Published On: Thu, Feb 19th, 2015

Government debt crippling pharma industry – Drugfield MD

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In this exclusive interview with Pharmanews, Pharm. Olakunle Ekundayo, managing director and chief executive officer of Drugfield Pharmaceuticals Limited spoke on the challenges facing the pharmaceutical manufacturing sub-sector of the Nigerian economy and argued that the greatest undoing to the sector presently is the billions of naira owed pharmaceutical companies by the government. He also spoke on how the recent devaluation of the naira, the insurgency in the north and policy inconsistency are hindering the development of the pharmaceutical manufacturing industry. Excerpts:

The manufacturing sector of the economy, including the pharmaceutical manufacturing sub-sector, depends heavily on imported inputs for its production. How are issues such as the devaluation of the naira and the recently released new classification of imports by the Central Bank of Nigeria (CBN) affecting the industry?

 The devaluation of the currency has so many implications for manufacturing. The number one implication is that we now need more working capital to import and pay for essential items which are used in manufacturing. The number two effect is that, with the low inflow of foreign exchange into the economy, we now have a situation whereby the raw materials used for pharmaceutical manufacturing are now re-classified as finished products. We really don’t know why the government should do that. Maybe it’s because of the scarcity of foreign exchange. This is why they have come up with some of these tricks to push manufacturers to source foreign exchange through other means, like the Interbank or even the black market. They just want to reduce pressure on the government Dutch option system.

The number three effect is that even when we now have to patronise the Interbank foreign exchange, the bank now puts up a trading system full of instabilities. For instance, they can tell you that the exchange rate as at this minute is185 naira to one US dollar, but that that rate is valid for only ten minutes. You can imagine that, as a manufacturer. What decisions or conclusions can you make within ten minutes to ensure you secure that rate? So there is so much confusion in the system.

When you put all these together, you begin to ask yourself how manufacturing operations can be run with such level of instability and confusion. Right now, it is really affecting the industry. I know, at least, two big companies around here who went on Christmas shutdown late last year and asked the staff not to resume in the new year until the situation had become conducive. This is the real challenge confronting us, with the devaluation of the naira and the drop in the price of oil which accounts for at least 70 per cent of the country’s foreign exchange income.

In trying times like this, governments are expected to be proactive by coming up with palliative measures to keep industries going. Are there steps the government can take to keep the pharmaceutical manufacturing industry afloat in the current situation?

 There is nothing the government is doing or has done so far. And we cannot see any measure being taken even in the immediate future. The government, I think, seems to be in a confused state because of the oil price that keeps falling. Yet it must be recognised that drugs are essential items that should not be played around with. This is because, with drugs, it is the health of the people that is at stake.

I think that the government should look into the sector and do things that will provide respite to the pharmaceutical industry, as well as giving the necessary concession that can keep the sector going and ensuring that prices of drugs are reasonably affordable to Nigerians.

The year 2014 was quite turbulent for the health sector generally, with strikes of health workers and insurgency in the north affecting pharmaceutical businesses. Looking at those challenges, what are your expectations for the sector in 2015?

 Your observations are correct. The insurgency in the north has reduced area of coverage for business. The northeast for us as a company was a very good outlet for our products getting across our borders into neighbouring countries. That has stopped completely. Even in certain towns and cities in the northeast, like Maiduguri, we cannot do business. That has reduced the incomes of our company and other companies who do business in that area.

However, beyond insecurity and insurgency, the government has also refused to pay drug manufacturers who supplied drugs on tender to the Federal Ministry of Health and to different government agencies. I think this is one of the greatest injustices to the sector. They owe the drug industry in billions and they forget that these supplies were mostly done with borrowed funds. It is thus a double jeopardy for manufacturers. We all know the situation that the banks are in today. Government owes manufacturers, and delay in payment of this debt is making the situation worse for the sector and for the banks. There is even no ray of light at the end of this dark tunnel because there is no sign that the payment is imminent.

