The Pharmaceutical Manufacturers Association of South Africa (Pharmisa) has called for urgent government intervention to combat the illicit trade in medicines, warning that the illegal market now also involves healthcare practitioners.
The warning was made by Pharmisa chairperson Stavros Nicolaou during a presentation to Parliament’s Standing Committee on Trade, Industry and Competition, which is this week receiving stakeholder submissions on South Africa’s Industrial Development Strategy.
During his presentation, Nicolaou also warned that South Africa’s pharmaceutical manufacturing capacity was being eroded, with contract manufacturing organisations (CMOs) that produce oral contraceptives and penicillin formulations having either shut down or temporarily suspended operations.
He said the sector could lose as many as 3 200 jobs, about a quarter of its manufacturing workforce, following 18 months of sustained volatility.
“We have seen a proliferation of the illicit pharmaceutical trade in our country and this requires all the relevant agencies to work together. The illicit trade taking place, even by healthcare professionals themselves, is terrifying to say the least,” he said.
Speaking after the committee meeting, Nicolaou said the proliferation of semaglutide – the active ingredient in the diabetes medication Ozempic – was an example of healthcare practitioners operating outside the law.
“The system is being abused. Compounding pharmacies are sourcing active ingredients such as semaglutide and compounding them into injectable products. The law does not allow these products to be manufactured at scale or supplied en masse,” he said.
His comments come after the Gauteng High Court granted an interim interdict in favour of Novo Nordisk against iDexis, preventing the company from compounding and supplying semaglutide injections pending the outcome of legal proceedings.
Novo Nordisk, a Danish pharmaceutical company, developed the prescription medicine for the treatment of diabetes, although it has since become widely used for weight loss.
“The problem is threefold. First, there are counterfeit copies of Ozempic. Second, there is the importation of a product called retatrutide, which has shown promising Phase 3 trial results but has not yet been approved. Third, there is the unlawful compounding of pharmaceutical products,” he said.
Nicolaou said tackling the illicit trade would require coordinated action by the South African Health Products Regulatory Authority, the South African Pharmacy Council, the South African Revenue Service, the Border Management Authority, the South African Police Service and the Hawks.
“If we do not work together, we will lose this battle,” he said.
During the committee Nicolaou warned that government procurement policy posed the greatest threat to local pharmaceutical manufacturing and South Africa’s long-term medicine supply security.
“The state procures more than 70% of the volume of pharmaceutical products in our country. There are 10 tenders that the Department of Health manages. The largest, in both value and volume terms, is the antiretroviral tender. The second is the vaccine tender and the third is the HP09 solid-dose tender. At the time this research was done, the results were available for the antiretroviral and vaccine tenders,” he said.
According to Nicolaou, when the first antiretroviral (ARV) tender was issued in 2008, 72% of its value was awarded to domestic manufacturers. That figure has since declined to just 28%.
He said the three-year tender cycle was also discouraging long-term investment in local manufacturing.
“During Covid our country found itself at the back of the queue for all medical countermeasures, whether pharmaceuticals or vaccines. It is exceedingly disappointing that, despite all those lessons, we have not heeded many of them. I would argue that today we are in a similar, if not worse, position from a drug supply security perspective,” he said.
“We have a high trade deficit in the sector and what I call a trend of attrition. Investment has declined because of a lack of certainty and predictability. How does 70% of your volume operating on three-year cycles attract investment? From firsthand experience, we have lost technology transfer agreements in this country.
“Vaccine manufacturers want to undertake technology transfers. They write to the Department of Health and explain that a technology transfer takes three years and requires an off-take agreement of at least seven years to recover the investment. The response they receive is that the Public Finance Management Act (PFMA) does not allow it.”
Nicolaou said several contract manufacturing organisations had either closed or suspended operations, including Wraps, Columbia, Sunpharm OSD, Technikon, SABS, Pharma Q (Injectables), Kiara, Barrs and Morianna.
“I have been in this industry for four decades and I have never seen shortages to the extent we are experiencing today. The reason is that these products have become economically unsustainable.”
“Up until March this year we had one oral contraceptive manufacturing facility. It has now shut down. Why? If you invest in a power plant, you look at a 20-year horizon. No one invests R70 million without knowing they will have off-take agreements beyond three years.
“I can cite penicillin as another example. We are now down to zero formulation facilities in South Africa. So when the Minister of Health says we are running out of penicillin G, it is because we no longer have supply security. If China or India were to impose export restrictions again, as they did during Covid-19, we would once again find ourselves in trouble. The same applies to paracetamol active pharmaceutical ingredients. India, our main supplier, can shut its borders again just as it did during the pandemic.”
