In BMI's Business Environment Ratings for Q309, South Africa's position improved from seventh tofifth, out of the 17 key Middle East and Africa (MEA) markets surveyed. The country is now considereda more attractive proposition than Israel and Bahrain, for example, which are more developed regionalmarkets. South Africa's benefits include its large market size in regional terms and favourable growthforecast. However, it is held back by slow population growth and an unfavourable regulatory environmentwhen compared with some Middle Eastern markets, as well as the 0.3% GDP contraction forecast byBMI for 2009. Nevertheless, the country's pharmaceutical market at consumer prices is expected to posta compound annual growth rate (CAGR) of 8.56% in local currency terms over the next five years, risingfrom ZAR20.63bn (US$2.50bn) in 2008, to ZAR31.11bn (US$3.85bn) in 2013.However, our forecasts are threatened by a recent announcement by the South African government that itwas considering relaxing its pharmaceutical patent and intellectual property (IP) protection laws in orderto address the affordability of anti-HIV/AIDS medicines. BMI cautions that such radical action willactually lead to a reduction in ARV supplies as drugmakers may revise their decision to remain in SouthAfrica under lower revenues. While the terms are unclear, BMI believes that the prospect of compulsorylicensing may be on the agenda after the South African president opened a HIV/AIDS conference byhighlighting that ARV prices are too high for most patients. More specifically, under compulsorylicensing and parallel imports, drug prices would be reduced as generic pharmaceutical manufacturerswill be allowed to produce 'patented' drugs. Nevertheless, a pre-emptive collaboration with thegovernment may secure pricing controls to avoid such drastic measures. In fact, in the past, a number ofmultinationals operating in South Africa had agreed on licensing agreements with local partners,receiving loyalties of around 5% and thus avoiding compulsory licensing.In the meantime, the domestic pharmaceutical industry is set to undergo further consolidation, withAdcock Ingram making a cash purchase of generic drugmaker Cipla Medpro South Africa (CMSA).The price, US$227.8mn, was considerably above the market per share, indicating Adcock's belief in thepotential of Cipla's generic portfolio. Moreover, Cipla SA offers adjacent therapeutic areas, includingoncology, which will strengthen Adcock's existing portfolio and represent the drugmaker in higher-valuepatient markets. Around the same time, UK drugmaker GlaxoSmithKline (GSK) was planning topurchase a minority (10-25%) stake in South Africa's generic pharmaceutical firm Aspen Pharmacare,using its assets to acquire the shares. GSK also revealed that one of its growth strategies includes a moreaggressive shift into developing countries in the Middle East, Africa and Latin America. The plannedminority stake will place GSK in line with this objective, particularly since Aspen recently announcedgrowing revenues from its overseas markets, and furthermore given the strong collaboration between thetwo over the past years.

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South Africa Pharmaceuticals and Healthcare Report Q3 2009
Published on July 2009
Report Summary
In BMI's Business Environment Ratings for Q309, South Africa's position improved from seventh to
fifth, out of the 17 key Middle East and Africa (MEA) markets surveyed. The country is now considered
a more attractive proposition than Israel and Bahrain, for example, which are more developed regional
markets. South Africa's benefits include its large market size in regional terms and favourable growth
forecast. However, it is held back by slow population growth and an unfavourable regulatory environment
when compared with some Middle Eastern markets, as well as the 0.3% GDP contraction forecast by
BMI for 2009. Nevertheless, the country's pharmaceutical market at consumer prices is expected to post
a compound annual growth rate (CAGR) of 8.56% in local currency terms over the next five years, rising
from ZAR20.63bn (US$2.50bn) in 2008, to ZAR31.11bn (US$3.85bn) in 2013.
However, our forecasts are threatened by a recent announcement by the South African government that it
was considering relaxing its pharmaceutical patent and intellectual property (IP) protection laws in order
to address the affordability of anti-HIV/AIDS medicines. BMI cautions that such radical action will
actually lead to a reduction in ARV supplies as drugmakers may revise their decision to remain in South
Africa under lower revenues. While the terms are unclear, BMI believes that the prospect of compulsory
licensing may be on the agenda after the South African president opened a HIV/AIDS conference by
highlighting that ARV prices are too high for most patients. More specifically, under compulsory
licensing and parallel imports, drug prices would be reduced as generic pharmaceutical manufacturers
will be allowed to produce 'patented' drugs. Nevertheless, a pre-emptive collaboration with the
government may secure pricing controls to avoid such drastic measures. In fact, in the past, a number of
multinationals operating in South Africa had agreed on licensing agreements with local partners,
receiving loyalties of around 5% and thus avoiding compulsory licensing.
In the meantime, the domestic pharmaceutical industry is set to undergo further consolidation, with
Adcock Ingram making a cash purchase of generic drugmaker Cipla Medpro South Africa (CMSA).
The price, US$227.8mn, was considerably above the market per share, indicating Adcock's belief in the
potential of Cipla's generic portfolio. Moreover, Cipla SA offers adjacent therapeutic areas, including
oncology, which will strengthen Adcock's existing portfolio and represent the drugmaker in higher-value
patient markets. Around the same time, UK drugmaker GlaxoSmithKline (GSK) was planning to
purchase a minority (10-25%) stake in South Africa's generic pharmaceutical firm Aspen Pharmacare,
using its assets to acquire the shares. GSK also revealed that one of its growth strategies includes a more
aggressive shift into developing countries in the Middle East, Africa and Latin America. The planned
minority stake will place GSK in line with this objective, particularly since Aspen recently announced
growing revenues from its overseas markets, and furthermore given the strong collaboration between the
two over the past years.
