In recent times, Nigerians have had several outcries on the exponential rise in the cost of drugs and other pharmaceutical consumables following the exit of GlaxoSmithKline (GSK) from Nigeria in August 2023.
One of the most touching outcries was posted by an Instagram user identified as ‘roki_foods’. She shared a video showcasing two asthmatic patients, an elderly woman struggling to breathe while lying on her sick bed with no help in sight, and a 13 years old boy suffering from what appears like a chronic asthmatic attack, and a ventilator connected to his nostril, as he struggles to breathe.
Under the video, she wrote, “I just finished having a meltdown before posting this, because, sometimes it can be tough and overwhelming. I’m not even talking about the other inhalers and Nebules he uses and we are supposed to be a middle-income family yet our resources are constantly being drained every single day as if there’s an agenda to impoverish more people.
“For us, I know we will always afford it but what of the low-income families with kids who are chronically asthmatic? They shouldn’t breathe again?”
GlaxoSmithKline’s (GSK) Exit
On August 3, 2023, GlaxoSmithKline (GSK) announced plans to cease operations after considering the pros and cons of switching to a third-party distribution model for its pharmaceuticals and consumer healthcare products.
Instead, they chose to offer medications in 29 sub-Saharan African regions using a distributor-led strategy.
GSK is a British pharmaceutical company that has existed in Nigeria for 51 years. On June 23, 1971, GlaxoSmithKline Consumer Nigeria Plc was established in Nigeria. Beecham Limited was the company’s original name when it opened for business on July 1, 1972. The Company began trading on the Nigerian Stock Exchange in 1977.
GSK Nigeria’s half-year revenues decreased to N7.75 billion from N14.8 billion in the same time a year before (2022), according to a report by the International Centre for Investigative Reporting (ICIR).
This data suggests that, apart from the half-year performance of GSK, which had a decrease, the last year recorded an increase. The corporation never reported a huge profit, but according to its financial statements, GSK hasn’t experienced a loss either in the previous five years.
It appears then that the pharmaceutical giant didn’t bow out due to past business failures. Rather, it may have bowed out due to present pressures and foreseen business struggles.
The Impact
Upon the exit of GSK in August, experts had projected its exit to affect a variety of parties, including the healthcare system as a whole, in some significant ways.
Highly renowned for its quality products, including Theraflu, Neosporin, Panadol, Sensodyne, Advair, and Neosporin, the exit of the pharmaceutical company was projected that it could reduce people’s access to safe and potent medications, inflate the cost of drugs and other pharmaceuticals, promote the influx of fake drugs into the country, and scare off other investors operating in the same sector.
Experts asserted that a significant pharmaceutical business such as GSK, leaving the country could considerably impact the economy. It could result in employment losses, decreased tax receipts, and a decline in the pharmaceutical industry’s economic activities, including manufacturing, distribution, and research and development.
Present Day Realities
In recent times, there have been reports of significant increases in the prices of drugs, a situation which has no doubt hampered Nigeria’s access to affordable drugs and deepened out-of-pocket spending on drugs and other pharmaceuticals by the very few who can still afford it.
This situation has also been worsened by a combination of hoarding and price gouging by some distributors of the product, against the decrease in demand, and increase in patronage of unregulated (harmful) herbal drugs by more Nigerians as a matter of last resort.
Distributor’s Insight
In a recent media interview, the Chief Executive Officer and co-founder of Remedial Health, a drug distribution company in Lagos, Samuel Okuwada, stated that the average price of imported drugs has increased by 200 per cent. In comparison, those manufactured in Nigeria also rose by about 40 per cent in the past six months.
According to him, “Augmentin is the most popular antibiotic that’s given out in Nigeria today. It was once sold for N4,000 per pack, then it became N6,000 per pack. Now it is N40,000 if you can find it to buy.
“Also, Ventolin inhalers for asthmatics today are no longer on the market. People have tried its other brands; for some people, it works, and they’re fine. For some others, it doesn’t.
“Seretide inhaler, also for asthmatics, is not in the market as well. Its price also went from about N8,000 to about N75,000, and now you can’t even find it in the market. Now, for most people who use Seretide, nothing else will work for them. Now doctors are trying to find different drug combinations to give them; and for some people, this combination is just not working to control their asthma.
“For diabetics, spend about N40,000 buying the medications they need. So, these are the issues: many medicines are out of stock, and a number are unaffordable to the common man. N40,000 is more than Nigeria’s minimum wage. We are in this terrible situation.
“Otrivin nasal drops which used to be sold for N1,000, are now sold between N4,500 and N9,000. Voltaren tablets which used to be between N100 to N500 per pack are now sold for between N2,500 and N10,000.
