degrading and sub-standard – A high percentage of drugs is of sub-standard quality. Degrading also plays a key role if affecting quality, often due to poor storage and transportation conditions. Waste management also remains a challenge, often caused by poor processes and limited locations to destroy waste and expired products.

Demand planning – African manufacturers can have difficulty forecasting demand, dealing with fluctuating costs, depreciating currencies and managing their pipelines. Thus, the availability of certain stock keeping units (SKUs) can fluctuate dramatically. Problems with in-bound supply chains and limited access to foreign exchange often result in fragile domestic supply chains.

Retail outlets – Country retail markets tend to be highly fragmented, with few franchises and chains.  In many countries there are high barriers to entry that also contribute to unregistered outlets. In some countries, such as Mali, there is a waiting list of pharmacists hoping to be granted a license to practice in rural and urban areas. Some countries are trying to increase the number of registered outlets, with a concentrated effort to create an organized supply chain e.g. the Accredited Drug Dispensing Outlet project (ADDO) in Tanzania.

Drug flow – African countries operate differently and the system is often characterized by weak distribution networks and fragmented competition. There are also significant regional differences, largely related to past colonial structures (e.g. Franco West Africa versus East Africa). Often, drugs are distributed through many channels ranging from importers, distributors and sub-distributors. In Nigeria, open markets, such as Idumota, also play a critical role in distribution.

Poor visibility and transparency – Supply chain often lack visibility when it comes to the availability of SKUs. Often there is also a lack of transparency when it comes to prices and quality.

Distribution – Poor transport infrastructure, especially in land-locked countries, can restrict market access.  Large wholesalers provide delivery services in large cities. However, in most cases, wholesalers do not provide last mile distribution and pharmacists and retail outlets must often collect stock themselves. Similarly, customers in peri-urban or rural areas often have to pick up supplies at wholesalers.  Orders are often generated through telesales.  In some countries, like Ghana, individual drug salesmen supply upcountry markets through van sales. Another strategy is that rural outlets bundle together for delivery. In some cases, wholesalers might have upcountry networks, supplying upcountry outlets.  Distribution may also make use of national bus routes to service upcountry networks.. However, in most countries, rural distribution remains a challenge.

 

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