Authority Opens Contract Manufacturing to Shore Up Drug Supply

Feb 28 , 2026. By BEZAWIT HULUAGER ( FORTUNE STAFF WRITER )

Federal drug regulators are redrawing the rules of the pharmaceutical industry, allowing manufacturers to outsource parts of production while remaining responsible for the finished medicine. After years of insisting on a single and integrated plant model, the Ethiopian Food & Drug Authority (EFDA) is opening the way for contract manufacturing, a response to chronic shortages of basic medicines and underused factory capacity.

Federal drug regulators are rewriting the rules for how medicines are made. After years of insisting that manufacturers handle all stages of production under one roof, they are now opening the door to contract manufacturing.

Companies will be allowed to outsource parts of production while still bearing responsibility for the finished product, a shift meant to unlock idle capacity, cut investment costs and ease chronic shortages of basic medicines.

Girma Ababi's experience as managing director and CEO of Liyana Healthcare Plc shows what is at stake.

Girma had planned to build his own plant at Qilinto Industry Park. Pre-construction work alone was estimated at 30 million Br, while putting up the facility would cost about 40 million Br. Before a single tablet rolled off the line, the company would have had to commit at least 72 million Br.

Rather than abandon the project, Girma is shifting into the new scheme. Liyana Healthcare has formed a joint venture, SI Liyana Engineering Plc, with Indian firm SI Engineering and another subsidiary, Liyana Oxy. Instead of building a full-scale plant from scratch, the Group plans to manufacture medicines under contract, using the framework to spread risks and investment.

“The first target will be nine high-demand medicines that are in short supply at the Ethiopian Pharmaceuticals Supply Service,” said Girma.

For officials at the Ethiopian Food & Drug Authority (EFDA), the bet is that contract manufacturing will widen participation without compromising standards.

Dejene Daba, head of the Authority’s Medicine Manufacturers Inspection & Enforcement Desk, argued that the scheme will help increase access to medicines and local supply. Companies that cannot build their own plants can join the system, while those with unused shifts can contract out capacity.

The directive also allows foreign direct investors to participate.

Under the agreements, unfinished pharmaceutical products can be imported and completed locally. Officials hope that will reduce foreign-currency spending by replacing finished imports with value-added goods produced at home, while making medicines more affordable.

“The foreign currency savings are significant,” Dejene told Fortune.

The Group is also assembling medical devices and preparing to make equipment for intensive care units. Girma expects operations to be up and running within six months. If production proceeds smoothly, he hopes to revive his initial factory plan.

Pharmaceutical company investment is said to take up to 1.5 million dollars, while medical device manufacturing and assembly take up to one million dollars.

Sector data show why officials are searching for new tools. According to the Ethiopian Pharmaceutical Association, by the end of last year, the country’s pharmaceutical market was worth 1.8 billion dollars. Imports of medical and pharmaceutical goods have fallen by 44.3pc to 194 million dollars during the first five months of last year.

Despite market growth, local manufacturers have lost ground. They now supply only eight percent of total pharmaceutical stock, down from the 25pc share they once commanded.

Of the 800 varieties of medicines procured for 10 billion Br, domestic producers accounted for only 13pc, while the state enterprise covered 75pc. During a half-year report, Prime Minister Abiy Ahmed (PhD) told Parliament that the share of locally supplied medical devices and inputs had risen from eight percent to 42pc.

Regulators insisted that flexibility on who makes what does not mean cutting corners on quality. Companies are required to comply with current “Good Manufacturing Practices.” Of the 15 companies currently involved, six are in the process of meeting the World Health Organisation’s (WHO) standards.

“The quality of medicine is as important as its supply,” Dejene said.

The directive applies to manufacturers of solid oral dosage forms such as tablets and capsules; liquid oral forms, including syrups and powders for reconstitution; and topical, non-sterile external preparations. It does not extend to partial contract packaging limited solely to primary, secondary or tertiary packaging. It also excludes semi-processed products whose bulk manufacturing is incomplete and not yet ready for packaging, as well as complex products such as advanced therapies and injectables.

According to Dejene, the Authority makes the final decision on each contract after verifying that regulatory and compliance requirements have been met.

For companies already running at full tilt, the new scheme offers less immediate relief.

According to Yoseph Argaw, deputy general manager of Humanwell Pharmaceutical Company, conditions have worsened as fuel shortages compound pressure on manufacturers. His company is now operating around the clock in three shifts. In the past, pharmaceutical firms were given priority access to foreign currency to import essential inputs, alongside fertiliser and fuel.

“It would have been a real opportunity for us if there were idle production space available,” he said.

Others see the policy as an opportunity to rationalise a fragmented industry.

Desalegn Gebrehawariyat, who has worked in pharmacy administration and clinical pharmacy for two decades, believes the new approach will lead to lower prices by cutting the load of diversified work and allowing manufacturers to specialise.

According to Desalegn, failures in good manufacturing practice can lead to products being recalled after distribution, with losses in foreign currency and imported inputs.

“Companies that meet standards can export their products, but those that fall short risk costly write-offs,” he told Fortune.

Desalegn attributed the industry’s foreign-currency strain to forecasting failures. Poor demand forecasting, he argued, has left Ethiopia with expired or underused medicines that are wasted. He believes the Ethiopian Pharmaceuticals Supply Service’s started committed-demand system will help improve forecasting by tying procurement more closely to confirmed needs.

“If there is nothing wasted, the biggest burden has been lifted on the hard currency,” he said.

PUBLISHED ON Feb 28,2026 [ VOL 26 , NO 1348]