Drug importers fear local content

Drug importers fear local content

FMCG SUPPLIER NEWS

Business Day - Apr 10th 2012, 09:08

National Association of Pharmaceutical Manufacturers complains of being sidelined by the government in search for domestic drug makers 

Cape Town - The National Association of Pharmaceutical Manufacturers on Monday complained it had been sidelined by the Department of Trade and Industry as it drew up plans for preferential procurement for domestic medicine makers.

The association is one of several local trade bodies for pharmaceutical companies and represents about half of those selling generic drugs, many imported from India.

Its complaint, which has flatly been denied by the department, highlights how high the stakes are for small importers of medicines.

The government’s industrial policy has designated the pharmaceutical sector as one in which local manufacturers should be given preference, a move intended to stimulate domestic industry and attract foreign investment.

However, this means importers stand to lose a significant part of their government business unless they invest in local manufacturing capacity.

A list of pharmaceutical products designated for preferential procurement has been finalised by trade and industry in consultation with the Department of Health, and is expected to be published by the Treasury shortly.

The contents of that list are worrying the association, which fears it will prejudice those of its members that import medicines.

National Association of Pharmaceutical Manufacturers CEO Charles Mothata said if importers of cheap generic medicines lost the option of bidding for government business, it would reduce competition and could push up price s.

Locally made medicines would not necessarily be cheaper than those imported from countries such as India, he said.

"We are not saying there should not be incentives for local manufacturers," Mr Mothata said, "but the way the list has been structured compromises cheap and affordable medicines. We support incentives but (not to) the detriment of importers."

Small companies that imported a limited range of medicines might be forced to lay off staff if they lost government business, he warned.

Trade and industry’s deputy director-general for industrial policy, Nimrod Zalk, said the claim of inadequate consultation was "absolutely not true".

"There have been a number of consultations with them, most recently in February. We gave them all the research and information (used for determining the list of products) and urged them to respond in writing. They didn’t.

"We have given them every opportunity to make their views heard … it really is very strange that they have chosen not to take advantage of the process we afforded them and have gone to the media," he said.

Mr Zalk said the government would not pay a premium for locally made medicines, as the health department would benchmark prices internationally. The government would not buy drugs from local manufacturers priced above this threshold, he said.

The government would continue to source medicines from importers, although on a reduced scale. "For security of supply reasons, we are not insisting on 100% local manufacture," he said.

Aspen Pharmacare executive Stavros Nicolaou, a spokesman for the trade association Pharmaceuticals Made in South Africa, said the department had consulted manufacturers "across the industry groups".

He welcomed the plans to support local drug makers such as Aspen, saying it would end the "roller-coaster ride" when bidding for government business and give them greater certainty of a return on their investments in local manufacturing capacity.

"It (preferential procurement) probably will prejudice importers unless they start manufacturing locally. Lots of other countries do this, including Brazil and India. Local is not always more expensive." Importers from India were effectively subsidised by the Indian government as it did not charge exporters corporate tax.