Dispensing with high prices: Antiretrovirals for 2013 and 2014 will cost South Africa R5.9-billion. (Stuart Price, AFP)
South Africa's ambitions of producing its own antiretroviral (ARV), malaria and tuberculosis drugs have taken a knock, with its private sector partner, Lonza Pharmaceuticals, pulling out of Ketlaphela, the public-private partnership intended to produce local ingredients for pharmaceuticals.
The Cabinet this week approved the search for new technology and investment partners.
The country has one of the highest HIV infection rates in the world, with nearly six million people infected, according to the Joint United Nations Programme on HIV and Aids. According to the health department, there are 1.9-million people on ARVs in the public sector.
Last year, Health Minister Aaron Motsoaledi announced that the two-year ARV drug tender for this year and next year would cost R5.9-billion, which is more than R2-billion cheaper than the previous tender, mainly thanks to government negotiations for lower prices for the new all-in-one ARV pill it introduced in April. The main suppliers are the global pharmaceutical companies, Mylan, Cipla and Aspen.
Ketlaphela's aim is to establish a pharmaceutical manufacturing plant at the South African Nuclear Energy Corporation's (Necsa's) Pelindaba campus to produce active pharmaceutical ingredients (APIs), which contain fluorochemicals and make a specific medication effective. APIs account for 50% to 70% of the cost of ARVs.
APIs are contained in all drugs, whether cough syrup or ARVs, but are formulated in different ways depending on the drug they will be used in. Up to 15% of the drugs that have been commercialised in the past 50 years contain fluorochemicals, which can be derived from the mineral fluorspar. South Africa has the largest reserves of fluorspar in the world and most of the production is exported.
Feng Zhao, from the African Development Bank, recently said at a health meeting in Botswana that some countries, such as Ethiopia and Uganda, spend up to half of their health budgets on importing expensive medicines, and that many pharmaceuticals could be produced locally at significantly reduced costs. Uganda has started producing malaria medication and Mozambique is planning to set up facilities to produce ARVs.
By producing its own APIs, South Africa's could curb foreign imports and save the government money, as well as securing supply. For example, if the ARV tender for 2013-2014 was R5.9-billion and APIs account for 50% to 70% of the cost, then the government could dramatically reduce its R3-billion to R4-billion API bill.
Ketlaphela, a Sesotho word meaning "I will survive", is a joint venture between the Industrial Development Corporation (IDC) and Pelchem, a subsidiary of Necsa and the only producer of fluorochemicals in the southern hemisphere. The project also involves support from the department of science and technology, which is leading the process; the departments of health, trade and industry, economic development and energy; and the treasury.
Developing an industry
The project was more than simply setting up a manufacturing facility, Pelchem managing director Petro Terblanche said on Wednesday. It was about developing an industry.
According to the department of trade and industry, the medical goods sector, which includes pharmaceuticals, medical devices and medical diagnostics, is the fifth largest contributor to South Africa's trade deficit, with pharmaceuticals responsible for a trade gap of R20-billion in 2011.
The partnership formerly involved Swiss pharmaceutical company Lonza, which had "made a strategic decision to reduce its footprint in small chemicals manufacturing", Terblanche said. "It is a disappointment for us; it was a strong partnership and a clear pathway to market."
Last year, Lonza retrenched about 500 employees but at the time denied that its restructuring would affect its South African plans.
But Lonza was not the only company in the world with the technical skill required for the project, she said. In fact, the department of science and technology's deputy director general for research, development and innovation, Val Munsami, noted that China and India are the only suppliers of generic ARV APIs, with four World Health Organisation-certified manufacturers in India and two in China.
Lonza's withdrawal does change the project's targets, though. Its cost was initially projected to be R1.6-billion, with production expected to start in 2017. When former science and technology minister Naledi Pandor announced the initiative last year, she said that various state institutions, including the IDC, would fund a capital investment of R1-billion, with Pelchem contributing R100-million and Lonza R500-million.
Munsami said that the new partner would also be expected to invest in Ketlaphela. When asked how the partner change would affect the total project cost, Munsami said that it would depend on the technologies used, but maintained that it would still be in the region of R1.6-billion.
The request for information would be published on Friday, and the closing date would be on June 14.
"Local and international experts will be utilised to evaluate the proposals … [and] it is envisaged that the final announcement with regard to a new partner will be made in September," he said.
Asked whether the project was considering a local or a foreign company, he said the partner could be "a South African company with an international partner, or just an international pharmaceutical company".
"The responses to the request for information will be evaluated on the proposed commercial offering, the proposed technologies that will be transferred, experience with regard to API manufacturing, the financial soundness of the company, and the proposed business structure," Munsami said.
However, the importance of Ketlaphela for Pelchem and its partners had not changed, Terblanche said. Securing the supply of cost-effective ARVs in South Africa was vital.
Phase one of the project would focus on supplying APIs for ARVs and "subsequent phases will focus on other communicable and noncommunicable diseases", the department of science and technology said.
The pharmaceuticals industry is also being targeted as a growth area for economic development and employment.
The department of science and technology said: "With Ketlaphela, the country will establish local manufacturing capacities, including skills for the development of the active ingredients of the most needed drugs and to support the critical requirement of having national in-house production …
"Expected to be constructed at Pelindaba, the project should create more than 1600 direct and indirect jobs."