Government Incentives to Promote Local Production of Pharmaceuticals- the Case of Ethiopia

1. Government Incentives to Promote Local Production of Pharmaceuticals- the Case of Ethiopia Messay Wolde-mariam Deputy DG Ethiopian Food, Beverage & Pharmaceutical Industry Development Institute (FBPIDI) Ministry of Trade and Industry (MoTI) Johannesburg June 4, 2019

2. Outline • Background • Brief Overview of Pharma Sector in Ethiopia • Sector - Specific Strategic Plans & Initiatives • Policy Recommendation and Incentives • Infrastructure -Pharma Park

3. Ethiopia at a Glance • Ethiopia is considered as a gate way to Africa as it is a seat for AU, ECA & many international organizations; the political capital for Africa • Fast pro-poor growth (average 11% GDP growth for the last 10 years) • Good governance & attractive investment law

4. About Ethiopia… Ethiopia: Country Profile Rapid economic growth • One of the fastest growing economies in the world • 11% average growth over the past decade Favourable destination for FDI • One of the top destinations for foreign direct investment (FDI) • Ethiopia accounts for 18.5% of all jobs created through FDI in Africa • Second most populous country in Africa • >100 million people, growing at 2.3 million annually • Young and productive age group accounts for 60% of the population Population • Total: 100m (est. 2017) Young and productive population • GDP/capita: $739 (2015/16) • FDI inflow: $3.2bn (2016) • FDI growth: 46% (2016) Economics • Health spend: $2.7bn • Health spend/capita: $27 • Health spend/GDP: 5% • Availability of EDMs*: ~70% Health Clear vision for development • Vision 2025: become leading manufacturing hub in Africa • Foreign investment is key focus of Prime Minister • Wide-ranging incentives in priority sectors Literacy • 49% of total population Source: World Bank, IMF, WHO

5. Brief Overview of Pharma Sector in Ethiopia The Ethiopian pharmaceutical market is estimated to be valued at ~684 million in 2015/16 with 75% share of Public purchase. • The Ethiopian pharmaceutical market is Highly dependent on import ~85%. • Only 9 human medicine producing companies at low capacity. • A 2012 estimate by Frost and Sullivan suggests revenue from the Ethiopian Pharmaceutical Market could reach 945 M by 2017. PFSA’s* pharmaceutical purchase over the past 3 years • Note • *Pharmaceutical Fund & Supply Agency • The weighted average exchange rate for each year was used to convert the purchase amount from birr to dollar. (source: National Bank of Ethiopia) Source: PFSA, Frost & Sullivan, National Bank, TBI analysis

6. Level 1 Import While there are 200+ importers, there are currently only 9 local manufacturers in Ethiopia with 2 new upcoming ones Mapping of the Ethiopian Pharmaceutical sector in the value chain Level2 Packaging and labeling Level 3 Product manufacturing Level 4 API manufacturing Level 5 Research and development Production of Active Pharmaceutical Ingredient (API) and excipients by following national or international GMP standards and WHO prequalification for APIs Research and development for new formulations, processes and new chemical entities following national or international GLP/GCP and ethical standards Packaging and labelling of imported bulk finished pharmaceutical products following national or international GMP standards Formulation of finished products from imported Active Pharmaceutical Ingredient(API) and excipients by following national or international GMP standards and WHO prequalification standard for products Distribution of finished pharmaceutical products Description 0 companies • 9 manufacturers • 2 just inaugurated • 3 PICs certified • companies • 0 WHO prequalified products >200 importers, wholesalers and distributors 0 company 0 companies Domestic companies Source: The National Strategic Plan of Action for Pharmaceutical manufacturing development in Ethiopia (2015-2020)

7. The key drivers of demand are increasing disease burden, rising healthcare coverage, and progressive growth of the Ethiopian population and economy Key drivers of demand • Disease burden is expected to increase for both communicable and non-communicable diseases • Ethiopia is affected by the burden of communicablediseases; the country is among the highest burden countries for Malaria, HIV/AIDS and TB • In addition, prevalence of non-communicable diseases, such as diabetes, cancer, and hypertension has also increased; Prenatal and maternal death, acute respiratory infection, nutrition deficiency and diarrhoea are also significant burdens Increased determination to address disease burden • The Ethiopian government plans to increase healthcare coverage to its large rural population, thus promoting the need for increased access to pharma • Ethiopia has a Health Extension Programme (HEP), which is a community based strategy to deliver health promotion and awareness creation among the public • The overall primary health care service coverage has reached 100% in 2015 and a social health insurance scheme has been introduced to the public aiming to increase access to health services Rising healthcare coverage • With a population size of ~100M, Ethiopia has the second-largest population in Africa; growth of 2.3% per year is expected • The increase in the population size results in an increase in the number of individuals requiring pharmaceuticals • Ethiopia is expected to become a middle income country by 2025 with an average economic growth of 10% per year resulting in an increase in the disposable income of the population; the increase in disposable income will influence spending on healthcare pharma products Progressive growth of the Ethiopian population and economy Source: Interviews, market research, AGI analysis

