Treating Egypt to a bright future: How a push to localise drug production has paid off

Geopolitical turmoil

The turmoil has again sent drug prices higher, alongside other goods and basic commodities. This has deepened a stifling economic crisis since Russia's invasion of Ukraine sparked an outflow of foreign capital from the country.

Rising inflation has undermined the borrowing power of pharmaceutical companies, among other sectors. The continued scarcity of foreign currency, alongside the rising cost of servicing external debt for at least two more years, leaves the political authorities with limited options to rebalance the economy without exacerbating social risks.

The effects of these global market forces on Egypt mean it has become more challenging for investors to back the country's moves to localise the production of medicines. The currency effects are the clearest: Firms need to raise dollars to import raw materials and equipment, which is getting more expensive.

One of the most prominent problems is that there have been shortages of some medicines in the Egyptian market. This has caused political controversy, with some parliamentarians calling for the government to be held responsible.

Some pharmacists believe that there's an abundance of supply in raw materials and local substitutes for imported medicines and that the public perception of shortages relates to a lack of expensively imported brand-name drugs.

Treating Egypt to a brighter future

Whatever the exact nature of the problem is, it comes after a major governmental push to develop Egypt's pharmaceutical industries, which, despite the current friction, now make up a large part of the national economy.

They also remain an essential means of development. The sector is profitable and an established means of attracting local and foreign investments. The medicines produced meet critical needs in the broader regional market.

Pharmaceuticals are a vital, strategic industry that the country and the region cannot do without. The next phase of the industry's development should make the industry more resilient.

Egypt also has plans to patent pharmaceuticals and accelerate the digitisation of drug production and sales as part of a wider ambition to provide universal health insurance. That plan has begun to be implemented in a few Egyptian governorates.

The Egyptian Drug Authority (EDA) has announced that the country was awarded seven major international accreditations to manufacture substitutes for modern, innovative, and essential medicines.

This will help lift self-sufficiency rates in various treatments – from immunosuppressants, with self-sufficiency rates at around 79%, to antibiotics, where self-sufficiency rates are expected to hit 71% – according to figures from the EDA's head, Dr Tamer Essam.

EDA milestones

The EDA's international accreditations, most notably from the World Health Organisation, have taken the country to the third level of maturity, as identified by the WHO's global benchmarking, by March 2022.

Egypt passed another critical milestone in June 2023 when it became a member of the International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use. It was the first country in Africa to do so.

Then, in October 2023, the EDA became a member of the International Medical Device Regulators Forum in October. Ten Egyptian companies with 12 factories have received international accreditations.

Al Majalla met with the head of the pharmaceutical division in the Federation of Egyptian Chambers of Commerce, Dr Ali Auf, who spoke of the progress and ambitions ahead.

"For the first time, Egypt will be manufacturing oncology drugs, diabetes drugs, hormones, and biological drugs," he said, adding that more drugs will be announced this year for local production.

Egypt currently has 180 licensed pharmaceutical manufacturers and 2,000 manufacturers working alongside other firms.

Overall sales in the country's pharmaceutical market in 2023 was $3.88bn, up 15% from 2022. That was worth 120bn Egyptian pounds, with 94% of the medicines consumed manufactured locally. 

Around 90% of the inputs used were imported, as is common with manufacturers in Europe and the United States, where raw materials come from India and China, he said. According to Auf, Egypt imports about $3bn of raw materials annually.

Ambitious plans

Egypt currently imports about 95% of its oncology drugs.  But it has an ambitious plan to change this. A production line is currently being set up to manufacture them, run by SEDICO Pharmaceutical.

By the end of October 2023, Egypt was exporting about $1bn of human and veterinary medicines, nutritional supplements, and medical and cosmetic supplies. These exports are expected to increase by about 10% during 2024.

Egypt aims to reduce its import bill by 10% to 15% by localising medicines as alternatives to foreign-produced drugs. In one case, a gland medicine which costs $40mn a year to import is now being made in-house with raw materials costing $200,000.

"Because the development of Egypt's pharmaceutical industry is considered paramount to national security, dollars are set aside for the industry on a priority basis," Auf explained.

"You can almost always find a cheaper substitute drug at every pharmacy in Egypt, but a culture change is needed, in doctors and patients alike, to accept locally-produced medications," he added.

According to the EDA, the number of licensed pharmaceutical factories in Egypt has gone from 130, with 500 production lines in 2014, to 191 factories, with 799 production lines – a growth rate of 37% and 60%, respectively.

The Ministry of Health disburses 40bn Egyptian pounds' worth of medicine annually to patients free of charge via various state mechanisms to ensure access to drugs in times of economic crisis.

Long history of localisation

Localisation of drug production in Egypt can be traced back to 1937, according to Dr Jamal Al-Laithy, the head of the Chamber of Pharmaceutical Industry in the Federation of Industries and Future Pharmaceutical Industries.

Speaking to Al Majalla, he said that Egypt's Nasr Factory has produced raw medical materials since 1965, adding that plans are currently underway to set up four more factories of this kind, while another has already begun production, which would cover between 5% and 7% of domestic needs.

"Egypt needs more than 40 factories to produce raw materials," he added.

Al-Laithy blamed the crises in the drug market on broader global geopolitical and market turmoil, as well as a dollar shortage in Egypt. The high cost of importing raw materials has led to shortages in some medicines up to 20% to 25% at the moment, he explained.

But, on a positive note, Egypt exported $1.5bn worth of medications in 2023, and investment in the pharmaceutical market was estimated at a whopping $16.2bn, pointing to the growing potential and confidence in the sector.