Panacea for the pharmaceutical companies

Doaa A.Moneim , Friday 5 Aug 2022

The government and pharmaceutical companies are discussing ways of giving the private sector a larger stake in the industry.

Panacea for the pharmaceutical companies
Egypt has the potential to localise the pharmaceutical industry


The government is engaged in consultations with the private sector on the recently published State Ownership Policy Document that sets out ways of partnering further with the private sector across a range of economic activities, including in the pharmaceuticals sector.

As a result of the impacts of the Russian-Ukrainian war on the Egyptian economy, with some putting overall economic losses since the conflict at LE465 billion, the government’s decision to give a wider role to the private sector is part of its support for the national economy.

The document sets out ways of increasing the private-sector contribution to the economy to 65 per cent, up from the current 30 per cent.

Multifaceted discussions took place last week between government representatives and 60 experts from the healthcare and pharmaceutical sectors with a view to developing them and enhancing the role of private players.

Main proposals include plans to ensure the equitable distribution of private-sector investment in the healthcare sector across different governorates, supporting the public-private partnership (PPP) model in integrated and university hospitals as well as in Egypt’s Universal Health Insurance System, and widening the state’s contribution to the provision of pharmaceutical raw materials and antibiotics production.

Speaking to Al-Ahram Weekly, chairman of the Pharmaceuticals, Cosmetics, and Appliances Chamber at the Federation of Egyptian Industries (FEI) Gamal Al-Laithi said that increasing the share of the private sector in the healthcare and pharmaceuticals industry was important amid the ongoing challenges.

He noted that while public companies dominate 72 per cent of healthcare and pharmaceuticals activity, private players currently represent only 28 per cent. “This is unlike the situation in other countries where the private sector has the lion’s share of activity due to its expertise as well as financial capabilities,” Al-Laithi said.

Al-Laithi is participating in the consultations with the government on the future of the sector. He told the Weekly that the proposals and recommendations needed clear mechanisms if they were to be implemented.

The proposals include expanding the PPP model, pushing for privatisation in the sector, and merging medical products companies to help them to tackle losses.

He said that the recommendations revolve around three main types of partnership with the private sector, namely selling a number of state-owned medical production companies to the private sector, implementing a PPP model, or privatising company management.

The State Ownership Policy Document would boost the role the private sector plays in health and pharmaceuticals fields capitalising on the latter’s extensive experience and huge financing capacity, Hatem Al-Wardani, executive manager of AstraZeneca told the Weekly.

“Egypt has good potentials that qualify it to implement a successful localisation of the pharma industry and also to transform the country to a regional hub for pharmaceuticals,” he added.

This includes its unique geographical location, the high rate of population growth, the presence of a robust private sector, as well as the current political will that prioritises giving the private sector a wider role in the economy, according to Al-Wardani.

He also added that Egypt has the infrastructure and human capital that enable it to succeed in its mission, in addition to the digital transformation policy which represents an effective element for the pharma industry in the market.

“In light with the efforts the state is doing to boost this industry, AstraZeneca plans to raise its investments and local production by 50 per cent over the coming three years,” Al-Wardani told the Weekly.

The State Ownership Policy Document sets out nine types of partnership with the private sector in various economic activities. They include concession contracts, build, operate, and transform (BOT) contracts, design, build, and operate (DBO) contracts, build, finance, operate, and transform (BFOT) contracts, build, own, operate, and transform (BOOT) contracts, build, own, and operate (BOO) contracts, performance contracts, management contracts, and the possible privatisation of a number of state-owned assets.

Al-Laithi said that the state should invest in producing drugs that need extensive investments in partnership with the private sector, including cancer and immunity treatments.

During the consultation, head of the FEI Private Sector Healthcare Chamber Alaa Abdel-Magid explained that expanding the role private companies play in the sector would require reassessing quality control measures applied on them in order to pave the way for new establishments to join the Universal Health Insurance System.

He called for redeploying public investments in the sector to focus on preventive medicine, emergency care, and reproductive health, while underlining the need for public investment in the healthcare sector.

Head of the commercial department at Zeta Pharma, a pharmaceutical production company operating in the Egyptian market, Mohsen Hassan told the Weekly that establishing real partnerships with the private sector in the healthcare and pharmaceuticals industry was necessary for the state, investors, and patients.

“The private sector enjoys many points of strength, starting with large financial capabilities, flexibility, fast decision-making, and the efficient management of both finances and resources. The private sector also has the ability to attract foreign investment and experiences,” Hassan said.

He said that Egypt lacked capacity for producing medical raw materials, causing it to rely on imports.

“The private sector can play a significant role in establishing such capacity and providing the required experience to manage it. This will also help to localise the pharmaceuticals industry, which will boost the national economy by saving hard currency, lowering the demand for the US dollar, and reducing the country’s imports bill,” Hassan said.

He called for listing such companies on the Egyptian Stock Exchange (EGX) to provide greater liquidity and to improve management models.

He stressed that the Egyptian pharmaceuticals market has significant experience that could be utilised in improving the sector. The pharmaceuticals market in the Gulf Cooperation Council (GCC) countries draws heavily on Egyptian managers, for example.

According to the State Ownership Policy Document, the government should incrementally disassociate from a number of economic activities in favour of the private sector, while taking into account the strategic and security dimensions involved.

It favours upgrading the mechanisms for allocating assets to various economic activities, as well as designing plans to deal with the impacts of state withdrawal, especially in terms of the workforce and revenues, and implementing packages of macroeconomic policies that would help to stimulate the private sector.

*A version of this article appears in print in the 4 August, 2022 edition of Al-Ahram Weekly.

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