Healthcare & Pharmaceuticals

Overview Saddled with a triple  disease burden – communicable (HIV/AIDS, TB), rising non-communicable (diabetes, cardiovascular disease, hypertension, cancer), and trauma (interpersonal violence, such as gunshot- and stab wounds)  – South Africa’s healthcare operates under  two systems: the public system, which caters to around 85  percent of the population, constituting roughly 48  percent of total healthcare expenditure with funding from the state (approximately nine  percent of GDP); and private healthcare, which looks after 15  percent of the population who can afford medical insurance. Both sectors offer a range of services from primary to more specialized healthcare, but more advanced, high-tech products and elective procedures are more commonly found in the private sector. South Africa is moving toward universal healthcare through a proposed National Health Insurance (NHI) scheme. Through NHI, the government will likely become the main procurer of health goods and services, as well as investing in the public healthcare system to improve infrastructure and access. NHI is being phased in with full implementation envisaged by 2026, but this will depend on funding and political will, among other constraints. The COVID pandemic will also have an impact on a timely NHI roll-out. The healthcare market in South Africa is highly complex and fragmented in terms of real purchasing power. Entry usually requires appointing a reputable and experienced distributor. The public sector is the biggest purchaser of healthcare equipment and supplies, particularly for primary healthcare.  Purchasing is devolved to each of the nine provinces that in turn publish their own tender notices, but the National Department of Health also issues tenders for national supply. Severe funding constraints make it difficult for public hospitals to maintain or purchase equipment. For now, the best prospects for advanced technology and equipment remain in the private sector. Hospitals in this sector are dominated by the big four hospital groups – Netcare Limited, Life Healthcare Group, Mediclinic Southern Africa, and the National Hospital Network. There are also a number of independent private hospitals. Around 78 medical schemes are in play in South Africa, 20 of which are open and the rest restricted. Discovery Health remains the largest open medical aid scheme, with an estimated 1.342 million members and 2.795 million beneficiaries (Council for Medical Schemes 2019/2020). All healthcare-related products must be registered with and evaluated by the South African Health Products Regulatory Authority (SAHPRA). All entities involved in the manufacture, distribution, import and export of healthcare products must be licensed by SAHPRA. Only authorized representatives resident in South Africa may apply for registration of products with SAHPRA. South Africa remains the largest pharmaceutical market in Sub-Saharan Africa. Total pharmaceutical expenditure was estimated to be $4.1 billion in 2019 and $3.6 billion in 2020 (2019, Fitch Solutions). Its prescription drug market is valued at approximately $3.0 billion (2019, Fitch Solutions), which equates to 88.7 percent of the total market in value terms but will drop in value due to prevailing market conditions. Should the National Health Insurance plan materialize, there could be rising demand for prescription generic drugs, improved healthcare infrastructure and access, as well as increased local pharmaceutical production of generics. Demand and spend in this sector, particularly as it relates to high value medicines, will likely be tempered, or entirely impeded by the economic recession and COVID-19 pandemic. There will continue to be emphasis placed on HIV/AIDS and TB treatment but over the long-term focus will also shift towards rising chronic disease burden – diabetes, cardiovascular disease, hypertension, and cancer treatments. The market for innovator/patented drugs is estimated at around $1.7 billion (2019, Fitch Solutions), equating to 51 percent of pharmaceutical sales and around 58 percent of prescription drug sales. Growth in this sector will be slower due to the associated high costs. Most innovator drugs are imported with main supply from India, Germany, United States, and France. Generic drugs, valued at $1.3 billion (2019, Fitch Solutions), are likely to see strong growth, both in terms of volume and spend, due to high demand and purchasing preferences (public sector), but also because of increased local production driven by government incentives and policies favoring local content. Over-the-counter-medicines represent the smallest segment of the market ($378 million). This segment is extremely competitive and much of it is driven by local production.  South Africa does not produce any Active Pharmaceutical Ingredients (APIs). All medicines, regardless of category (including dietary supplements), are subject to registration and evaluation by the South African Health Products Regulatory Authority (SAHPRA) which is guided by the Medicines And Related Substances Act, 1965:  https://www.sahpra.org.za/wp-content/uploads/2020/02/Government_Gazette_Medicines_and_Devices_Act_Jun_2017-1.pdf . Labeling compliance is also addressed in the Act. One of the outcomes of the COVID-19 pandemic and the resulting shortfall in vaccines for Africa is the recognition that South Africa needs to develop its own production hub to manufacture vaccines to mitigate the supply challenges posed by future pandemics. In mid-2021, the WHO announced that it is setting up an mRNA site in South Africa, which will produce COVID vaccines for the region. Digital Health The South African government has indicated that digital healthcare technologies will form an integral part of NHI in that it will strengthen healthcare systems, provide better access for patients, and improve health outcomes. To this end, they have published a National Digital Health Strategy for South Africa 2019-2024, prioritizing The development of a complete electronic record for patients (some form of this already exists) Digitization of healthcare systems business processes An integrated platform and architecture (open source/open architecture) for health sector information to ensure interoperability of existing patient-based information systems Growing health to promote coverage for target population groups. Developing and growing digital health knowledge for implementers and users High data costs, low connectivity density and inadequate ICT infrastructure will need to improve significantly for the successful implementation of the strategy. Adequate funding for this initiative will be key to its proper and timely implementation.  Due to the high number of mobile phones, and increasingly, smart phones, several health initiatives, like MomConnect at http://www.health.gov.za/momconnect/ – a public/private partnership, have proven very successful. Opportunities The underdeveloped market offers