This Content Is Only For Subscribers
The Egyptian Center for Economic Studies in its last edition of series of analytical reports, “Views on the Crisis” to analyze the consequences of the Covid-19 pandemic on the pharmaceutical industry in Egypt, which is one of the industries that were classified among industries that benefited from this pandemic, according to the analysis, and it is one of the vital industries in Egypt.
The pharmaceutical industry in Egypt is of particular importance because it is closely related to the healthcare sector and affects human health.
This study comes as a second edition which is complementary to the first study previously issued on the impact of the Covid-19 pandemic on the manufacturing industries as a whole, and the detailed reports aim at a more in-depth analysis according to the various types of industries.
The study classified the manufacturing industries into three sections according to the apparent impact of the pandemic on them in their early stages, which are: Industries that benefited from The crisis, industries kept out of the limelight, industries that struggle to survive.
The Global Market Volume of Pharmaceutical Industry
The size of the global market for pharmaceutical products in 2019 is estimated at about $25.1 trillion, and this industry is characterized by a monopolistic nature as its trading market is subject to what is known in economics as “oligopoly”, where a few companies control the market share of pharmaceutical products, and this sector relies heavily on research and development, which is characterized by a huge increase in the market value of the operating companies, with the market value of the least companies reaching $108.6 billion dollars.
Pharmaceutical Industry in Egypt
Pharmaceutical production in Egypt is concentrated in the private sector with 94% of the total investments producing 80% of medicines in Egypt, compared to 6% for the government sector, which produces 20% of medicines, and foreign private sector companies acquire 69% of the medicine market in Egypt, while local companies acquire It held 31% of the drug market share in 2018.
The size of the pharmaceutical market in Egypt is estimated at 400 billion Egyptian pounds, with pharmaceutical production contributing 3.1% of the GDP during 2016/2017, and the pharmaceutical industry’s investments in Egypt are estimated at 80 billion Egyptian pounds (6.8% of the total investments in 2018/2019, The equivalent of producing 5.2 billion packages of medicine annually, of which similar medicines represent the largest proportion, equivalent to 69.3% of the total pharmaceutical packages produced, while sales of similar medicines account for nearly two-thirds of the market.
In Egypt, there are 350 facilities for the manufacture of pharmaceutical preparations, employing about 84.6 thousand workers, of which the government owns only 3%, compared to 97% owned by the private sector.
Despite the huge market value of Egypt’s sales of medicines in the Middle East, it is not the most advanced in its manufacturing, as Egypt’s increasing production of medicine has not been accompanied by a development in research and development, nor successful attempts to manufacture the active ingredients instead of importing foreign active pharmaceutical ingredients from abroad.
Egypt imports the largest part, whether from the inputs of active materials, packing and packaging requirements, etc., or from the final products of medicines and medical supplies, from abroad. More than 90% of the raw materials used in local production are imported, which covers 93% of local consumption.
Egypt’s imports of pharmaceutical products amounted to about $2.61 billion, compared to only about $271.85 million for exports in 2019, and therefore our imports of pharmaceutical products exceed our exports by about 9 times.
Impact of Coronavirus Pandemic on the Pharmaceutical Industry in Egypt
The analysis showed that the pharmaceutical industry in Egypt was not affected during the first stages of the emergence of the coronavirus, despite the beginning of the disruption of global supply chains due to the stop of production in Chinese companies and the beginning of the lack of imports of active ingredients, medical supplies and imported medicines, as companies relied on stocks of active ingredients they have.
While the continuation of this disruption was reflected in Imports of medicines and pharmaceuticals from China and India decreased during the first quarter of 2020 by about 29% compared to the corresponding quarter of last year, with a shortage of stocks of some pharmaceutical companies.
The phase of exacerbation of the crisis from mid-March to mid-May witnessed the increasing paralysis of global supply chains for pharmaceutical products and raw materials, which was reflected in the decrease in imports of medicines and pharmaceutical preparations by 10.4% during April 2020 compared to the same month of 2019.
In the pharmaceutical industry in Egypt, Exports of medicines and pharmaceuticals decreased by about 20 % during the month of March 2020 compared to March 2019, and the percentage rises to 30% during April 2020 compared to April 2019, and as a result of the high demand and competition for certain types of medicines and disinfection and sterilization supplies, this was reflected in the increase in sales during the first quarter of 2020 by about 12% compared to the same quarter of 2019.
The period of exacerbation of the crisis witnessed a shortage of certain types of medicines and vitamins and the complete disappearance of some of them, which led to a clear increase in their prices, and a scarcity of protective equipment like masks, medical gloves and sterilization preparations such as alcohol and others, which led to a high rise in its prices, and this resulted in decisions from the Ministry Commerce and Industry to stop the export of alcohol of all kinds and its derivatives and surgical masks, and companies were obligated to supply their stock and production to the Unified Purchase and Medical Supply Authority.
With the increasing pressure on medicines and sterilization requirements during the period from mid-May to the end of last June, certain types of medicines and vitamins disappeared from the market, and there was a sharp decline in the value of exports of medicines and medical preparations, which reached 98% during June compared to the same month last year, and to 53% from the second quarter of 2020 compared to the corresponding quarter of the previous year,
While the cost of imports increased by 115.6% during the month of May only, and the percentage decreased to 36% last June, bringing the rate of increase in the import bill during the second quarter of 2020 to 27% compared to in the same quarter of last year.
The period from the first of July witnessed a decline in the number of infected cases, and therefore the demand for medicines decreased as it continued to use masks and sterilization supplies, and the impact of the crisis on the sector during the coming period is related to the severity of the pandemic.