“Today, 85 per cent of the medicines that we sell to Nigerians are imported in ready-to-sell form. The ingredient used to manufacture the remaining 15 per cent in Nigeria is imported.
“So, everything we consume in terms of medicines is imported. It means everything depends on the dollar exchange rate. It also relies on the price of shipping at the time.”
Understanding the Real Causes
Providing better clarification to help understand the reason for the hike, the Chairman, St Racheal Pharma, Pharm. Akinjide Adeosun, also the former African Director and Head of Branded Generics at GlaxoSmithKline Pharmaceuticals, Africa, provided a deeper perspective on the issue.
According to him, “I will analyse this from two perspectives. The first is the analogy between price increases and symptoms of a disease.
“Just as a patient with asthma experiences breathlessness due to narrowed airways, the surge in prices is a symptom of an underlying issue in the pharmaceutical sector.
“To draw a parallel, treating respiratory distress with an inhaler is akin to addressing the immediate concern by importing expensive drugs. Having served as the African Director and Head of Branded Generic at GlaxoSmithKline Pharmaceuticals, Africa for five years, I understand the intricacies of the industry.
“During my tenure, a drug called Seretide was used to address both the disease and its symptoms. However, for immediate relief, a palliative measure like the Ventolin inhaler was administered.
“Now, the steep increase in prices is predominantly attributed to imported brands. Instead of merely focusing on these symptoms, it is imperative to delve into the root cause, which is the ailment plaguing the pharmaceutical sector. This issue is not isolated to pharmaceuticals; it extends to other sectors, such as aviation. Just as flight prices have skyrocketed, reflecting a broader economic challenge.”
The ‘Pharmaceutical Disease’
Adeosun likened the current state of the country’s system to a state of coma, occasioned by what he tagged ‘Pharmaceutical Disease’.
According to him, “to understand the symptoms of scarcity, price hikes, and medicine insecurity, we must recognize these as indicators of a more profound issue, which is the emergence of what I term as a ‘Pharmaceutical Disease’ in Nigeria.
“This malady has surfaced abruptly in the last six months, exacerbated by the macroeconomic challenges the nation faces. While the country experiences similar macroeconomic challenges affecting various sectors like food and provisions, the critical distinction lies in the irreplaceable nature of healthcare.
“Consider the analogy of adjusting food consumption; a shift from a whole loaf to half a loaf, while challenging; doesn’t compromise one’s fundamental well-being. However, health, especially in the context of essential medications, cannot be subject to compromise.
“If someone, for instance, must take a daily anti-diabetic drug, reducing the dosage arbitrarily could lead to hyperglycemia, posing a serious threat to life. The analogy underscores the unique and non-negotiable nature of healthcare; health is indeed wealth.”
He said that the pharmaceutical sector’s integration into the macroeconomic fabric of Nigeria demands a specialized approach.
“Unlike commodities or food items in a supermarket, the consequences of mishandling the pharmaceutical sector extend beyond economic implications. It’s a matter of life and death.”
Drawing parallels to the impact of health crises, such as the Covid-19 pandemic, he said the importance of a robust and well-managed pharmaceutical sector becomes not just an economic necessity but a critical element in preserving the health and lives of the nation’s citizens.
According to him, “the malaise afflicting the pharmaceutical industry in Nigeria today can aptly be termed a ‘pharmaceutical disease’. The symptoms of this ailment manifest in the unavailability of products, escalating prices, and imbalances in supply and demand.
“The fundamental economic principle of scarcity contributing to price hikes becomes evident when fewer goods are available in response to heightened demand. Although I hesitate to provide specific details, having been a director at GSK and bound by confidential agreements, the issue extends beyond any single pharmaceutical organization.”
Consider the broader landscape encompassing pharmaceutical companies in Nigeria, including notable entities like May & Baker Nigeria Plc, Emzor Pharmaceutical Industries Limited, GlaxoSmithKline Consumer Nigeria Plc (GSK), Fidson Healthcare Plc, Evans Medical Plc, Swiss Pharma Nigeria Limited, and Neimeth International Pharmaceuticals Plc, Adeosun said it’s crucial to acknowledge that this list is not exhaustive, as numerous other pharmaceutical companies operate within the Nigerian landscape.
He said the pervasive challenges facing the industry demand a comprehensive and collaborative approach to address the root causes of this ‘pharmaceutical disease’ and restore stability to the sector.
Overreliance on Imports
Importantly, Adeosun said, a significant aspect of the pharmaceutical challenge in Nigeria stems from the fact that 70 per cent of drugs are imported, leaving only 30 per cent manufactured locally.
