The COVID-19 pandemic has highlighted pharma companies’ weaknesses in foreseeing some of the world’s most consequential health needs. Their Africa outlook currently suffers from the same reality. An investigation of their drug portfolios shows major gaps in what they offer and where market opportunity exists. Health spending and disease pattern data provide insight into the conditions and product requirements that will allow them to better serve the region. The pharma industry must adopt a more longsighted and data-informed view in order to seize these emerging business opportunities.
The Problem with Billion-Dollar Drugs in African Markets
An analysis of the three largest multinational pharma companies shows only 48 percent of their billion-dollar drugs are available in the region beyond South Africa. Putting aside consumer buying power factors, these drugs have little potential on the continent as they focus on health conditions with extremely low prevalence. Of these top selling drugs, 57 percent are indicated for cancers and a set of autoimmune diseases including Crohn’s disease, ulcerative colitis, rheumatoid arthritis, and psoriasis. In Africa, the combined prevalence of these conditions is 849 cases per 100,000 population, compared to 8,083 cases per 100,000 population in the U.S., according to data from the Institute for Health Metrics and Evaluation.
Cardiovascular disease is the third most commonly indicated condition among billion-dollar drugs and is relatively more widespread in Africa; prevalence stands at over 3,000 cases per 100,000 population. However, these drugs comprise only a small proportion of big pharma’s portfolio, with only 11 percent of billion-dollar drugs’ revenue. Pharma companies must ask: what other areas can their portfolios target?
Aligning Drug Portfolios to Africa’s Future Health Needs
After anti-infectives, the next best selling drugs in Africa target cardiovascular disease and diabetes in a distant second and third. Non-communicable diseases (NCDs) such as these account for a much smaller share of adult deaths in the region compared to developed markets: 13-31 percent across the region vs. 80 percent or more in the U.S., U.K., Germany, and Japan. However the contribution of NCDs to the health-care burden in Africa is expected to rise by 21 percent through 2030. While treatments for acute infections may be the best sellers of today, the portfolios of tomorrow must target the region’s most prevalent chronic conditions.
Many of the top NCDs in Africa are shared with developed economies. Headache disorders, oral disorders and sexually transmitted infections (excluding HIV) are the three leading disease categories in both regions, each with over 20,000 reported cases per 100,000 population. However, several conditions have notably higher prevalence in Africa: Liver diseases (due to hepatitis B), blood disorders (G6PD deficiency), dietary deficiencies (iron and vitamin A), and vision impairment (near vision loss and refraction disorders) each affect 5 percent or more of the population in Africa, at rates significantly higher than the U.S. Yet none of pharma companies’ top drugs target these conditions, providing an opportunity for portfolio realignment.
Looking at drug types, over-the-counter (OTC) products warrant particular attention. OTC spending makes up 22-34 percent of all pharma sales in African markets, compared to 17 percent in the U.S., according to World Bank data. OTC is also projected to grow faster than the prescription market. The three major OTC categories in Africa of anti-infectives, analgesics, and multivitamins have fewer patentable formulations than prescription medications, so differentiation must be based on superior branding, lower operational costs or better distribution.
Building Products That Fit the Region’s Buying Profile
The region has double the rate of out-of-pocket spending compared to the U.S.: 22 percent of total health costs versus 11 percent, according to World Bank figures. In absolute terms, out-of-pocket spending is $30 per capita, meaning drugs must be affordable at a very low price point. Even for products with a strategy to reach lower volumes at a higher cost, price must still be relatively affordable. The out-of-pocket health-care spending for the top 10 percent of the population by income (assuming OOP spending is a constant percent of income) is only $115 per capita.
The region also has notoriously low insurance penetration. Health insurance represents only 14 percent of health spending in Sub-Saharan Africa, compared to 35 percent in the U.S. With such a small insured market, the list of covered drugs will inevitably be short. Pharma companies must focus on negotiating coverage for fewer products which need to provide significant economic benefit to insurers — either by reducing patients’ later health costs or increasing their lifespan.
A final source of expenditures, which impacts potential partnerships in the region, comes from government health programs. Governments are major buyers of drugs that serve large proportions of their populations, such as anti-malarials, antibiotics, and anti-retrovirals. However, their spending levels are highly variable across the continent. In some markets, such as Nigeria, Uganda, Liberia, and Cameroon, government spending is well below 20 percent of the country’s total heath spend. In other markets, including South Africa, Zimbabwe, and Botswana, government spending exceeds 50 percent. Whether governments can be targeted as key buyers will vary dramatically by nation and must be planned on a country-by-country basis rather than a regional level.
The current pandemic underscores the imperative for pharma companies to respond swiftly to changing global health conditions. Future needs in Africa will surface quickly given the market’s rapid growth. Timely responses by drug companies are required to address the specific NCDs common on the continent as well as the proliferation of OTC products. This must happen while accommodating the low price points and insurance penetration rates that will affect go-to-market plans. The COVID-19 crisis can serve as a warning of the perils of failing to anticipate the needs of a pivotal market.
Lauren McHugh Olende WG17 is a former vice president of the Wharton Africa Students Association.