We are also calling on the government to change the classification of the pharmaceutical manufacturing sector. We want them to do what they have done in other sectors like the textile or automotive industry and get the sector moving. It will be a tragedy if Nigeria allows the pharmaceutical sector to collapse. No country in the world should allow that to happen. In these days of all sorts of warfare including biological warfare, no country should rely on imports of drugs for its own people. That can be a veritable tool by the enemy to wipe out a whole population.

The refusal of the US government to give ZMapp to Nigeria during our trying period of Ebola crisis last year once again reinforced the need for Nigeria not to depend on external sources for local medicine needs. What other lessons should we learn from that incident and how can we institutionalise Research and Development (R&D) in the pharmaceutical manufacturing sector to ensure we are able to solve our health problems?

 I think the lesson to learn should be on the side of the government. Government should take the lead in this effort. When Ebola came, there was very little the local pharmaceutical industry could do other than to support government and provide palliative drugs that could help, which we actually did. In fact, it was surprising that we donated drugs but they were never officially received by the Federal Ministry of Health. The Pharmaceutical Manufacturing Group of the Manufacturers Association of Nigeria (PMG-MAN) asked members to donate drugs to support government efforts in taming Ebola, which we actually did; but no one could receive the drugs on behalf of the government.

Beyond that, in the last few years, a number of Nigerian companies have signed on to upgrade their facilities for the World Health Organisation Good Manufacturing Practice (WHO-GMP) qualification and the United States Pharmacopoeia (USP) standard. Very expensive ventures! A lot of investments have been made by these companies. We are grateful to God and also to NAFDAC which facilitated the process that, at the end of the day, four Nigerian companies have received WHO-GMP certification at very high costs. And that was just the first phase to the whole process. The end-point is when you have products that are pre-qualified by the WHO. Therefore, what the four companies have received is the first phase approval. They now must come forward with the products they want WHO to prequalify so that they can compete in international tenders.

As we speak, the Nigerian government has not done anything to encourage the sector or these companies. They have not said that “because of the huge investment you have made and the honour you have brought to Nigeria, we are giving you tax break, we are paying off the debts we owe to your sector or we are going to support you with this to enable you invest in research and development to come up with new drugs or even vaccines.” Nothing like that has come from the government.

Many of our colleagues are disappointed that, having invested huge amounts of money on this upgrade, not even proper recognition of what they have done has come from the government. But we are Nigerians and this is our country. We must continue to strive and work hard and talk when we need to do so and be hopeful that things will change.

Last year, Drugfield was celebrated for introducing Chlorxy-G (Chlorhexidine) Gel, an innovative low cost product for prevention of umbilical cord infections in newborn and a drug said to be quite invaluable in our quest as a nation to reduce infant mortality. What prompted your decision to manufacture this product and is this an indication that Drugfield will be doing more in the area of infant care medicines?

 Thank you very much for this question. First, as a company, we pride ourselves on always looking for opportunities and areas of healthcare where there are gaps and needs to be filled. We have always tried to make products available in areas where there is scarcity. This has been our philosophy all along. Therefore when we saw in the newspapers that the United States Pharmacopoeia (USP) was asking Nigerian companies to express interest in producing Chlorhexidine Gel, we quickly jumped at it.

We did that for a number of reasons. One, as at that time, we had four products in gel form in our portfolio which we manufactured locally. So we have a lot of experience in the manufacture of gel. The second reason is that since the product was a United Nations (UN) commodity, we thought “why not give it a shot to show how experienced we are to the global community?”The third reason is that we know that the product could launch us into the international market and contribute to maternal and child health care in a way that could be positively effective.

One thing which we never imagined was that, as simple as the product is, it could put us in the limelight. By the time the USP visited Nigeria to look at the companies that had shown interest, we already had the packaging material made. We were already waiting to clear the raw materials at the airport. They were pleasantly surprised that we moved so rapidly. It helped us in a lot of ways. We already had TSHIP (Targeted States High Impact Project)’s support. TSHIP is an NGO financed by the United States Agency for International Development (USAID) and a few other world bodies working with Chlorhexidine Gel imported from Nepal in a few states in the North. They were using it in Sokoto and Bauchi States in umbilical cord care. The product was imported from Nepal which was then the only country in the world producing it. We then became a kind of a partner to USP and TSHIP. USP was providing the Good Manufacturing Practice (GMP) coverage, looking at what we had on ground and the necessary improvement we needed to make because the product is an international one.