“Even within this local production, the active pharmaceutical ingredients are often imported, with approximately 95 per cent of them coming from abroad. This reliance on imports, especially for critical components, underscores the precarious situation faced by the pharmaceutical industry in Nigeria.
“This reliance on imports also makes the industry highly vulnerable to monetary challenges. Currently, the exchange rate for the US dollar on the parallel market is ₦1165. Any fluctuations in the government’s monetary policy could have catastrophic consequences, given the extensive importation integral to pharmaceutical operations.”
The Monetary Challenge
To comprehend the depth of the pharmaceutical challenges, Adeosun said it was essential to view them as symptoms of underlying issues in Nigeria.
According to him, “One primary concern is the monetary challenge, and the susceptibility of the pharmaceutical industry to changes in exchange rates poses a severe threat.
“It becomes evident that these challenges require government intervention, not just to address the symptoms but to tackle the root causes and avert a looming disaster in the pharmaceutical sector.
“The current parallel market exchange rate for the dollar stands at ₦1165, a significant surge from the pre-existing rate of ₦461 official rate before the current government took office.
“It’s essential to acknowledge that reforms, which should have been initiated even four years ago, have played a role in the economic landscape. President Bola Ahmed Tinubu’s entrepreneurial prowess transformed Lagos State from junk to a megacity, achieving an impressive monthly IGR of ₦50 billion monthly, from ₦800 million monthly. Despite these positive changes, some consequences and challenges have arisen, particularly in the realm of foreign exchange.
“Forex challenges stem from the drying up official rates, which were previously accessible for industries. Multinationals, accustomed to different credit allocations, have faced a year-long drought in official allocations, exacerbating production and importation challenges.
“The compounding factors of production issues, import bills, and electricity shortages contribute to the escalating Forex rates. Previously, the pharmaceutical industry obtained the official rate at ₦461, eliminating the need for resorting to the parallel market. However, the absence of official allocations for over a year has forced industries to navigate the parallel market, where the cost of the dollar alone has soared to ₦1165.”
He noted that this dramatic shift in forex dynamics has profound implications for industries reliant on imports, particularly pharmaceuticals. Hence, the ripple effect “is felt in the prices of drugs, with a $2 Free On Board (FOB) remaining constant globally but experiencing a substantial increase in naira due to the elevated exchange rates.
“A drug priced at ₦1000 has surged to ₦3000, highlighting the stark difference in the cost implications. The once assessable official rate is now inaccessible, leaving industries, especially multinationals, in a challenging predicament as they grapple with the consequences of the evolving economic landscape.
“The prevailing trend indicates a significant disruption in the supply chain, primarily due to the unavailability of dollars at the official exchange rate and restricted access to foreign exchange.
“This disruption is evident in the case of Emirates Airlines, having approximately $80 million capped in Nigeria, yet facing challenges in repatriating these funds due to lack of dollars to pay them. In the aviation sector, the withdrawal of multinational players like Emirates can have cascading effects, impacting both industrial operations and the choices available to consumers.”
Surge in Inflation
Adeosun said the second monetary challenge contributing to the pharmaceutical predicament is the surge in inflation, escalating from a previous rate of 17 per cent to the current alarming rate of 27 per cent.
“This inflation, driven by internal factors like food insecurity, inherently impacts the cost of goods, services, and crucially, pharmaceuticals. The intricacies of inflation extend to the lending rate, specifically the Monetary Policy Rate (MPR), adjusted by the Central Bank of Nigeria’s Monetary Policy Committee. MPR is currently 17.5 per cent and lending rate is 30 per cent. For the lending rate to go down, thereby increasing consumer borrowing, the MPR must go down.
“This economic scenario reverberates across industries, placing pharmaceutical companies on the same economic plane as giants like Dangote, MTN, Shell, Mobil, and Coscharis.”
The Fiscal Challenges
Adeosun identified fiscal challenges as constituting the second section of his analysis.
According to him, “There’s an evident collapse in the supply chain, and the prospect of Nigeria recovering within the next year seems daunting. Multinationals, contemplating staying, are in the process of altering their business models and transitioning to a third-party system, which involves partnering with local entities for imports. This shift signifies substantial investment flight from Nigeria, resulting in a diminished presence of these multinational brands.
“The fiscal issues exacerbating this scenario include various taxes and levies. Corporate income tax stands at 30 per cent, and arbitrary levies imposed by the Federal Inland Revenue Service (FIRS) further burden businesses.