8. Sector - Specific Strategic Plans & Initiatives Global initiatives • WHO –Access to Essential Medicine through Local Production • UNIDO-Inclusive & Sustainable Industrial Development (ISID)-SDG-Goal 9 Continental initiatives • Accelerated Industrial Development of Africa (AIDA). • Pharmaceutical Manufacturing Plan for Africa (PMPA) National initiatives • Growth and Transformational Plans (GTP-I & II) • Health Sector Development Plan (HSDP) • National Strategy and Plan of Action for Pharmaceutical Manufacturing Development in Ethiopia (NSPA-Pharma)

9. The pharmaceutical manufacturing sector is recognized as a priority sector by the Ethiopian government • UN-SDGs • Goal #3: Good Health and wellbeing • Goal #9: Industry, Innovation and infrastructure • PMPA • One of the pilot sites for the implementation of the PMPA Business Plan. • Growth Transformation Plan (GTP) • Ethiopia Vision – 2025 • Targeting as middle income Country by 2025 • Industrial Development Strategy and Roadmap • Leading in light manufacturing in Africa • Pharma is considered as one of the priorities in the Ethiopian Industrial Development strategy.

10. GoE has put forth an ambitious national strategy to develop the pharmaceutical manufacturing industry

11. GoE has put forth an ambitious national strategy to develop the pharmaceutical manufacturing industry Vision: “To transform the Ethiopian pharmaceutical manufacturing sector into a fully GMP-compliant, competitive and innovative industry that meets the national needs of quality assured essential medicines and serves the African market by 2025” 10 Strategic Objectives:

12. NSPA-Pharma Vision is highly inter-related with the mandates and core competencies of WHO WHO-GMP LP Advocacy WHO-PQ • The implementation of the NSPA-Pharma is under the leadership and strategic guidance of the Ethiopian Government/JSC. • The Project Secretariat, housed at the Ministry of Trade and Industry and supported by WHO, will coordinate the implementation activities. • WHO supported the Project office by: • Consultant and logistics Provided by WHO: • Assigning consultant/s • Office furniture • Vehicle • and IT equipment “To transform the Ethiopian pharmaceutical manufacturing sector into a fully GMP-compliant, competitive and innovative industry that meets the national needs of quality assured essential medicines and serves the African market by 2025” Policy Coherence Capacity Building Innovation Global Resource generating Tech. Transfer

13. National Strategy & Plan of Action for Pharmaceutical Manufacturing Development in Ethiopia (2015-25) Vision: “To transform the Ethiopian pharmaceutical manufacturing sector into a fully GMP-compliant, competitive and innovative industry that meets the national needs of essential medicines and serves the African market by 2025”

14. The scope of EIC’s preliminary research was to assess the opportunities and challenges of Ethiopia becoming a pharmaceutical manufacturing hub Key questions What products and companies should Ethiopia prioritize? How do we attract these companies to establish manufacturing facilities in Ethiopia? What infrastructure and institutions are necessary to support the industry? How do we get there? Note: The scope of this engagement was defined by the Prime Minister’s Office and the Ethiopian Investment Commission

15. The study methodology: More than 100 interviews were conducted as part of this research More than 100+ reports were incorporated in our study A survey of all existing pharmaceutical manufacturers in Ethiopia also generated insights for our research In addition, learning trips were conducted to China, India, South Korea & Singapore to draw on best practices from international experiences

16. Policy Recommendation and Incentives The National strategy was updated after an exhaustive study on the Pharmaceutical sector and proposed policy recommendations were reviewed and were later approved by the Ethiopian Investment Board Approved Recommendations: • Investment Promotion • Improved incentives and government support for investment • Support domestic manufacturers • Promote linkage with supporting industries • Enabling Business Environment • Custom clearance and VAT refund • Human Resource development • Industrial information • Export Facilitation • Lead regional efforts to achieve regulatory harmonization • Enhance and optimize export logistics • Facilitate market information and linkages • Industrial Park development dedicated for Pharma • Government Institutions and regulatory framework • Reinforcing nodal institution • Strengthening the regulatory body • Restructure and strengthening industry • Market guarantee through PFSA • Strengthening the bioequivalence center

17. Infrastructure -Pharma Park Kilinto Industrial Park • Overview • Location: Southeast Addis Ababa • Close proximity to top talent, Ethiopian Airlines, and Addis-Djibouti railway • Land area: 276 hectares • Infrastructure • Serviced land with common infrastructure, such as waste treatment plant • Available at low land lease rate • Dedicated power substation • One-stop-shop government service • Relevant regulatory and supporting institutions will be located in the park to provide services, such as fast-track medicine registration • Incentives • Competitive income tax and other duty exemptions

18. Kilinto Industrial Park

19. cGMP Certified Facilities Humanwell Pharmaceutical Ethiopia PLC

20. Sansheng Pharmaceutical PLC

21. Thank you!