How medical procurement by donors is killing pharma industry in East Africa

By Gatonye Gathura

Huge donor-funded medical procurements, skewed to favour imports, a new study shows are killing the local pharmaceutical industry.

Many local companies, the report says have already stopped producing some medicines because of cheaper donor funded imports from India and China.

“We know there is a problem and we are engaging with Treasury on the matter,” industrialization Cabinet Secretary Adan Mohammed said on Monday.

Responding to concerns by local manufacturers of unfair trade policies that favour foreigners, Adan said this is especially a concern in the health care sector.

“Some of the donor funded projects come with some less than satisfactory conditions including tax waivers which disadvantage local manufacturers,” Adan said during a public forum hosted at the University of Nairobi on Monday.

The CS was referring to huge donor driven pharmaceutical imports from Asia mainly funded by the USAID and the Global Fund which the new study says are crippling local manufacturing.

Last year the Federation of Kenya Pharmaceutical Manufacturers (FKPM) had complained to the government of their being unfairly locked out of lucrative public sector tenders.

When the donors supply imported drugs to the government, FKPM had explained they are exempt from all import duties, levies and taxes in Kenya.

But if the same donor agencies were to buy from local manufacturers, the Kenyan government would first take away a railways development levy and an import declaration fee.

This, the federation argued was killing local industries and exporting thousands of local pharmaceutical jobs to Asia and western economies.

The new study by among others Dr Mercy Karimi Njeru, a senior researcher at the Kenya Medical Research Institute (Kemri) says this is a classic example of how globalization is cannibalizing economies in East Africa.

The report appearing in the March issue of the journal Social Science & Medicine says due to the donor funded medical imports  the pharmaceutical sector in Kenya has almost stagnated in the last decade while that in Tanzania has shrank by half.

The study led by Maureen Mackintosh of The Open University, Walton Hall, UK had analysed medical procurement in 97 health facilities, pharmacies and drug shops in Tanzania and Kenya.

It reports that despite huge donor funding for medical supplies access to medicines has remained poor with huge stock outs in hospitals with patients still buying most medicines from private pharmacies.

“At times we can stay for even six months without getting the specified drugs,” reported an official at a public dispensary in Kenya.

In both Kenya and Uganda, the report shows even non-medicine supplies such as microscope slides, diabetes strips and diagnostic consumables are coming from China, Korea and western countries.

The takeover of drug procurement by donors the researchers say has left many local producers to only supply low value products such as brooms, bed sheets, towels, bandages and disinfectants.

“While local firms had supplied the bulk of the previous first line anti-malarial treatment (SPs) the switch to the new more expensive ACTs as first line treatment has raised barriers for local firms,” says the study.

This, the study says raises serious sustainability and donor dependency concerns at a time donor funding for malaria is shrinking.

The donors such as USAID, the report says have engaged own international procurement systems rendering Kenya Medical Supplies Authority (Kemsa) to no more than a shopkeeper or a logistics agent.

The researchers recommend western donors and Kemsa adopt the procurement model used by the Mission for Essential Drugs and Supplies (MEDS).

Meds is a large Christian based non-profit drug supply agency operating locally with the new report showing it makes major efforts to purchase from and engage local manufacturers.

Interviewees, the study says attributed MEDS relatively high reliance on local procurement, at 75 per cent, to its active working relations with local manufacturers.

They suggest the government similarly consider policy changes supportive of local pharmaceutical manufacturers.

“Such relationship is important for industrial and employment growth, and may reduce over-reliance on low-priced Indian imports.”

Such imports, the authors say may not be sustainable as reputable Indian exporters move to higher margin markets

Last year the former CS for Health Dr Cleopa Mailu had promised the government would in a new trade policy comprehensively address the concerns of local pharmaceutical manufacturers.

The policy he said would for example offer specific incentives to the local pharmaceutical companies for increased production.

Some of the promised incentives would have KEMSA give preference to locally produced medicines in public procurement and removal various prohibitive tariff barriers.

However the National Trade Policy which has since been launched lacks specifics on the mater.The challenge for the Government is to review and rationalize all taxation laws and regulations to enhance competitiveness in production,” is the closest the document gets to address the matter.

However CS Adan has said the matter is already on the table and being addressed by relevant authorities.

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