“FIRS, at times, levies charges unrelated to taxes, compounding the financial strain on companies. Import duty is 20 per cent for finished brands and 5 per cent for Active Pharmaceutical Ingredients (API). This becomes a critical concern, especially for the pharmaceutical industry reliant on importing active pharmaceutical ingredients, particularly for high-tech drugs and biologicals.”
He said Nigeria cannot currently manufacture certain drugs, including vital high-tech drugs and biologicals.
“Despite the commendable efforts of Nigerian companies like Emzor and Fidson, proficient in manufacturing basics such as paracetamol and multivitamins, the absence of capability in producing complex pharmaceuticals is a stark reality.
“This incapacity poses a significant challenge, especially in times of health crises like the Covid-19 pandemic, where the demand for advanced pharmaceuticals, including vaccines, becomes crucial.”
He therefore said the need for a strategic approach to bolster the manufacturing capacity of high-tech drugs in Nigeria is imperative for the resilience and sustainability of the pharmaceutical sector.
Over-taxation and Energy Cost
Similarly, Adeosun identified the issues of taxation both in levies and taxes, and power issues, as major contributors to the spike.
According to him, “Customs, responsible for imposing taxes, levies, and import duties, play a pivotal role. The charges, often surpassing 20 per cent, encompass various fees, including ECOWAS levies.
“Additionally, inspections by NAFDAC and expenses related to clearing agents contribute to the overall cost. It’s essential to recognize that pharmaceuticals are a business, and the cumulative effect of these charges impacts the industry’s competitiveness.
“Comparatively, global pharmaceutical giants like Pfizer thrive, generating over $100 billion in revenue last year. Government support, grants, and investments enabled them to swiftly develop Covid-19 vaccines.
“Vaccines, known for their complexity, highlight the challenges of pharmaceutical production. Amidst these complexities, excessive charges from regulatory bodies like NAFDAC add significant financial burdens.
“NAFDAC’s fee for verifying offshore manufacturing facilities, often in dollars, increases the overall cost. On a positive note, the Pharmacy Council of Nigeria receives commendation for its professional regulation, offering modest fees for licenses and maintaining a commendable standard of professionalism in the industry.”
He therefore said a strategic approach to streamline charges and regulations was essential for fostering a conducive environment for the growth and sustainability of the pharmaceutical sector in Nigeria.
Similarly, he noted that the escalating energy costs in Nigeria pose a significant challenge, particularly for pharmaceutical companies.
“The price of diesel has soared from ₦800 to ₦1200. Hence the expense of running generators has become a substantial part of the overall energy cost.
“Many pharmaceutical companies, compelled by the unreliable power supply from the national grid, rely on diesel generators. This shift adds a considerable financial burden, especially for companies with representatives in the field who use petrol to fuel their cars to reach doctors and promote brands.
“When assessing the cumulative costs, including energy, brand promotion, and other operational expenses, the reality emerges that pharmaceutical prices might be three times higher than they should be.
“This challenge is not exclusive to multinational pharmaceuticals; it’s a pervasive issue for businesses in Nigeria, affecting those importing or locally manufacturing drugs. Adapting prices to the economic reality becomes imperative for survival.”
Need for ‘Bank of Health’
As part of solutions to all the challenges he mentions, Adeosun said it is a shared macroeconomic reality, where the pharmaceutical sector cannot be isolated from broader economic challenges, and therefore proposed the creation of a Nigerian ‘Bank of Health’.
He noted that the idea involves separating health financing from other sectors like telecoms and oil and gas.
“This separation recognizes the unique financial challenges faced by the healthcare industry, creating a conducive environment for borrowing at rates that consider the specific needs and challenges of the sector.
“In essence, acknowledging the distinct financial landscape of the pharmaceutical industry and providing tailored financial solutions is crucial for its sustained growth and resilience in the Nigerian business environment.
“Unlike other commodities, health is a unique and indispensable facet of life, emphasizing the need for a dedicated institution, a ‘Bank of Health’. This establishment, separate from commercial banks and the Bank of Industry, should oversee various health-related facets, including hospitals, pharmaceutical industries, labs, and insurance.”
Reflecting on over 30 years of experience in the health industry, Adeosun advocated for the creation of a ‘Bank of Health’, while also drawing attention to the global standards observed in every continent around the world.
He said recently, that there is a Post-Covid positive shift among banks to incorporate healthcare divisions in Nigeria, acknowledging the unique nature of the sector.
“However, the contention remains that commercial banks are ill-equipped to manage the intricacies of the healthcare sector. The call for a specialized institution, a Bank of Health, stems from the recognition that health is not merely a commodity but an integral aspect of life.
