Project Key findings

This policy-focused project uniquely combines analysis of low-income country health care systems with a corresponding investigation into local manufacturing capacity. There are huge unmet needs for essential medicines and supplies in Tanzania and Kenya, as in many African countries, and domestic health markets offer large unexploited opportunities for locally based manufacturers.   

In summary the project has identified:  

  • the extent of opportunities to combine better health care with industrial development;
  • strengths and weaknesses of domestic supply chain linkages, and external pressures that tend to disaggregate them;
  • the core challenge faced by locally based firms of upgrading to achieve and sustain international competitiveness;
  • existing policies that support or undermine health-industrial synergies;
  • the reshaping of health systems and procurement required to use local suppliers effectively to address population needs.

A conceptual framework of industrial and institutional capabilities is used to show how industrial suppliers of essential medicines and medical supplies in both countries face sharply rising international competitive pressures. These result from: broader trade liberalisation and specific policies encouraged by donors to remove tariffs and taxes from imported health sector supplies; externally focused international procurement; competitive and regulatory pressures for higher quality standards; and changes in first line treatments for major illnesses requiring investment in technological upgrading.

All domestic manufacturers interviewed engaged in continuous upgrading: hugely challenging in their context of poor infrastructure, expensive and limited industrial finance, and low education and skills (particularly serious in Tanzania).   In both countries, pharmaceutical companies are mainly locally owned, and in neither country is their domestic market share rising. In Tanzania local pharmaceutical firms’ domestic market share has recently been falling sharply as they struggle to cope with competitive pressures. Kenya-based producers are doing better within a much stronger national industrial base, sustaining domestic market share and increasing exports to regional markets. 

Both sets of firms need industrial policy frameworks that support sustained investment in improved technological capabilities, including upstream supplier improvement, associated with sufficient time-limited trade protection.  Health sector organisation and procurement processes also need to build the collaborative capabilities to extract local health-industrial synergy.  Damaging and exclusionary reliance on out-of-pocket payments, and doubtfully sustainable reliance on Asian suppliers, both need revision towards more tax and social insurance funding for supplies and public procurement policies that reduce barriers to entry for local firms. There are lessons from good procurement practice in the non-profit sectors, which were found to purchase a higher share of their supplies from domestic manufacturers while private wholesalers relied more on imports.  

Collaborative capabilities in industrial and health policy have to be built, from a basis of very limited communication between relevant Ministries and international stakeholders. The project has created local forums for industrialists, industrial and health policy makers, regulators and medical officers to interact directly, opening possibilities for creative interventions to radically improve effective governance in this crucial area of development.  Internationally, the project has contributed to expanding research in this field, notably through a UNIDO-supported publishing initiative on Making Medicines in Africa drawing on experience from nine African countries.