PHARMACEUTICAL INDUSTRY IN LESOTHO

1. HISTORY:

Lesotho is a landlocked country within the Republic of South Africa, with a population of 1.8million; economically classified as Least Developed Country (LDC).

Being surrounded by South Africa influences business practices in Lesotho. In the pharmaceutical sector, decisions were taken in 1977 to protect citizens against drug shortage in the event that the then South Africa should close its borders with Lesotho. The decision to have a “National Drug Stockpile Organization (NDSO)” was a direct response to this observed threat. This organization had the mandate to buy and literally stockpile drugs. However, if the borders were to close, the drugs would soon run out anyway. So, along with that decision, was the decision to manufacture drugs within the country. This gave birth to the Lesotho Dispensary Association (LDA). The two organizations were for all intents and purposes government owned; situated on the same premises in a small southern town of Mafeteng.

In 1987 the NDSO’s purpose was revisited and translated from a stockpile organization to a “service” organization, thus keeping its acronym of NDSO. The dispensary association’s purpose was radically changed from being a non-profit drug manufacturing company to a business corporation called Lesotho Pharmaceutical Corporation (LPC).

Back in 1987 the drive for GMP certification was lacking and this gave LPC both its glory and its downfall. The corporation enjoyed markets within the SADC region and as far north as Eritrea and Somalia. Interesting markets were those of the South African “Bantustans” whose drug purchases were not regulated from Pretoria! They brought healthy business to LDA/LPC. The advent of a “small country totally surrounded by South Africa and running a completely Lesotho owned company” was a great marketing line for the LPC team. It also had the advantage that economic sanctions against South Africa meant limited significant competition. The major local client NDSO was managed by LDA/LPC. There were thus no marketing costs to sell to this client, also being on the same premises meant no transport cost. Prices to NDSO were set by the management of LDA/LPC. Those were the glory days. Staff that worked in the company enjoyed truly corporate respect. Visitors to Lesotho invariable would be treated to an outing in Mafeteng. The “chink in the armour” - this did not put pressure on LDA and its successor LPC to get a GMP certificate. The products were good. Recipient countries tested them, were satisfied with the quality, and kept their loyalty. Clients loved in particular the anti-TB drugs (Ethambutol, Isoniazid, Pyrazinamide, Rifampicin, in single compounds and combinations). Even the South African patients from the non-Bantustan areas accessed these, following the regulation that a patient could obtain and import small amounts of drugs as per prescription.

A second factor in the glory days, that turned to be the very weakness of the company, was the absence of a Drug Regulator. The process taken to distribute locally and export the drugs was not hampered by regulatory procedures.

1 However, the glory days vanished with the release of our dear Mandela from prison in February 1990. South Africa became democratic. Bantustans were eliminated. Regulations applied across all South Africa. Pretoria had put in place a good Drug Regulatory System by then. This now was taking care of all outlets of drugs, including those that were good customers of LPC. No hospital could buy drugs from any company that did not have a GMP certificate. LPC markets shrunk almost overnight. At the same time, markets north of South Africa were developing their Regulatory Authorities, and they lost the ‘awe’ of the “poor country enclosed by an unfriendly neighbour”. The ground was leveled for marketing drugs, and - LPC was not ready! Efforts to upgrade the plant to GMP status proved very expensive. Partnerships were tried but no efforts bore fruits. Sale of the company was tried but no successful negotiations between potential buyers and the government were realised.

Within Lesotho, at the end of 1999 NDSO was delinked from LPC. This instant market now required that LPC participates in tenders and fight for sale of its lines at competitive prices. As part of the delinkage, LPC was accorded a 15% local preference. However, even this 15% was not enough to protect the company against multinationals from India.

The many factors working against LPC left it in serious financial difficulty. The owner, the government of Lesotho, was approached to assist with funds to upgrade the facility of GMP status. In May 2003 the government granted LPC M8 million (approximately $800,000) for the GMP upgrade, as requested by LPC Management. Unfortunately the calculations made gave too low a figure for any significant change, and the result was still a non-GMP compliant LPC. Financial stress thus plunged the company into deeper trouble. Further requests to government to bail out the company with a grant for operational purposes were not entertained.

In 2007 the government took the decision to close the company. A sad ending, however …..