So, in the event that the severity of the pandemic continues to slow and the sector gradually recovers during next August, it is expected to continue to rise The import bill is 36%, which is the same annual rate of change for last June.
As for the pessimistic scenario, in the event of a satisfactory setback, the conditions for the month of May are expected to return from preventive measures and a deficit in medicines, vitamins, protective supplies, and an increase in the import rate by about 115%.
- How Efficient Business Contracts Can Boost Growth
- The Future of Digital Marketing: Key Trends and Strategies
- Why ATU Market Research Could Be Your Secret Weapon for Raising Brand Awareness
- Top 3 Challenges in Multi-Country HCP Engagements and How to Overcome Them
- The Role of Women in Healthcare Startups: Challenges and Opportunities
The study shows that the expected recovery during the period from September to next June is linked at this stage to the previous scenarios, in the case of the optimistic scenario that assumes the emergence of a vaccine for the disease and the absence of new strains of the virus, a cautious return to the sector will occur with the slowdown in the spread of the disease, the increase in the value of sales and exports and the return of imports to normal Gradually.
But in the case of the pessimistic scenario, which assumes the absence of a vaccine or the emergence of new strains of the virus and a satisfactory setback and a return to the previous stressful atmosphere.
It is expected that prices will rise and the stock of medicines will decrease again with the disruption of production movement, and a decline in sales and exports while the movement of imports continues to be normal.
The study emphasized that, unlike the sectors previously analyzed, the necessary measures to mitigate the crisis are clearly linked to the institutional weaknesses of the pharmaceutical industries, where the institutional weaknesses are divided into two types.
The first type is the institutional weakness that has already appeared with the change of the institutional framework of the administrative and control system, and the second type is an institutional weakness due to a chronic form of “price imbalance” that has existed for many years, the main dependence on imports and the irregularity of the pharmaceutical market in Egypt.
The study confirmed that there is a terrible overlap between the competencies and roles of each of the two bodies currently regulating the sector, which is a recent institutional system, namely the Egyptian Authority for Unified Procurement, Medical Supplies, and the Medical Technology Department, and the Egyptian Drug Authority (EDA).
Despite the importance of dealing with one authority, which was provided by the new organizational structure, However, it may be preferable to make a complete separation between the responsibility of the commercial part “with regard to pricing, export, etc.” and the technical part “regarding research, control, and others”.
The study pointed out that the new institutional form of the drug manufacturing management system is also responsible for distributing the drug, which is impractical for distribution at the level of the Republic, with the presence of about 75 thousand pharmacies at the level of the Republic.
It is difficult to achieve this through the unified procurement authority, and therefore, there There is an urgent need to deal with the recognized distribution companies to play this role, as they perform it through a special financial mechanism in dealing with pharmacies and a different financing method that is difficult to implement through direct dealing with the Ministry of Health or the unified procurement authority.
The study stressed that one of the urgent measures to be taken is to review the method of dealing with the unified procurement authority with medical devices and supplies, which it has been working with for two years, as the focus is on purchasing at reduced prices as the only goal in the purchase.
That causes the weakening of local investments as a result of their inability to achieving the requirements, and therefore the problem must be quickly rectified and solved so that the same type of problems with medicines do not recur.
The study called for expediting the preparation of detailed executive regulations for the new regulatory bodies to start their regular work, with specific performance standards to avoid monopolizing the decision and causing future harm to investors, and a clear control system on the performance of the two bodies, taking into account the views of “local and international” producers, whether pharmaceutical or medical supplies companies in In this regard.
In addition to regulating the relationship between the Ministry of Health and other concerned authorities, with clarification of the tasks and roles of the Ministry.
On the side of the measures required to treat the chronic institutional weakness resulting from drug pricing flaws, the study called for a review of the pricing system and to be guided by the experiences of other countries in this regard, so that certain categories “such as certain hospitals” are identified at reduced prices, but without generalizing these prices at the level of the Republic, because of what causes it.
This leads to the decline in the role of export in the pharmaceutical sector, given the strong correlation between the export price and the price in the country of origin, which calls for multinational companies to escape from the Egyptian export market and the research and development with it.
While it is necessary to encourage them and encourage the entry of research and development into the market, pointing to the need to review the position of local companies and identify their problems, whether with regard to pricing, import, export, or production.
With regard to the weaknesses of the main dependence on imports, especially the active ingredients and intermediate raw materials needed for drug production, the study called for a gradual easing of this dependence on imports by creating Egyptian distinction through more research and development in the field of medicines based on Egyptian medicinal and natural plants, especially with the global interest of this type.
The study pointed to weaknesses related to market irregularity, which mainly appears in the shortage of medicines and the disappearance of important items, especially in times of pandemic.
As 50% of the registered items are not available, and there are 4,000 items that were not originally produced despite their registration, and also the spread of Fake medicines or smuggled drugs, as the trade in fake medicines represents about 10% of drug sales in Egypt, which amounted to about 60 billion pounds in 2018, exceeding the global percentage estimated at 6%.
The study handled the impact of the coronavirus pandemic impact on the pharmaceutical industry in Egypt and stressed the need to take quick measures in a phased manner to regulate the pharmaceutical industry in Egypt to eliminate the two phenomena of drug shortages and the spread of fraudulent drugs, especially the disappearance of drugs in times of pandemic as a result of scrambling for certain items and causing their prices to rise.
If you liked this article, please don’t forget to share your thoughts and best with HBC in the comments and let us know your opinion about the impact of coronavirus pandemic on the pharmaceutical industry in Egypt. If you have valuable content to share on Healthcare Business Club you can publish your content for free and share your knowledge with all healthcare business professionals, send your articles to the HBC editorial team on [email protected] please don’t hesitate to contact us at any time.
