The global pandemic amplified the vital role played by the pharmaceutical industry and revealed significant potential for local growth. South Africa is a leader in the antiretroviral program and one of the world’s largest producers of radiopharmaceuticals. In recent years, the industry has expanded locally with the production of COVID-19 vaccines, in addition to medications for the domestic market. So, where is the local pharmaceutical market headed? All reports indicate an upward trajectory.

A Positive Forecast

According to Fitch Solutions, South Africa's sizable population, National Health Insurance (NHI) initiatives, a large private sector, and public/private partnerships are leading to increased investment in the healthcare system, which is likely to grow steadily. The industry is projected to experience an annual compounded growth rate of 6.7%, reaching R643.5 billion by 2025.

With a strong healthcare market, South Africa is becoming highly attractive to patented drug markets in Sub-Saharan Africa. Currently, it is the only market in the region where patented medical sales account for a larger proportion of the prescription market than generic medical sales. This is largely due to the well-established local manufacturing industry, which is appealing to both local and international investment. Additionally, South Africa's regulatory bodies are stronger compared to regional counterparts.

New Opportunities

Moving forward, the balance is likely to shift from patented drug sales toward generics. The greatest commercial growth opportunities will be found in the generic medication sector. This shift is linked to the mandatory offer of generic substitution introduced in South Africa in 2003, which required interchangeable medications to be offered in order to manage the high costs associated with patented medications.

Since then, pharmacists are obligated to offer the generic form of any medication, allowing patients the choice to accept or refuse it. As a result, the market share of patented drugs has decreased from 64.5% of total prescription drugs in 2013 to 56.7% in 2020, and is expected to fall to around 45% by 2030.

This trend clearly indicates that generic medications are poised to dominate the market, presenting significant opportunities in this sector.

The Bottom Line

Post-pandemic economic recovery is closely tied to partnerships between local and international players. With foreign investment in the local pharmaceutical industry, alongside opportunities in generic drug development, the industry is set to expand significantly in the coming years.

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