Before they came for their second visit, the product samples were ready and we sentone to their office in Washington DC. USP was happy and TSHIP was also very happy. Subsequently, there was to be a world meeting of the different partners who were involved in Chlorhexidine development in May 2014 and TSHIP said we should come to be a part of the meeting. They got Bill and Melinda Gates Foundation to co-finance the trip with us and we took the product along and introduced it at the meeting to the group. At that meeting, Drugfield Pharmaceuticals was admitted into the World Chlorhexidine Working Group. We thus became the second country in the world and the number one in Africa to produce Chlorhexidine Gel for umbilical cord care. We were getting calls from all over the world. Calls were coming from many of the NGOs and foundations. Many of them visited us.

The usage of the gel also received a boost in Nigeria, with states signing on to its usage and we were supplying. But the real issue is that government agencies that are supposed to be the biggest buyers are the worst to do business with. Notwithstanding, many of what we have supplied have been paid for by some of the interested NGOs and we are hopeful that the business of Chlorhexidine Gel will grow.

We have sent samples to a few others African countries like Kenya, Mali and even Haiti in South America, based on the request they made to us. We supplied to them free of charge to also let them know how to undertake the development of this product in these countries. We are hopeful that if they want it in the future and cannot produce it, we can supply them finished products to use because we have the capacity.

How is the Nigerian government taking this product?

 The sad thing, really, is that, even though our government has put this product on the Essential Drug List, the kind of awareness we expected the government to give to such a lifesaving product is not forthcoming. Before this product, which has now helped to save the lives several new born babies, was introduced, Nigeria was the number one in Africa with cases of umbilical cord infection and number four in the world. So, one would have expected that our government would take advantage of the fact that we now produce the product in Nigeria to change the situation.

One Dr Ado Yobo, a Ghanaian, who works for USAID, came visiting us because of this product. After a tour of our facility, he said he would talk to the Ghanaian government that Nigeria had the capacity to supply Chlorhexidine Gel for use in Ghana. He also said if the development of the product had taken place in Ghana, he was very sure that the government would have banned the use of methylated spirit and all manners of life-threatening materials for the treatment of umbilical cord in newborns, and legislate that only Chlorhexidine Gel should be used in all hospital delivery rooms across the country. He wondered why Nigerian had not done that. We know things don’t work that way here. But we hope that, one day, Nigeria will get it right.

Drugfield has, over the years grown to become a reputable indigenous pharmaceutical manufacturer with over 140 registered products, what is the philosophy driving your processes and operation?

 Let me first of all thank God for what he has enabled us to achieve since our establishment. I am not the only one who worked with a multinational company before venturing into pharmaceutical manufacturing. So, I am not the only one who has experience. However, one thing that has helped us is that we have always looked for opportunities and products that are needed in the country and are essentially being imported. That was why we started with ointment and creams. When we started, people thought they were not significant products, until recently when everybody is now going in that direction. I must say that these are products that all the people use, irrespective of social class. So, to look at areas of need and gaps to fill has always been the driving philosophy of our business and it has paid off over the years.

Our philosophy also informed our decision to go into sterile manufacturing processes – making eye drops, small volume injectables and large volumes infusion products. These are areas of opportunity that we don’t have many companies going into. So, we believe Nigeria has a lot of opportunity to offer to those who can see it. This is why a lot of foreigners come into this country. They see these opportunities and take advantage of them. This is a huge country with a large population. The country has the potential to be a rich nation if our resources are well managed. The future also looks good for pharmaceutical manufacturing if the right things are done.

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Government debt crippling pharma industry – Drugfield MD