2. OPPORTUNITIES:

This was now opportunity for potential manufacturers to start something that would be built on current Good Manufacturing Practices.

Lesotho has opportunities like straight out of the book:

 Being an LDC, it is candidate for the TRIPS flexibilities (albeit until 2021);

 It has a relatively stable political and labour set up;

 Literacy rate is 83%;

 It has easy access to foreign exchange for purchase of APIs;

 Business taxation is more attractive than most countries;

 The country is a member of SADC and SACU;  As a member of SACU, the country enjoys both SACU benefits as well as LDC exemptions;

 South African harbours are within reasonable reach (Durban being 6 hours drive from the capital);

 International organizations still play a big part, in particular procurement agencies like Global Fund;

 HIV prevalence is at 23.6% - the second highest in the world (as per July 2014 statistics), a crisis for the country, and opportunity for industry;

 TB statistics place Lesotho fourth in the world;

 Pharmaceutical Technologists and Pharmacists are trained in-country.

With these opportunities, how has Lesotho positioned itself to take advantage of them?

3. CURRENT STATUS:

Unfortunately, these opportunities have not been tapped effectively. Most companies that were set up after the closure of LPC went for the cosmetic manufacture in preference to drugs. With the closure of LPC was the termination of production of a cosmetic line LDA Hand & Body Cream that was very popular and what had kept LPC afloat towards the end. Thus companies that manufactured cosmetics took opportunity of the gap created by the absence of the LDA Hand & Body cream.

One company, Tripharm, which had been set up as a Wholesaler in the late 80’s, had started cosmetic manufacture before LPC was closed. It now has expanded into drug manufacture, although still very small scale, manufacturing medicated creams.

The LPC itself was sold to a Chinese consortium which, up to August 2014, has not started to manufacture drugs. A few private companies buy finished products and sell to NDSO and pharmacies, accessing the procurement preference for local companies.

A new manufacturing trend has appeared on the scene – concoctions of drugs that are sold on the streets in large quantities. These concoctions seem (and claim) to be plant based and are sold for almost all kinds of diseases.

With this poor picture of current status, related issues that impact strongly on the observed status ….

4. LEGISLATION AND REGULATORY STATUS:

For the drug industry to operate it needs an enabling legislative environment. Unfortunately Lesotho started late to address this issue. The Bill that will set up the Drug Regulatory Authority has yet to be

3 passed by parliament. Regardless, the pharmaceutical directorate at the Ministry of Health has set up a Regulatory office to monitor movement and quality of drugs circulating in the country. This office is starting to make its mark in the country.

4.1 Drugs of Abuse Bill

The Drugs of Abuse Bill seeks to bring Lesotho’s drug laws in line with the following international drug conventions: the 1961 Single Convention on Narcotic Drugs and its 1962 Protocol; the 1971 Convention against Psychotropic Substances; and the 1988 United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances; and is set up to repeal the Dangerous Medicines Act (No 21 of 1973).

4.2 Pharmaceutical testing

In 2011, the Pharmacy Department at the University started testing cosmetics manufactured in the country and drugs imported. Products come from manufacturers themselves for purposes of getting a stamp of authority to sell in country and export. The Regulatory office has been encouraging this. Thus to obtain some competitive edge most cosmetic companies comply. Pharmacies that import directly from outside the country (not via NDSO) have started doing spot checks of their drugs at the University laboratories. This is still at a small scale but has the impact that companies selling drugs into Lesotho have to be extra careful of the quality of their products.

5. PERSONNEL:

The country has been training Pharmacy Technologists at the National Health Training College, since 1988. It trains Pharmacists at the National University of Lesotho, since 2003. This has boosted personnel availability.

At the end of 2013 the number of qualified pharmacists was just over 250, working in government, community pharmacies, NGOs, academic institutions and some have been engaged in Botswana and Swaziland private and public sectors. In 2009 the group decided to resuscitate its ailing Pharmaceutical Society. It has since been working on its Strategic Plan which it adopted in January 2012; key to the Strategic Plan is - close relationships with government structures. This provides good platform for influence. At the end of 2013, the Pharmaceutical Society of Lesotho (PSL) had gained recognition as the advocacy body for pharmacists in the country, but with still a long way to go to actually have impact in the government structures.

