South Africa - Battle Intensifies for Lucrative HIV/AIDS Drug Market

South Africa has one of the highest rates of HIV/AIDS infections in the world; according to latest government estimates, around 5.4 million people were infected by HIV, just over 10% of the entire population. The true picture could be even more widespread, as these estimates were derived using mathematical models based on surveys done on pregnant women.

The market for antiretroviral (ARV) drugs looks set to grow; after years of not addressing the severity of the problem, the government has now started to look at ways to increase the supply of these drugs via the public system.

In June 2009, president Jacob Zuma, in his first State to the Nation Address endorsed the establishment of a National Health Insurance (NHI) scheme. Zuma said the scheme, which aims to provide universal health for all South Africans, will be implemented in phases. There is little detailed information, at this stage, on how the scheme is to be implemented.

International tendering exists, but as Aurobindo, one of the world’s largest producers of generic ARV drugs found out, does not always work in favour international companies. The Indian drugmaker, in June 2009, announced that it plans to sue the government, on claims that it had lost out to local manufacturers in a R400 million (US$38.1 million) contract for ARVs, although its price was 30% cheaper on the tender.

The government increased prices by 5% in 2006, and 6% across 2007 and 2008, but the industry complained these increases were below the rate of inflation. In January 2009, prices were increased by 13.2% by the DOH, a move that was welcomed by the Pharmaceutical Industry Association of South Africa (PIASA), which said the increase helped combat increasing margin pressures experienced in 2008 due to mainly imported raw materials against a weakening local currency.

The government, although wanting to back the local industry with protectionist measures, could be tempted to procure more drugs from countries like India and China, who can provide a higher volume of drugs for the same tender price compared to local companies.

Further reading - An in-depth analysis of the South African pharmaceutical market, including some background information on HIV/AIDS infections in the country, is available from Espicom: The Pharmaceutical Market: South Africa (published June 2009)