The Imperative of Backward Integration and Strategic Sourcing in Africa’s Pharmaceutical Sector

Pharmaceuticals in Africa

Adenike OnasogaAfrica’s pharmaceutical sector is in the midst of a significant transformation, writes Head of Supply Chain at Kimberly-Clark in Nigeria, Adenike Onasoga. With over 70% of medicines consumed on the continent being imported, this sits at $14 billion. It’s evident that this poses a huge threat to the continent, given the various global disruptions in the last three years.

Africa’s dependence on external sources makes the sector vulnerable to supply chain disruptions, price shocks and, most importantly, limits its ability to meet its healthcare needs. This is where backward integration and strategic sourcing are highlighted as the solution.

We all know that backward integration is one of the popular post pandemic buzz words, but how has it transitioned in the last three years? Also, how then has strategic sourcing changed in Africa to be more inward-facing, rather than outward?

A Growing Concern

The justification for this change emerges from personal experiences. Over a weekend, a friend reached out to me to help with an emergency. He was searching for a specific medication that his daughter urgently required, and despite our collective efforts to locate it at various pharmacies in our vicinity, we were unsuccessful. This scenario was eerily reminiscent of a previous incident involving another friend who needed a specific medication for her son. In both cases, the drugs were frustratingly elusive, even after extensive searches.

Upon delving into the matter, we discovered that the manufacturer of these drugs had left the country, rendering these essential medications unavailable. These experiences not only underscored the issue of inaccessibility to vital medications but also revealed the unsettling reality of how this impacts the already-behind healthcare gap in Africa, compared to the rest of the world.

The Backward Integration Solution

Backward integration, which involves pharmaceutical companies investing in the manufacturing of their own active pharmaceutical ingredients (APIs) and other local operational inputs, is essential for addressing the vulnerabilities and limitations of Africa’s pharmaceutical sector.

Supply Chain Reliability: Backward integration reduces dependence on external suppliers, thus decreasing the risk of supply chain disruptions. The recent COVID-19 pandemic and the ongoing crisis in Ukraine serve as stark reminders of the need for a secure and resilient supply chain.

Cost Impact: By reducing reliance on imports, pharmaceutical companies can lower the cost of their products. This is of utmost importance for African consumers who often grapple with high medication prices. Don’t forget statistics show that an average African is one medical emergency away from poverty.

Economic Growth and Job Creation: Investing in local manufacturing creates jobs within the pharmaceutical sector and supports other businesses in the supply chain. This, in turn, fosters economic growth and development.

Challenges and the Way Forward

Despite the numerous benefits, significant challenges must be addressed to make backward integration a reality in Africa’s pharmaceutical sector:

Investment: Pharmaceutical manufacturing requires substantial investment in infrastructure and technology. African governments must create an investment-friendly environment and provide incentives for pharmaceutical companies to invest in local manufacturing.

Knowledge Gap: The pharmaceutical sector requires more supply chain expertise. To ensure transfer of knowledge between other sectors and pharmaceuticals in Africa, there is also a need to invest in education and training to develop the skills necessary for the sector to thrive.

Regulatory Hurdles: Regulatory frameworks must be harmonised across African nations to streamline the approval process for new drugs, making it easier for pharmaceutical companies to manufacture and sell their products on the continent. I touched on this in my last article on Fragmentation of African supply chains.


Strategic Sourcing for Local Suppliers / Manufacturing

While backward integration addresses the core issue of manufacturing, strategic sourcing complements this effort by focusing on the procurement of inputs and raw materials locally. This approach not only supports the growth of local suppliers but also ensures a steady and secure supply of essential materials.

A concerted effort is requiring public and private partnerships (including pharmaceutical companies) to realise the potential of backward integration and strategic sourcing in Africa’s pharmaceutical sector.

Africa’s pharmaceutical market is projected to exceed $60 billion by 2030; this means that while a number of the pharmaceutical’s giants have exited the African market, there is still a huge opportunity to be tapped, and this can happen through local manufacturing. African governments are also taking steps to support the sector by providing tax breaks and other incentives to pharmaceutical companies – It will be interesting to see how this is implemented to ensure success.

I firmly believe that backward integration and strategic sourcing are not just options but necessities. They hold the promise of a healthier future for millions of Africans. In the pursuit of a robust pharmaceutical manufacturing ecosystem, it’s not enough to focus solely on local production. To truly bolster Africa’s pharmaceutical sector, we must ensure that the high supply chain expertise, which is often found in other sectors, is effectively transferred to the pharmaceutical industry.

Africa’s growing pharmaceutical ambitions demand a skilled workforce with deep expertise in supply chain management. By leveraging the knowledge and experience from other industries, such as technology and automation, we can infuse the pharmaceutical sector with the best practices in logistics, procurement and distribution. This transfer of expertise can significantly improve the efficiency and effectiveness of the pharmaceutical supply chain.

Moreover, this knowledge transfer should extend beyond just the technical aspects. It encompasses building a culture of supply chain excellence within the pharmaceutical sector. It involves imparting the principles of resilience, adaptability and innovation that are crucial in navigating complex supply chain challenges.

Incorporating supply chain expertise into the pharmaceutical sector not only ensures the availability of vital medications but also helps to establish a sustainable and competitive industry. It’s a strategic move that reinforces the entire ecosystem, from local suppliers to the end consumer.

In this way, Africa can not only bridge the healthcare gap but also elevate its pharmaceutical sector to a global standard. It’s a holistic approach that encompasses not only local manufacturing but also the best practices in supply chain management, creating a healthcare ecosystem that’s resilient, affordable, and accessible to all.

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