Table of Content
SWOT Analysis7
South Africa Pharmaceuticals And Healthcare Industry SWOT ....... 7
South Africa Pharmaceuticals and Healthcare Report Q3 2009 Page 1/5

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South Africa Political SWOT ..... 8
South Africa Economic SWOT ... 8
South Africa Business Environment SWOT.. 9
Pharmaceutical Business Environment Ratings .......10
Table: Middle East And Africa Pharmaceutical Business Environment Ratings for Q209 . 10
Limits to Potential Returns ...... 11
Risks to Realisation of Returns 11
South Africa ' Market Summary.......13
Regulatory Regime.14
Table: South Africa Drug Classification System (Section 22A Of Medicines And Related Substance Act 101 Of 1965).. 14
Recent Regulatory Developments ..... 15
Table: Proposed Scope Of The South African Health Products Regulatory Authority........ 15
Pharmaceutical Advertising..... 16
Intellectual Property Environment.... 17
Recent IP Developments . 18
Counterfeit Activity 18
Pricing System....... 19
Price Increases ...... 20
Recent Pricing Developments .. 21
Hospital Tenders.... 23
Reimbursement System ... 23
Industry Developments...25
Epidemiology 25
HIV/AIDS...... 25
Tuberculosis.. 27
Healthcare Sector .. 28
Recent Healthcare Sector Developments ... 30
Private Healthcare Regulation 31
National Health Reference Price List ........ 32
Health Insurance ... 33
Government Health Insurance . 34
ARV Manufacturing and Government Tenders ... 35
Retail Pharmacy Sector .. 37
Research and Development Sector.... 39
Recent R&D Activities .... 40
Vaccines........ 41
Traditional African Medicine... 42
Medical Devices..... 43
Table: South African Customs Classification Of Medical Devices . 44
Regional Developments in Medical Devices Sector ..... 46
Table: Aims Of PEPFAR-BD Partnership . 46
Industry Forecast Scenario ......48
Overall Market Forecast. 48
Table: South Africa - Drug Expenditure Indicators, Historical Data and Forecasts . 49
Key Growth Factors ' Industry 50
Table: South Africa ' Health Expenditure Indicators, Historical Data and Forecasts ....... 51
Key Growth Factors ' Macroeconomic.....52
Table: South Africa - Economic Activity .... 53
Prescription Market Forecast .. 54
Table: South Africa ' Prescription Market Indicators, Historical Data and Forecasts (ZARmn unless otherwise stated) ....... 55
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Patented Market Forecast........ 56
Table: South Africa ' Patented Drug Market Forecast Indicators, Historical Data and Forecasts ..... 56
Generics Market Forecast ....... 57
Table: South Africa - Generic Market Indicators, Historical Data and Forecasts..... 58
OTC Market Forecast..... 59
Table: South Africa ' OTC Drug Market Indicators, Historical Data and Forecasts (ZARmn unless otherwise stated). 60
Medical Device Forecast 60
Table: South Africa ' Medical Device Market, Historical Data and Forecasts 61
Pharmaceutical Trade Forecasts...... 62
Table: South Africa ' Pharmaceutical Trade Indicators, Historical Data and Forecasts (US$mn) ..... 63
Other Healthcare Data ... 63
Table: South Africa ' Other Healthcare Indicators, Historical Data and Forecasts . 64
Key Risks to BMI's Forecast Scenario....... 64
Competitive Landscape..65
Table: Private Market Size for Selected Products in South Africa* (2007)....... 65
Company Monitor...66
Leading Foreign Companies 66
Sanofi-Aventis........ 66
Pfizer ... 68
Roche... 70
Ranbaxy ........ 72
GlaxoSmithKline.... 74
Merck & Co .. 77
Leading Indigenous Manufacturers ....... 79
Aspen Pharmacare. 79
Adcock Ingram....... 83
Enaleni Pharmaceuticals (Cipla-Medpro). 86
Country Snapshot: South Africa Demographic Data 89
Section 1: Population...... 89
Table: Demographic Indicators, 2005-2030....... 89
Table: Rural/Urban Breakdown, 2005-2030 ...... 90
Section 2: Education and Healthcare ........ 90
Table: Education, 2002-2005 .. 90
Table: Vital Statistics, 2005-2030..... 90
Section 3: Labour Market and Spending Power . 91
Table: Employment Indicators, 2001-2006 91
Table: Consumer Expenditure, 2000-2012 (US$) ........ 91
Table: Average Annual Wages, 2000-2012 92
BMI Forecast Modelling..93
How We Generate Our Pharmaceutical Industry Forecasts ...... 93
Pharmaceutical Business Environment Ratings Methodology ... 94
Ratings Overview... 94
Table: Pharmaceutical Business Environment Indicators .... 95
Weighting...... 96
Table: Weighting Of Components..... 96
Sources ..... 96
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