‘Government needs to support local manufacturing to make drugs affordable’
by Anthonia Obokoh
October 15, 2017 | 3:43 am| | | Start Conversation
Chibuzo Opara and Ahdam Yehia, co-founders of Drugstoc, recently spoke with Anthonia Obokoh on a number of issues bordering on access to the right drugs for health facilities and the role the company is playing in that regard, high cost of drugs, need to boost local manufacturing of drugs to reduce import dependence, among others. Opara is a health economist who has worked in different international and Nigerian companies on healthcare policy, management, financing and business of healthcare, while Yehia has a background in the sciences and specialises in generics and health services.
Your firm Drugstoc is an innovative means of ensuring pharmacies and retail shops have access to medicines. What informed this innovation and how has it impacted the health space in the country?
We had this idea about four years ago and in January, we opened our experience centre and warehouse. We are also into health information technology (IT) and logistics, ensuring health-care provision is done properly in Nigeria. We were concerned about how to ensure that the patients get the most from the health system. What informed the innovation was simply experience trying to sort drugs for various facilities that we work with, seeing how difficult it was to ascertain the originality of drugs. From that point of view, we did not find anything specifically on the market that will cater to health-care professionals, that will empower the health providers to make a better decision and have easier access to the drugs that they need in order to improve their services.
However, the quality of drugs is one of the big issues. Another issue is also affordability. Because most drugs are imported, the price tends to fluctuate. Basically, we entered the industry to see how to create a slight change in how we cater to the clients, that is, the health professional, and also how to improve access to drugs. Most health facilities do not have the procurement department that focuses entirely on ensuring they get the right quality and the right price of drugs, so you tend to see a lot of them pass down the cost of their inefficiencies to the patients themselves. What we have done with Drugstoc is that we have set ourselves in the position to empower the healthcare providers by giving them as much access to the right drugs and prices as we possibly can and ensure that there is enough transparency in the process.
What challenges are you facing in the delivery your services?
The challenges we face are the challenges any small-medium scale retail business in Nigeria faces – the typical infrastructure issues. Obviously in logistics, infrastructure is a big issue – things like traffic jam, very high operational cost, etc. Aside from that, some of the other challenges we face are things that are inherent in the Nigerian pharmaceutical industry. The market is highly fragmented, so it’s often the case that they come in small groups, there is no big purchaser per se that will stabilize the market.
Despite the recent stability in the foreign exchange (forex) market, prices of medicines are still quite high. Why is this so?
Well, when you say expensive, it is relative. In actual terms, I will say the forex issue started around 2014. If we want to compare the prices of drugs in 2014 and the prices in 2017, from my perspective, the real prices of drugs have fallen. They are expensive in naira terms, but in dollars terms, they are not. A lot of companies have exited the country; a lot of companies have sort of folded up. It is not because they want to leave the country, but because the profits are not good enough. Pharmaceutical business is a dollar-dependent market; even the raw materials that are used in the packaging in Nigeria, whether they are produced here or not. Around 80-90 percent of everything is imported and depends on forex, so you can see how that might affect the prices of drugs.
How can the government help to make drugs more readily available and cheaper in Nigeria?
I think the leadership of PSN is doing a lot of things ensuring that technology is involved, that group players play together, ensuring that we have more organized health commodity market place and ensuring that no sub-standard product gets into the system. These are the three things we can start on. The most important thing we tend to underplay is how you get the drugs to the nooks and crannies of Nigeria. There is capacity issue in distribution of drugs in Nigeria, there are a lot of innovations that can be put across and there is need for more resources to be devoted towards expanding the number of pharmacists and access points. There are issues around human resources, access, and quality in the last mile. A lot of interesting organisations, even the donor organizations, are all playing in that space trying to expand the capacity. Even the government is also trying to expand the capacity in that space, but it is a tough one because some states do not have enough pharmacists. For instance, Zamafara probably has about 10 pharmacists and seven of them are working in the government hospitals. These are some of the challenges in that space that have led to these problems.
You mentioned that a large percentage of drugs in the country are imported and depend on forex. How do you make drugs less dollar-dependent?
To make drugs less dollar-dependent, local manufacturing needs to be boosted – not only the packaging but also the local capacity to produce raw materials and drugs that are necessary. What the government needs to do is encourage local manufacturers to manufacture more drugs so dependence on forex for importation of drugs will reduce drastically, though some locally-manufactured drugs still need some imported supplements. Inflation is also a major aspect affecting the prices of drugs in Nigeria because prices of goods and services have marginally increased over a period of time, which is partly why drugs are still expensive. A lot of foreign investors are also pulling out of the Nigerian drug market due to losses incurred as a result of high rate of forex. This tends to create opportunities for local manufacturers. Another reason is the lack of systematic approach to the drug market – poor warehouse, lack of proper distribution channel which makes most drugs to spend longer time in supply and logistics. All these have contributed to the high prices of drugs in the market.
