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EF: What are GBMSA's top priorities? Specifically, what are the main agenda items you are currently focused on for this year?
VF: The big thing on everyone's mind right now is National Health Insurance (NHI), which has made its way through both houses of parliament and is just awaiting the president's signature. From our perspective at GBMSA, we want to ensure that we are well-positioned, especially since generics are a big part of our portfolio. We need to ensure they are included in whatever formularies are established. Our stance is clear: we advocate for affordable medicine.
The concern is not just about pharmaceuticals but also medical aid insurers. If the NHI is implemented, they will mostly be excluded. It is challenging to strategize beyond staying informed on a day-to-day basis. Market intelligence is crucial.
The Department of Health estimates that when the law passes, establishing the necessary committees, like advisory and formulary committees, will take about a year. Then, it will take another five years to roll out the first package of services, which will be very basic. However, health needs continue, so it will probably be business as usual.
Generics now hold a 70 percent market share in volume in the private market, a significant increase from previous years. This shift has been largely driven by medical insurance companies favoring lower-cost generics on their formularies, which has naturally reduced the market share of originator brands.
EF: How are you contributing to the positive developments in South Africa through your role?
VF: I have been with this organization for 11 years. It is interesting to see how things have evolved over the years. Initially, there was a lot of skepticism about generic medicines—they were often seen as cheap and of poor quality. But now, attitudes have shifted completely. Now, generics are widely accepted, and the introduction of biosimilars makes it even more fascinating. Based on their experience with generics, physicians are much more open to biosimilars. They have seen that generic medicines are top-notch in quality, so there's little resistance to biosimilars. In the market, physicians are not hesitant to switch patients to biosimilars or start them on biosimilars instead of the originator products.
I am proud to say that I served two terms as chairperson of the International Generic and Biosimilar Association. In my first term, we were incorporated as a not-for-profit company in Switzerland, a significant milestone. Then, in the second term, a couple of years ago, we were recognized by the World Health Organization (WHO) as a non-State Actor, which was another major achievement. Now, the IGBA collaborates closely with the WHO on various initiatives to promote generics, which is incredibly rewarding work.
EF: What initiatives could help the Government recognize the value of your efforts, particularly in South Africa?
VF: From the Government's perspective, pharmaceuticals are not the top priority. If you look at the budget, there have been issues with paying doctors. A month ago, around two to three hundred doctors were unemployed due to budget constraints. So, medicines are not the biggest concern for the Health Department, as it seems the tender process is running smoothly. One positive change over the years is removing the profit motive from medicines, particularly from the intermediaries and pharmacists. This is a positive development in the private market that increases patient access. The market share of generic medicines has taken about ten years to increase from around 55% to 70%.
EF: From your perspective, what are the main concerns currently, and how are you addressing them?
VF: Our main concerns revolve around pricing. Let me backtrack a bit. From an international perspective, during my tenure at the IGBA, we established an advisory panel comprising the CEOs of 14 major companies. Their primary worry is the decline in generic prices worldwide. Every country strives to lower prices, which is also happening in South Africa. The concern is that it is getting to a point where some companies might find it unprofitable to produce certain drugs anymore, especially the older products that still serve patients' needs. So, manufacturers' sustainability is concerning, which could lead to drug shortages.
The South African Health Products Regulatory Authority (SAHPRA) recently revised the fee structure for regulating medicines. One of the anomalies of the new structure was that the registration of generic medicines was at a higher fee than an originator product. This fee structure would discourage companies from launching generic medicines.
Perhaps it suited SAHPRA to slow down the rate of generic medicine applications. A few years ago, there was a backlog of 15,000 drugs (mostly generics) awaiting registration, which took about three years to clear. Unfortunately, that backlog is now building up again, which is an obstruction to launching products. This delays patients' access to cheaper generic alternatives in the long run.
In the private market, medical insurance companies and medical aids hold significant power. They create formularies that can be beneficial in the short term but lead to a race to lower prices. This again threatens the sustainability of the industry. Last year, despite inflation being around 7%, the Government allowed pharmaceutical companies to raise prices by just over 3%. Happily, after input from the whole pharmaceutical industry, the permissible increase for 2024 was set at 7%.
