Pharmaceutical manufacturers have underperformed, failing to deliver 4.1 billion Br worth of medicines to the Ethiopian Pharmaceutical Supply Service (EPSS) over the past two years, according to a recent assessment. The Service’s performance rate for 2023/24 stands at just 51pc, leaving essential medicines like amoxicillin and paracetamol in short supply.
At a recent meeting to address the crisis, Solomon Nigussie, EPSS deputy head, criticised manufacturers for delivering less than half of the 100 types required. He said that the sector is characterised by issues such as missed delivery schedules, low production capacity, and poor performance, especially regarding the 80pc of medicines categorised as essential.
The EPSS issued a nine-billion-Birr tender four months ago for 14 local manufacturers to supply 100 types of medicines. Abdulkadir Gelgelo (PhD), EPSS director general, warned that missed delivery schedules would result in penalties. “Penalties will follow if delivery schedules are missed,” he said. He urged manufacturers to improve production capacity and delivery timelines.
Despite receiving up to 25pc price preference over international suppliers, local manufacturers have delivered only 47pc of contracted amounts. They face problems such as low production capacity, supply chain disruptions, and limited investment in research and development.
Manufacturers at the meeting cited financial constraints, high operational costs, and delayed payments from the EPSS as barriers to production. They also blamed fluctuating input prices, which further complicate efforts to meet demand and improve productivity.
Ethiopian Pharmaceutical Manufacturing SC, East Africa Pharmaceuticals Plc, Addis Pharmaceuticals Factory SC, and Cadila Pharmaceuticals have secured contracts through direct tendering to supply 10 types of medicines. The procurement process for restrictive tenders is set to conclude within weeks due to unresolved complaints from manufacturers.
Daniel Waktole (PhD), president of the Ethiopian Pharmaceuticals Suppliers & Manufacturers Sectoral Association (EPSMSA), says payment delays are affecting manufacturers’ working capital and their ability to deliver products on time. The lack of flexible financing has hindered the industry, according to him. The Association has submitted a letter to the Public Procurement Authority (PPA) and the Ministry of Finance (MoF) addressing price variation concerns.
In response, Abdulkadir acknowledged the difficulty of adjusting prices due to fluctuating raw material costs. However, he said that EPSS is negotiating with the Commercial Bank of Ethiopia (CBE) to provide credit to manufacturers. “Though preconditions must first be met,” he said.
Last year, Kilitch Estro Biotech Plc, an Ethiopian-Indian joint venture, secured a direct contract worth 522 million Br to supply medications to EPSS. Daniel Waktole (MD), also general manager of the company, noted that local pharmaceutical manufacturers have capacity but are hampered by persistent problems.
Tadesse Teferi (MD), CEO and shareholder of Africure Pharmaceuticals Plc and board chairman of the Association, said, “The industry is at a critical point, facing the possibility of collapse or revival.” He stated that issues like low productivity, outdated technology, and regulatory hurdles continue to disrupt the sector.
He also blamed tendering delays, payment bottlenecks, factory closures, and customs complications related to under- and over-invoicing.
Four months ago, the EPSS issued a tender to procure over nine billion Birr worth of products from local manufacturers through direct and restrictive tendering. The tender required local manufacturers to quote prices in Birr, while foreign suppliers could continue quoting in hard currencies. Although a new directive allowing local manufacturers to quote in foreign currency is pending, many have cited the difficulties in sourcing large amounts of foreign currency.
Established in 1947, the EPSS supplies drugs and medical equipment to 5,000 health institutions nationwide through 19 outlets. In the last fiscal year, it distributed medical supplies worth 51 billion Br, sourced from donations and procurement.
Program medicines, funded by the Ministry of Health (MoH), account for 70pc of the Service’s distribution, with a budget of 21 billion Br for 2023/24 fiscal year. These include 100 types of essential medications. The remaining 30pc, budgeted at eight billion Birr, cover revolving fund medicines for chronic disease treatments and routine medical supplies.
Ras Desta Memorial Hospital, serving half a million patients annually, is grappling with severe medicine shortages and rising drug prices. Teshome Hunde (MD), the hospital’s director, described the situation as strained and complex. He says that the hospital faces critical shortages of essential medications, particularly for treating non-communicable diseases, which are increasingly common among patients. Despite an annual procurement budget of 100 million Br, more than 50pc of the required medications remain unavailable, affecting patient care.
“Shortage of supplies is the main issue,” Teshome said.
Getasew Amare, a health economist, noted a large gap between demand and supply, hindering progress toward universal health coverage. “Resource and financing gaps remain a major problem,” he said.
Getasew also pointed to poor communication between the EPSS and health institutions, leading to procurement decisions made without proper market assessments. “End-user preference has played a minor role,” he stated.
He recommends the inclusion of professionals and policymakers with a thorough understanding of the health market to accurately assess demand and address supply issues. “Health sector governance remains a big problem,” he said.
Getasew worries about declining international funds, which previously covered 30pc of medical supply needs. This shortfall forces the government to shoulder the burden, creating financial strain. He urged strategic government investment, calling for increased health sector budget allocations and improved data management to aid decision-making.
Loading your updates...