UNECA- Study on the Complexities of Value Chains in Pharmaceuticals and Other Essential Goods in Africa – A Focus on the Role of Services

International Economics Consulting Ltd (IEC) prepared this study on the Complexities of Value Chains in Pharmaceuticals and Other Essential Goods in Africa – A Focus on the Role of Services, for the United Nations Economic Commission for Africa (UNECA). This study examines the role of trade in services in the manufacturing of pharmaceuticals, but also examines how services commitments, both in the current and subsequent phases of the African Continental Free Trade Area (AfCFTA) trade in services negotiations, can be leveraged to support the development of the industry.  The study covers an overview of the pharmaceutical value chain, the state of the pharmaceutical industry in Africa, the role of services in research and development, manufacturing, and distribution of pharmaceutical products along with highlighting the regional initiatives aiming to build the pharmaceutical industry.

The study elaborates the role of services in the African pharmaceuticals value chain, while mapping the opportunities presented in the AfCFTA, which aims to liberalise trade in goods, trade in services, ease trade facilitation, put in place frameworks for competition policy, intellectual property rights (IPRs), investment promotion, develop platforms for regional cooperation, mechanisms for monitoring implementation, as well as providing an avenue for dispute settlement.

African countries account for 25% of the global disease burden and more than 50% of the global deaths of children under five. The extreme impact of infectious diseases is largely felt in Sub-Saharan Africa (SSA), while North African countries have disease profiles that are more closely related to those of industrialised countries. It was estimated that by 2020 Africa could have 60 million people with hypertension, 1 million cases of cancer annually and 18.6 million people with diabetes. Although Africa has among the highest disease burdens in the world, it is estimated that the availability of essential medicines, excluding North Africa, is way below 40% in the public sector, which caters for the bulk of the population, and less than 60% in private sector medicines outlets. Despite over 70% of African countries having a pharmaceutical industry, the African manufacturers are primarily small, privately-owned companies that mostly serve their national markets.

The report found that a global pandemic outbreak, such as the COVID-19, poses the risk of total shutdown of production operations for local pharmaceutical manufacturers in Africa. African countries were faced with a sharp shortage of available medicine, and increased procurement lead-times, as well as food shortages, price hikes and breakdowns in pharmaceutical supply chains due to the dependence of local pharmaceutical manufacturers’ on imported drugs. Boosting the internal production of pharmaceutical products might bring extensive benefits, such as saving on foreign exchange, creation of jobs and thereby the alleviation of poverty and promotion of social development, technology transfer, increased exports, cheapest products and self-sufficiency in medicine supplies. Doing so would require significant efforts, such as liberalisation of Trade in Services incidental to Pharmaceutical Manufacturing, Improve the regulatory frameworks to support competitiveness, promoting investment in R&D, strengthening the implementation of regional agreements, amongst others. The AfCFTA can be leveraged to support the development of African Pharmaceutical manufacturing and regional value chains through intra-African trade.

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