Meanwhile, our members face challenges like electricity load shedding, where interruptions during production runs can result in wasted materials. Some companies have had to invest in generators, incurring unplanned fuel expenses. The inflation leaves little incentive for investment in the sector. We advocate vigorously for fair pricing and, at 7%, have secured a reasonable increase this year. However, medical aid insurance administrators often negotiate separately with our members and pressure companies to keep prices unchanged or even lower. Pressure creates a race to the bottom, impacting companies' ability to stay competitive and sustainable.
EF: How do you encourage stakeholders to collaborate, prioritize, and work together effectively in healthcare?
VF: Originator drugs form the basis of the generic medicine pipeline. They must be encouraged to innovate. Thus, it is fair that the innovators are granted 20 years of patent exclusivity. After this exclusive period, generic medicines should be able to enter the market. Lowering the cost of medicines to the patient allows the system to free up capital, which originators can use to innovate and develop newer drugs. It is essentially a cycle, which is the argument we advocate for. Our beef with the originators is the concept of "evergreening," by which multiple spurious patents are granted on the original product. This causes a barrier to entry by the generic drug as litigation must be used to challenge the patents.
Over the years, we have seen an increase in the credibility of generic medicines among patients, as evidenced by the rise in market share. In recent years, the Government, medical aid societies, and pharmacy societies have spearheaded patient education in generic medicines. We have contributed through our website and social media. It is worth noting that GBMSA operates with just two staff members, so our primary focus is addressing the concerns of our members, such as pricing issues, intellectual property matters with the Government, and interactions with medical insurance providers. That is where the bulk of our time and resources are allocated.
EF: How can we develop a sustainable healthcare model for the future? What are the essential pillars required for sustainability?
VF: Much has been said about establishing an African Regulatory Authority, much as has been done in the European Union. There are also initiatives to establish African free trade zones, which, in the long run, would make local manufacturing on the African continent more feasible. Medicine manufacturing is mostly automated, so having sufficient volume through demand is essential.
Governments in countries in East Africa have moved to provide incentives for local manufacturing. In South Africa, multiple pharmaceutical manufacturing plants have closed in the past decade and a half. Costs associated with running a pharmaceutical plant include maintaining it to global standards. A challenge is the lack of locally made machines, leading to significant capital expenditure for importing them.
The capital cost of importing the latest equipment is prohibitive based on the volumes demanded in the country. If Africa could open up more quickly, it would help as an incentive to increase local production.
Regulatory hurdles are raised regularly to ensure medicine quality and patient safety. This is a good aspect, but it increases manufacturing and ancillary costs.
EF: How can we tackle the problem of inadequate infrastructure hindering healthcare innovation and access?
VF: One of the incentives the Government provides for starting a new plant is tax benefits. However, if you are establishing a Greenfields plant, it could take quite some time until you break even and start making a profit to benefit from those tax incentives. While tax incentives benefit expanding existing plants, they do not help much help in attracting new foreign investment.
Another challenge in South Africa is the lack of local manufacturing of active pharmaceutical ingredients (APIs). Considering that APIs make up most medicines, we still need to import the API even if we manufacture tablets locally.
The reliance on imported APIs is concerning, as most are sourced from China and India. There are reports of significant shortages of medicines, particularly in America and Europe. One of the causes is the availability of APIs.
South Africa often finds itself at the end of the queue due to its dependency on overseas APIs. This dependency raises concerns about the resilience of African countries' pharmaceutical supply chains.
Additionally, there is a notable shortage of antibiotics manufactured locally, as many generic companies concentrate production in centers of excellence to achieve economies of scale.
Starting a small-scale operation for antibiotic production is not seen as viable due to the need for continuous production and international distribution.
EF: In your 11 years leading the association, what are you most proud of during your time as head?
VF: I am proud that we have not lost any members during my time leading the association, which means we add value for our members. Our lobbying efforts have led to a better position of the value generic medicines bring to patients. We have received recognition from the government for being invited to participate in the Department of Health's multi-stakeholder forum. Our members played a vital role in continuing the supply of medicines during the Covid pandemic, and GBMSA assisted the supply through our contacts in the IGBA. We are recognized as a peer by the three other industry Associations representing originators and self-care companies.
The recognition by healthcare professionals that generic and biosimilar medicines offer quality, safe, effective, and affordable solutions to their patients.
Our impact on the International Generic and Biosimilar Medicines Association is significant, as we are members of the management committee, considering we are a small country.
One standout achievement is that our members supply 73.9 percent of the HIV medicines in South Africa.
