Uganda Pharmaceuticals and Healthcare Report Q3 2012

BMI View: Economic growth and the resulting increase in Uganda's middle-class population will lead to rising demand for quality healthcare services as incomes improve. Investment into private healthcare facilities in Uganda in order to meet the demand for services is therefore an advisable business strategy and should be a key component of the hospitals' business models.

Headline Expenditure Projections • Pharmaceuticals: UGX676bn (US$268mn) in 2011 to UGX758bn (US$317mn) in 2012; +12.2% growth in local currency terms and +18.5% in US dollar terms.

• Healthcare: UGX2,842bn (US$1.13bn) in 2011 to UGX3,288bn (US$1.37bn) in 2012; 13.6% growth in local currency terms and 16.76% in US dollar terms.

Risk/Reward Ratings: In BMI's Q312 BERs, Uganda is ranked 24th in the Middle East and Africa (MEA) region. A sizeable counterfeiting industry, poor healthcare funding, corruption, regulatory environment deficiencies and a number of other issues will conspire to keep Uganda in a similarly low position in the MEA matrix over the coming months. Nevertheless, we believe the Ugandan pharmaceuticals and healthcare market presents significant revenue earning opportunities for drug companies. Growth in the sector will be boosted by strong demographics, increased healthcare needs, longer life expectancy, greater healthcare spending in the public and private sectors and improved access to health facilities. Furthermore, in addition to an increase in the healthcare services provided by the government, we note that there is also a growing demand for health services by the population due to a growing awareness of preventative healthcare.

Key Trends And Developments

The prevalence rates and deaths caused by malaria in Uganda have reduced quite substantially as compared to five years ago, according to local media, citing Myers Lugemwa, team leader for the malaria control programme. With more than 320 deaths every day, malaria has been termed as the number one cause of sickness and death in the country over the last few decades, but some districts have reduced fatalities by more than 80%. The ministry of health spends 10% of its budget on the deadly disease.

In April 2012, the Ugandan National Drug Authority (NDA) reported a rise in counterfeit malaria drugs in recent years, according to Kate Kikule, the head of drug inspectorate services. Malaria drugs account for 20-30% of the counterfeit market. Counterfeit drugs, mostly from China and India, are becoming difficult to monitor due to technical advances by the producers, Kikule said. Counterfeit detecting machines have been provided to the NDA by Pfizer. A survey by the World Health Organization in 2007 found 20,000 people die every year worldwide after consuming fake medicines, especially malaria pills.

In April 2012, it was reported that India-based hospital group Apollo, one of Asia's largest healthcare chains, is to set up a clinic and an information centre in Uganda. The company aims to provide patients in Uganda with specialised healthcare treatments that they would normally seek outside of the country – including in open heart surgery, kidney and liver transplants, orthopaedics and cancer care. The company is also looking to establish a telemedicine network in Uganda in order to enable medical personnel to access more knowledge in their field through a training and exchange programme.

BMI Economic View: We have revised down our 2012 Uganda economic growth forecasts, to 6.2% from 7.1% previously, on the back of evidence that high inflation and tight monetary policy will keep both investment and consumption subdued. We continue to expect robust real GDP growth once oil revenues come into play, in 2014-2015.

BMI Political View: The public unrest seen in 2011 is set to continue, and perhaps intensify, in 2012. Although inflation has begun to come down, there is still widespread discontent over the rising cost of living, and tight monetary policy has put enormous strain on businesses by increasing borrowing costs. Meanwhile, the long-awaited resolution to the government's dispute with Tullow Oil appears to have been reached.