What’s the ratio of your drug supply from foreign manufacturers to that from local manufacturers?
In broad terms, the market trend is shifting more towards locally-manufactured and packaged products. We hold the international brands, but we are excited to work with the local brands, especially ones that are becoming GSK-compliant and building their inventories and quality. The way it works, we have the brand products and generic products. A lot of Nigerian companies play in the generic section, they are trying to up their quality and they are doing quite well, but there is still a lot that can be done to boost manufacturing so it will really reduce the reliance on forex.
How can Nigeria boost local manufacturing?
A lot has been done by the PSN in terms of getting the stakeholders to come together to discuss issues around what manufacturing is in Nigeria and how we can ensure that it becomes better. I think it has to do with more access to capital. Of course, government has to intervene to ensure that we bring the industry into Nigeria. It takes a lot of private investment, people that can look at Nigeria’s investment landscape, see the positives and say, yes, I will invest in this country. Looking at the manufacturing sector, what you see is that because we are import-dependent, we have to pay the tariffs. Drugs that are manufactured in Nigeria should have a friendly tariff regime when it comes to importation, because it can affect the short term. The Nigerian drug industry was about $2 billion before the dollar crashed; we do not have a company in the country that can say it is reaping the benefits of this $2 billion. I think there needs to be some sort of Marshall Plan by the government. As a country, part of your security comes from being able to say that there are some things that you can do on your own. If we have a huge burden of disease, we should be able to manufacture at least 40 percent of the drugs for those diseases.
With recent developments in the health sector, is Drugstoc ready to go into manufacturing of drugs?
Not in the short term, though it interests us. We are focusing on the bigger issue, which is access and distribution, ensuring the providers have the right drugs at the right time. But for sure manufacturing is interesting in the longer term.
Selling of drugs appears to be the new fad. What are you doing differently to hedge against competitors?
The three pillars we stand on are transparency, consistency and lack of any counterfeit drugs in our system. And also we rely more on IT because when you look at hospitals and pharmacies, part of the challenges is that they have a lot of issues around managing. So we have a lot of IT solutions to offer them to download applications. The second strong pillar will be that every client of ours is a strong pillar. We like to be involved with our clients to know their problems and how to solve their problems.
How can technology boost Nigeria’s healthcare system?
I think the answer to that is not the use of technology, but using technology to get to an end point, not using technology for technology’s sake. Technology is very important and exciting, but in reality, we encourage players in the Nigerian health sector space to go for technology that can solve the problems they actually have. The biggest problem they should be solving at the moment is the accounting and billing system. Now, you see that most hospitals try to go for full-fledged electronic medical records and do everything paperless. Let’s start where the problems are and ensure we have a viable business before investing X millions in a system that you cannot finish paying a developer. Technology is an enabler, it is not the end. I will say that more than focusing on technology solving the issue, how do we solve these issues? My best takeaway is that technology creates openness to be able to say, how do you push this change? If you have a challenge in this space and you bring in technology, people are ready to give in more space to innovate, which I think a lot of companies in Nigeria need. The country has a big infrastructure problem with regard to power issue, transportation and the rest of them. Technology can do a lot in Nigeria but it must not be a copy-and-paste kind of arrangement from the United States.
Fake drugs in the market seem to outnumber original ones. What is the percentage of fake drugs in the market?
Typically, it is very difficult to get a quote for the percentage of fake drugs in the market because it varies from place to place; we can only quote according to the official statistics. According to research, looking back to 2001, it was quite significant – about 50 percent of anti-malaria drugs in the market were fake, which is an indicator, but Pharmaceuticals Society of Nigeria (PSN) has done a lot of work. Drugs are of random samples, so fake drugs are very difficult to track. But even if it is just 1 percent, it is too much because you do not know those that will be affected.
What advice would you give to Nigerians on the use of drugs?
There is a lovely quote that says, “The bitterness of fake drugs lasts longer than the sweetness of the price.” Fake is a broad term – it could be counterfeited from scratch, it could be the importer reduced the ingredients, and it could be it was stored in sub-standard conditions. Drug abuse is a very big issue in Nigeria. In a nutshell, every drug is a chemical. Chemicals are not meant to be ingested like food, hence you have to take drugs from a professional who has the legal rights to prescribe drugs because they understand it could be harmful if not taken according to doctor’s prescription. It is important for an average Nigerian to know that the drug you take is a chemical and should be supervised by a healthcare professional at all times.
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