West and Central Africa Pharmaceuticals and Healthcare Report Q4 2012
BMI View: We hold to our view that Cameroon’s medium-to-long-term drug market expansion potentialremains highly dependent on the country’s economic growth and is strongly linked to rising income andgreater consumer purchasing power. We see Cameroon enjoying above-trend real GDP growth for thenext several years as new oil production and a set of major new investments give a temporary boost to theeconomy. However, the government has limited funds to make the investment needed to improve thehealthcare sector. In the meantime, private out-of-pocket expenditure will have to be sufficient to supportelevated growth rates in the pharmaceutical market. Irrational consumption of pharmaceuticals,counterfeit medicines, the very price-sensitive consumer, the prevalence of informal distribution channelsand competition with traditional healers will be key challenges for drugmakers in the country.
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Headline Expenditure Projections
Pharmaceuticals: XAF106.7bn (US$226mn) in 2011 to XAF114.8bn (US$222mn) in 2012;+7.5% in local currency terms and -1.6% in US dollar terms. 2011 calculated growth reviseddown, 2012 forecast lower from Q312 due to macroeconomic factors.
Healthcare: XAF643.0bn (US$1.36bn) in 2011 to XAF695.5bn (US$1.37bn) in 2012; +8.2% inlocal currency terms and -1.0% in US dollar terms. Forecast broadly unchanged in localcurrency terms, weaker in US dollars.
Risk/Reward Ratings: Within the 30-country MEA region, Cameroon is 26th in the table, holding steadyin our latest RRR assessment. Cameroon remains near the bottom of the MEA markets assessed by BMIand is therefore one of the least attractive propositions to multinational drugmakers in BMI’spharmaceutical universe. Cameroon scores 34.5 out of 100 in BMI’s proprietary RRRs system. Itsindustry and country risk profiles weigh most heavily on its overall performance.
Key Trends And Developments
In May 2012, Roche signed a memorandum of understanding (MoU) the Camerooniangovernment to reduce the cost of treating hepatitis C. The cost of drugs has been reduced by33%, said the president of the Cameroon Network against Viral Hepatitis, Oudou Njoya.According to the MoU, the number of times patients come for treatment every month has beenreduced by 50%. The price of the ribavirin injection has been cut from XAF159,000 (US$308.4)to XAF106,000 (US$205.6).
In May 2012, a three-year programme to improve access to pharmaceuticals services has beenlaunched in Cameroon. The US$3.5mn project, announced by Minister of Public Health AndréMama Fouda and US ambassador to Cameroon Robert P. Jackson, involves financial assistancefrom the US government and is part of a USAID programme called Systems for ImprovedAccess to Pharmaceuticals and Services (SIAPS). SIAPS will work with the ministry through theDirectorate of Pharmacy, the Central Medical Stores, the regional departments for stockingdrugs and the National AIDS Control Committee, Jackson said. He said the programme willsupport the National AIDS Control Programme to meet the proceeding conditions for round 10of Global Fund grants.
BMI Economic View: A surge of investment and new exports should boost growth to an average of5.4% through 2015, while improved infrastructure will marginally raise the longer-term growth rateabove the 3.3% trend. Risks are primarily to the upside, with oil production potentially exceedingexpectations in 2012. We see Cameroon enjoying above-trend real GDP growth for the next several yearsas new oil production and a set of major new investments give a temporary boost to the economy. Ourprojection is for growth to climb to 4.3% in 2012, 5.6% in 2013 and then hold at 4.9% in 2014 and 2015.This compares favourably with 2011's estimated 3.7% and the 2001-2010 average of 3.3% per annum.Furthermore, the short-term risks are to the upside.
BMI Political View: The decision by Cameroon's government to increase fuel subsidies by XAF400bn(US$760mn) is a surprising reversal of policy and a troubling sign that the state may be backtracking onnecessary reforms in the lead-up to a legislative election in February 2013. The subsidy increase, whichrepresents 14.3% of state spending, will redirect funds needed for infrastructure improvements.Rewards
Cameroon’s score is stable in our latest Q412 assess after weakening in our Q312 ratings, a score of 30for industry rewards to reflect a slightly moderate growth outlook, still trailing the regional average scoreof 40. This category is a measure of the size of the market and its potential for growth. The size ofCameroon’s pharmaceutical market is comparable to many of its closest neighbours. Per capitaexpenditure is extremely poor compared to developed states but not dissimilar to other markets in theregion. The outlook for growth is elevated and relatively stable.