“This shift is essential for sustained prosperity and economic growth, emphasizing that without health, these pursuits hold little meaning.”
Declaration of ‘state-of-emergency’ on the pharmaceutical sector
Adeosun also advocated for the declaration of a state of emergency in the pharmaceutical sector.
According to him, “In addressing the issues in the pharmaceutical sector, there’s a tripartite involvement: the government, industry players, and patients. Given the current circumstances, I advocate for the government to declare a state of emergency in the pharmaceutical sector.
“This declaration should come from the Aso Villa, under the leadership of President Ahmed Bola Tinubu, an experienced individual with a background in Deloitte and Mobil. This move should be initiated urgently to address the pressing challenges within a year.”
Need for ‘Medicine Security’
To chart a way forward, he said there must be a vision for the pharmaceutical sector in Nigeria, specifically regarding medicine security.
“Nigeria should aim to achieve ‘medicine security’ by 2033. Without a clear vision, leadership becomes directionless, but a well-defined vision can energize and guide everyone.
“The responsibility for setting this vision lies with the president. I propose a short-term plan, achievable within a year, followed by medium-term goals spanning 3 to 5 years, and long-term objectives over 10 years, culminating in the 2033 vision.
“Currently, Nigeria imports 70 per cent of pharmaceutical products and manufactures only 30 per cent. While changing this overnight is impractical, a well-structured plan can gradually shift the balance.
“This comprehensive 10-year plan is essential for the pharmaceutical sector’s growth, and once agreed upon, the first step is assessing the current situation. This strategic approach ensures a systematic and effective transformation of the pharmaceutical sector in Nigeria.”
For short-term solutions, within a year, he said, a massive importation of drugs is necessary to address immediate gaps, especially at the multinational level.
“It’s crucial to signal a shift from the current pharmaceutical sector decadence. In this short-term strategy, a significant emergency purchase of pharmaceuticals is proposed, akin to the Petroleum Trust Fund’s approach under General Buhari in 1994. This move would stimulate employment, and liquidity, and positively impact the pharmaceutical sector.
“However, the challenge lies in payment issues, particularly with teaching hospitals and some private institutions. Creating a pool of funds, like the model under the PTF, could be a solution, ensuring prompt payment for supplied drugs.
“Additionally, addressing the weak demand and promoting health insurance coverage is essential. Currently, only 5 per cent of Nigerians are covered by health insurance, a stark contrast to countries like the UK and the US where coverage is more widespread.
“A short-term measure involves maintaining the 70 per cent drug importation rate while collaborating with local drug manufacturers. This collaboration ensures access to essential medicines, stabilizing the sector.
“A subsequent goal could be a 50/50 distribution, increasing local manufacturing to 50 per cent and reducing importation to 50 per cent. However, achieving this requires developing local capabilities.”
In the long term, he said aiming for 100 per cent drug production within Nigeria is unrealistic, given global practices. What we can do in the long term is target 80 per cent local production and 20 per cent imported.
“Even in the US, drugs are imported from India and Canada. The focus should be on developing local capacity to not only cater to the Nigerian population but also enable exporting to other African countries, fostering economic growth and sustainability. This comprehensive approach lays the foundation for a robust and resilient pharmaceutical sector in Nigeria.”
To achieve medicine security in Nigeria within the next 10 years, Adeosun said, a national strategic plan must be developed under the presidency’s guidance.
“This plan should outline strategic objectives, focus areas, identify roadblocks, and leverage enablers. Liquidity, a critical enabler, is highlighted as essential for overcoming financial challenges.
“The strategic plan must aim to remove roadblocks, such as cash constraints, and promote a collaborative mindset between government and industries to view businesses as partners, fostering their profitability.”
He also recommended that the government must strive to “restrict interest rates to a maximum of 5 per cent, ideally at 0 per cent, to facilitate accessible financing for health-related operations.
“The demand for drugs within Nigeria is identified as a significant issue affecting the pharmaceutical sector. Addressing these challenges through strategic planning and policy adjustments is vital for the sustained growth and resilience of the health sector in Nigeria.”
He therefore concluded that “government’s patronage is essential for the development of local manufacturing, a process that takes time but is crucial for sustainability.
“Doubling the number of pharmacy schools in Nigeria over the next 10 years and emphasizing business skills in the curriculum can foster a more self-sufficient pharmaceutical industry.
“This holistic approach, encompassing government intervention, education, and local manufacturing support, can create a thriving and enduring pharmaceutical sector in Nigeria, ensuring economic growth and improved healthcare.
“Health is an essential pillar of development, only a healthy nation can enjoy a prosperous economy.”
