Merchant Capital

How The Pharmaceutical Industry Is Set To Rise In South Africa

The global pandemic amplified the vital role played by the pharmaceutical industry and revealed huge potential for local growth. South Africa is a forerunner in the antiretroviral program and one of the world’s largest producers of radiopharmaceuticals. In recent years, the industry has been growing at a local level with the production of COVID-19 vaccines in addition to medications for the local market. So where is the local pharmaceutical market headed? All reports point upwards.

A positive forecast

According to Fitch Solutions, due to our sizable population, NHI initiatives, large private sector and private/public partnerships, our healthcare system is receiving more and more investment and is likely to grow. This growth will take place steadily over the next five years with an annual compounded growth of 6,7%, reaching R643.5bn by 2025. With a strong healthcare market, South Africa will be seen as highly attractive to patented drug markets in Sub-Saharan Africa. Currently, South Africa is the only Sub-Saharan African market where patented medical sales make up a greater proportion of the prescription market than generic medical sales. The reason is that our well-established local manufacturing industry is highly attractive to investment both locally and internationally. Further to this, our regulatory bodies are strong, when compared with regional associates. 

New opportunities

Going forward though, the scales are likely to tip from the patented drug sales, towards generic ones. And it is in the generic medication sector where there will be the greatest opportunity for commercial growth. This is linked to how a mandatory offer of generic substitution was introduced in South Africa in 2003 which stated that interchangeable medication be offered to contain high expenses associated with patented medications. From that point onwards, a pharmacist is obliged to offer the generic form of any medication, and then the patient can choose to accept or refuse it. This call has caused patented drug shares to fall from 64,5% of total prescription drugs in 2013,  to 56.7% in 2020 and will drop to around 45% in 2030. Here we can clearly see how generic medications will soon dominate the market and here lies the opportunity in this sector. 

The bottom line

Post pandemic economic recovery is closely tied to partnerships between local and international players. With foreign investment in the local pharmaceutical industry, together with opportunities in generic drug development, the industry will really expand locally in the coming years. 

To fund your pharmacy’s next ambitious growth strategy, contact Merchant Capital today.  

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