Cameroon scores relatively favourable in our country rewards indicator with a rating of 63, just above theregional average of 61. The split between urban and rural residents is not particularly attractive, nor is thesize of the pensionable population, which is low. The most attractive indicator in the country rewardscategory is favourable population growth, which should lead to increased sales over the longer term.
Cameroon scores poorly in our industry risks indicator, receiving a score of just 23, considerably belowthe regional average of 37. The government’s limited involvement in the provision or funding ofmedicine is unfavourable. The lack of control of medicine distribution is also discouraging.More positively, Cameroon’s WTO membership and its steps to implement the Agreement on TradeRelated Aspects of Intellectual Property Rights (TRIPs) benefit the assessment of the country’sintellectual property (IP) regime. Less positively, in Transparency International’s 2011 CorruptionPerceptions Index, Cameroon was 134th, with Syria above it and Eritrea below.
Cameroon’s country risk profile weighs heavily on our overall assessment. It scores 37 for this indicator,which is some way behind the regional average of a more respectable 52. This highlights the weakness ofthe local legal framework and the level of bureaucracy and corruption. However, the economic andpolitical continuity scores are relatively favourable.
BMI View: A lack of domestic pharmaceuticals manufacturing facilities means that Côte d'Ivoirecontinues to depend upon pharmaceutical imports to meet domestic demand, with France, Morocco andTunisia providing the majority of imported drugs. The government did attempt to boost the healthcaresector, by hosting a pharmacy exhibition in May 2012, and has launched campaigns to encourageIvoriens to comply with national vaccination and healthcare campaigns. BMI forecasts that healthcareand pharmaceutical expenditure as a percentage of GDP will decline between 2011 and 2016, and thatCôte d'Ivoire will not fufill its potential over the medium term. Security concerns persist, as illustrated bythe July 2012 attack on a camp of internally displaced citizens.
Headline Expenditure Projections
Pharmaceuticals: XOF170.3bn (US$360mn) in 2011 to XOF180.8bn (US$369mn) in 2012;+6.2% in local currency terms and +2.5% in US dollar terms. Historic data revised downwardsmarginally from Q312 due to new imports data.
Healthcare: XOF571.6bn (US$1.21bn) in 2011 to XOF601.7bn (US$1.23bn) in 2012; +5.3% inlocal currency terms and +1.6% in US dollar terms. Forecast revised downwards slightly fromQ312 due to new historic data.
Medical Devices: XOF19.25bn (US$41mn) in 2011 to XOF20.66bn (US$42mn) in 2012;+7.3% in local currency terms and +3.6% in US dollar terms. Forecast revised downwardsslightly compared to Q312.
Risk/Reward Rating: In Q412, Côte d'Ivoire kept its position in the penultimate rank in BMI's RRRs forthe MEA region, although its overall score remains at 28.0 out of 100, significantly below the regionalaverage of 44.2. Côte d'Ivoire only outranks Sudan in the table and is just under 2pp behind Zimbabwe.
Key Trends And Developments
Health Minister N'Dri Yoman launched a national child polio vaccination programme in May2012. The WHO and Rotary International have provided funding for the scheme.
In June 2012, Health Minister N'Dri Yoman launched an electronic vaccinations card, which thegovernment aims will increase compliance with vaccinations campaigns, as well as a mother andchild health card.
President Alassane Ouattara met with Chinese private business owners in July 2012, indicatingthe Ivorian government's intention to increase international investment as a means of boostingeconomic recovery.
BMI Economic View: Côte d'Ivoire continues on its road to economic recovery, and advances towardspeace are boosting the confidence of potential investors. Moves such as the President's meetings withrepresentatives from China's business community are a positive development. We are now forecastingreal GDP growth of 8.1% in 2012 and sustained growth of between 4% and 5% until 2021.
BMI Political View: Violence following Côte d'Ivoire's 2010 election killed over 3,000 people, andfollowing the arrest of former president Laurant Gbagbo, we see many reasons to be positive about thecountry's political development. While the situation is still fragile – as attacks on a camp of displacedpeople in July 2012 illustrate – BMI predicts a gradual return to political stability.
