Who Owns Whom

The pharmaceutical industry in South Africa, like in many other countries, is made up of a mix of local and international owners. Over the years, multinational pharmaceutical companies have established significant presence in South Africa, with some establishing subsidiaries or partnerships with local companies.

This involvement has largely been in the manufacturing, distribution, and marketing of pharmaceutical products. While the local manufacturing of medicines contributes meaningfully to the economy, the pharmaceutical terrain favours financially strong players. COVID-19 vaccines brought this into sharp focus, with developing countries experiencing unexpected market challenges. Looking at the market caps, strategic trajectories, and the high-stakes game of pharmaceutical research, a complex picture emerges in South Africa’s pharmaceutical landscape.

Local and international ownership in South Africa’s pharma sector

Manufacturing medicines locally is positive for the local economy as it creates jobs and stimulates industrial activity. It also does away with the need to spend foreign currency to import, alleviating strain on the country’s trade and payments balance.

“In the South African pharmaceutical manufacturing context, we have observed that generic medications are produced locally more so than original branded pharmaceuticals. The local pharmaceutical manufacturing context faces noticeable challenges when it comes to capacity, cost and ensuring robust regulation, access and quality. While 60-70% of pharmaceutical products are produced locally, almost 98% of active pharmaceutical ingredients (APIs) are imported, and this results in capacity challenges.”

Etienne Dreyer, PwC South Africa healthcare consulting leader

The advances in research and technology to treat difficult and new diseases require deep pockets and long-term investments. A most recent example was the COVID-19 vaccine, where wealthy countries led the way in rapidly developing and producing vaccines. The same countries then bought up and administered those vaccines to their populations and even ordered boosters for already-vaccinated people. Meanwhile, many developing countries struggled to deliver even one dose to most of their populations. The perceived threat was so great that enormous resources were allocated with standard approval processes not followed.

The Biggest companies in the pharmaceutical industry

While the industry favours big players, they are not immune to the intricacies of this industry. Pfizer, as well as its rivals, experienced financial difficulties. The hoped for annual sales of the COVID vaccine did not materialise due to resistance to the new application of mRNA vaccine carriers. This led to about US$150bn loss in market value for Pfizer. In 2023, Bayer was in a similar predicament with an unsuccessful phase 3 trial of a new medicine, resulting in several billion euros of losses in market value, on top of its legal battles in respect of Roundup, a widely used herbicide.

Aspen, the second biggest local pharma, fought hard to get a production licence for the COVID-19 vaccine, only to now experience abysmal sales.

The market caps of the international players all range in the US$70bn (ZAR 1,330bn) to US$250bn (ZAR4,750bn), and if they discover a successful medicine, this value can jump, as is the case with Eli Lilly and its obesity drug, which saw the company’s value outpace Johson and Johnson to over US$500bn (ZAR 9,500bn) in 2023. In comparison, the two biggest South African pharmaceuticals’ current market values are US$8.9bbn (ZARZAR 169bn) (ZAR 89bn) and US$4.7bbn for Adcock Ingram and Aspen respectively.

Partnerships in the pharmaceutical industry

What seems to be driving pharmaceutical industries globally is the shift towards value-based healthcare and medicine, whereby there is coordination among healthcare professionals to ensure patients receive comprehensive and personalised care that meets their specific needs This forces the industry to improve the effectiveness of medicine and therapies to remain competitive.

Local and international players have started forging meaningful partnerships. This was accelerated by the Covid-19 pandemic which brought about triumphs and challenges for the industry. As the global industry evolves towards value-based healthcare, the need for evidence-based practice and decision-making remains. Evidence based medicines have been consistently linked to improved quality of care, patient safety, and many positive clinical outcomes in isolated reports according to the National Centre for Biotechnology Information (NCBI). South Africa can also benefit from the synergies between academic research and local pharmaceuticals to drive impactful research in this dynamic sector.

The contributions of multinational pharmaceutical companies are significant, despite the criticism leveled against them about drug pricing, access to medicines, and the potential influence of these companies on healthcare policies. Balancing the interests of multinational companies with the healthcare needs of the local population is an ongoing consideration for policymakers in South Africa and globally.

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