South Africa creates list of drugs it will buy only if they are made there

In another example of drug manufacturing protectionism, South Africa is compiling a list of medications it says it will buy only if they are manufactured on the home turf.

There will be 70 pharmaceutical products, all solid, oral medications, which the government says must be made in manufacturing plants in the country. The companies bidding to make them for the government must also agree to meet international pricing benchmarks to make sure prices are acceptable, InPharm reports. The contracts for the drugs are estimated to be worth about $313 million.

Precious Matsoso, director general of health, said the country would buy 70 percent of those drugs from local companies and 30 percent could be produced by any supplier. "The Sanofi ($SNY) plant in SA, that's the kind of thing we would support," Matsoso says, referring to Sanofi's recently announced plans to manufacture tuberculosis drugs at its Mamelodi, SA, plant, reports Business Daily.

The country was very upfront about the purpose of the mandate. "The intention is to create security of demand for domestic production, attract foreign and domestic investment and to further industrialize the economy," said Trade and Industry Minister Dr. Rob Davies. "This will create an opportunity to enhance local manufacturing capacity to create decent jobs, add value and build export platforms."

This is the first application to the drug industry of the Preferential Procurement Regulations that South Africa introduced last year.

Many developing countries have trade rules that protect their local manufacturing or distribution. For example, China has not let foreign drug distribution companies come in without partners. And Indonesia is restricting applications for drugs made from foreign companies.

Not surprisingly, the local manufacturers are all for the restrictions. "It gives you greater certainty of demand, so pharmaceutical companies are more likely to invest in SA," Stavros Nicolaou, an executive with Aspen Pharmacare, South Africa's largest drug manufacturing firm, told Business Daily. He said it also goes some way to "leveling (the) playing field," with countries like India which provide tax breaks for drug exporting.

- here's InPharm's story
- read more in the Business Daily