Healthcare Infrastructure: Developing R&D and manufacturing infrastructure in the life sciences industries
An issue that remains a continuing subject of literature and debate is accessibility, pricing and affordability of medicines in Africa.
Despite an abundance of healthcare policies in Africa, the actual delivery of care is impeded significantly by the lack of adequate healthcare infrastructure and the presence of inconsistent and incomplete regulatory and governance frameworks.
KPMG’s report ‘Curing the Ails of Investments in Healthcare in Africa’, for example, identified the most important challenges in the Zambian healthcare sector to be its chronic shortage of medicines, a changing disease profile, lack of healthcare infrastructure, poor financial management and a lack of effective governance structures. Another dimension complicating the conversation on access, pricing and affordability are the often high mark-up costs. According to IFPMA’s ‘Facts and Figures 2014’, these include distribution costs, import tariffs, port charges, importers’ margins, value-added taxes and high margins in the wholesale and retail components of the supply chain (in Tanzania, pharmaceutical manufacturers have to factor in a two percent pharmacy board fee for example).
A common theme to date in the literature has been the greater need than ever to cultivate a strong, ‘inclusive’ pharmaceutical manufacturing capability in Africa. In this respect, among KPMG’s ‘Examples of Excellence’, is Johannesburg based JSE Limited listed Aspen. Aspen, now one of the major producers of generic anti-retrovirals (ARVs) in Africa, made international headlines in 2003 when it responded to the opportunity to develop the first generic ARV drug manufactured in Africa (reducing costs of treatment from approximately $25,000 per patient per year in 2002, to $180 per patient in 2014). Aspen is now the fifth largest generic manufacturer globally, and has factories in Tanzania and Uganda, with revenue of over ZAR40 billion and a market capitalisation between $13-14 billion in 2014.
The development of substantial local manufacturing capacity is undoubtedly an important aspect of the debate. In this respect, for developers planning the design and construction of new R&D or manufacturing facilities in the region, regulatory compliance and managing the risk of time and cost overrun should be priority items on the agenda. What merits particular attention from a regulatory perspective is the concept of Good Manufacturing Practices (such as those set by the WHO) as part of the wider management system.
Directly connected with this, and in addition to more general requirements around product safety, are requirements around anti-contamination procedures and controls and accordingly the reliance that these place on so-called ‘clean room’ technologies’. The interface between these clean room technologies and the primary and secondary process infrastructure that they house creates particular issues to be considered when formulating contractual structures for the delivery of relevant process plant infrastructure. This feature has tended to move the life sciences process industries more towards a multi-contracting approach, since any single contractor may be unable or reluctant to assume a full integration risk between different process technologies particularly if the technology is novel. It is only with careful planning in the development and implementation of contractual structures used to facilitate delivery of process plant infrastructure that developers and investors in the life science industries can appropriately and effectively mitigate their exposure to time and cost overrun risk, and the losses and liabilities associated with regulatory non-compliance and plant underperformance.
Regulatory compliance and managing the risk of time and cost overrun should be priority items on the agenda for developers planning the design and construction of new R&D or manufacturing facilities in the life sciences industries.