BMI View: The attractiveness of Gabon’s healthcare sector to pharmaceutical companies and medicaldevice manufacturers has decreased, albeit slightly, for the second consecutive quarter. Expendituregrowth rates are lower, due to a less optimistic outlook for the economy, which is failing to fufill itspotential, despite a stable political regime.
Headline Expenditure Forecasts
Pharmaceuticals: XAF63.7bn (US$135mn) in 2011 to XAF68.3bn (US$132mn) in 2012;+7.2% in local currency and -2.1% in US dollar terms. Forecast down slightly compared withQ312 in local currency and US dollar terms, due to lower macroeconomic projections andan expected weakening of the Central African CFA franc.
Healthcare: XAF256bn (US$542mn) in 2011 to XAF284bn (US$551mn) in 2012; +11.2% inlocal currency and +1.6% in US dollar terms. Forecast down slightly compared with Q312 inlocal currency and US dollar terms, due to updated historic data and the forecastweakening of the franc.
Medical Devices: XAF11.1bn (US$24mn) in 2011 to XAF12.1bn (US$23mn) in 2012; +8.8%in local currency and -0.6% in US dollar terms. Forecast down slightly compared with Q312in local currency and US dollar terms, due to lower macroeconomic projections and anexpected weakening of the franc.
Risk/Reward Rating: Gabon’s pharmaceutical risk/reward rating (RRR) has decreased from 41.5 out of100 in Q312 to 40 in Q412. This drop was due to a downward revision in the pharmaceutical marketgrowth forecast, from 8.1% compound annual growth rate to 6.7%. This downgrade in our expenditureprojection was itself due to a less optimistic macroeconomic outlook. The drop in Gabon’s RRR scoremeans the country’s pharmaceutical market is now the 20th most attractive in the Middle East and Africaregion. Previously, it had been ranked 19th.
Key Trends And Developments
In July 2012, it emerged that the number of diabetes cases in Gabon had almost trebled from2,300 cases five years ago to approximately 6,000. A local endocrinologist recommendedimproved prevention and management strategies, in both urban and rural areas. Thisdevelopment highlighted the evolving disease burden in Gabon, and potential commercialopportunities for diagnostic manufacturers and producers of diabetes therapeutics.
Also in July 2012, the National Communication Council banned the advertisement ofprescription drugs on television and radio. This demonstrates the improving pharmaceuticalregulatory regime in Gabon.
July 2012 also saw the publication of a report by the Gabon Department of Health that revealedthat 32 new cases of leprosy were reported in 2011. This represented a decline from the 40 newcases detected in 2010. However, there are still 10,000 lepers in the African country.
In July 2012, the Caisse National d’Assurance Maladie et de Garantie Sociale (CNAMGS) waspresented with an award in recognition of introducing mandatory health insurance in 2007. Thescheme has improved key health indicators and the reduced the costs of many medical services,such as pharmaceuticals in pharmacies.
In June 2012, it was revealed that 63,000 people in Gabon were infected with HIV in 2010. Thisequates to a very high prevalence of 4.3%. In that year, there were 6,000 new cases of thedisease and 2,000 deaths. We expect more funding to be allocated to prevention and treatmentstrategies, with particular commercial upside for manufacturers of antiretrovirals.
BMI Economic View: On a May 2012 visit to London, Gabonese President Ali Bongo Ondimbaelaborated on the 'Emerging Gabon' initiative that he hopes will develop new industries to replacedeclining oil revenues. BMI believes that the country's financial markets will not be capable ofsupporting the complex financial instruments with which the president plans to fund his developmentprogrammes. We remain pessimistic on Gabon's long-term growth prospects, but flag iron ore mining haspotential.
BMI Political View: The Gabonese Democratic Party (PDG) of President Ali Bongo Ondimba has wonall six seats contested in by-elections across the country. The poll was called after a judge found thatresults from the December 2011 legislative election were unreliable due to fraud. Foreign observersbelieve that the last election was systemically biased in favour of the president's party, and mostopposition parties boycotted the election. The results now give President Bongo's party, which has ruledthe country since independence, 114 of 120 seats in Gabon's national assembly.
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