6. FINANCE TO SUPPORT DRUG MANUFACTURING: With the scenario painted thus far, small pharmaceutical companies should now be manufacturing drugs in Lesotho. However, start-up capital is probably the biggest stumbling block frustrating a few companies now. As graphic illustration of this, we shall look at the short history of PharmLegacy, a company set up in 2007 in response to the vacuum left by the closure of LPC.

In 2007-2008 PharmLegacy was a member of the consortium GlobaPharm whose objective was to build a new LPC after the closure of the former company. To achieve this, the consortium engaged companies from Germany, USA and Kenya; companies who had the skill, WHO prequalified formulations, research and development track record and the will to be part of a larger consortium to manufacture much needed drugs in Lesotho and the sub-region. Much as the external partners could raise their part of the needed finances, the challenge for both PharmLegacy and GlobaPharm was capital. The consortium engaged government so as to have some collateral for fund raising. As does happen in industrial ventures where government comes in, the negotiation processes dragged out so long that the process was lost somewhere on the line. The new LPC was never built! GlobaPharm consortium disbanded. PharmLegacy still only operates its small business of buying and selling OTC medicines and nutriceuticals. Its vision though is still to have a small drug manufacturing plant, starting with bulk packing.

Thus the question remains – how do small start-up companies access financing?

7. TO MANUFACTURE LOCALLY OR NOT TO MANUFACTURE – THAT IS THE QUESTION:

The other question that is always asked when local manufacturing is considered is – to import finished products or manufacture locally. Arguments are always put forward for both sides. On this issue, two opposing priorities come into collision:

• Government must increase access of drugs for its citizens – low prices, readily available, with the right quality and quantity.

• Manufacturers need to get return on their investment; thus they will be driven to manufacture drugs that are needed in large quantities.

• Government must provide drugs even for the few patients with the odd disease, still at as low a price as they access.

• Manufacturers need the numbers, thus need cross-border agreements in order to reach as many people in the region as possible.

• It is governments that negotiate for cross-border agreements.

• At the same time, government needs the foreign exchange that exports bring, the more the exports, the higher the foreign exchange.

5 To answer the question – to manufacture locally or import – the two parties have to come to the table and bring the best of both sides for the overall health and economic benefit.

At the end of the day, in Lesotho, the thought that brought about the setting up of LDA and NDSO still has merit. Locally produced pharmaceuticals are easier to control for quality and supply. The skills imparted from one generation of professionals to the next contribute massively to the overall economic independence. To overcome the challenge of economies of scale – companies in the region can collaborate in terms of segmenting the categories or groups of drugs to manufacture. Then each company accesses as much of the regional population for markets as its muscle can afford. Using the approach of regional collaboration, local manufacture becomes an opportunity and not a challenge.

8. WAY FORWARD UNDER REGIONAL COOPERATION:

Key goals for cooperation:

 GMP compliance and WHO prequalification. Any drug manufacturing company must start with the vision to be GMP compliant. This is not an option but has to be done. After some years of business, with the right partners, the company may explore WHO prequalification on one or more of its lines. Universal Corporation in Kenya got its WHO prequalification after about 6 years in business. Varichem in Zimbabwe similarly did it after a few years in operation. A pharmaceutical company in Lesotho can do it, with the right passion, knowledge and skills.

 Training of personnel for the above requirements. In this respect, the Southern African Generic Medicines Association (SAGMA) is already in the process of organizing training sessions for its members in partnership with donors, mainly UNIDO.

 Regulatory framework: political will – this needs to translate to action by passing all the necessary outstanding Bills in parliament.

In addition, mutual recognition of registration requirements, in the SADC region at least, will go a long way to lower costs of registration. Already the process of Harmonisation of drug registration for SADC countries is at an advanced stage.

 In order to be relevant to the patients, manufacturing companies will need to look at some of the new molecules that are needed to attend to diseases in the region. While Lesotho is still a Least Developed Country, companies can then take advantage of the TRIPS flexibilities and access these products.

In conclusion then, manufacture of drugs in Lesotho is feasible. All that is necessary is realization that concerned groups only have to push: “pressurize until something happens”.

Written for SARPAM/LESOTHO MINISTRY OF HEALTH Workshop on TRIPS Flexibilities By: Gertrude Mothibe, [email protected]

Lecturer in Pharmaceutical Sciences and Pharmaceutical Chemistry at the National University of Lesotho.

Maseru, August 2014

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