Country Report: Algeria

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ALGERIA: A Regional Champion Coming of Age

Newcomers to Algeria's fledgling but increasingly vibrant pharmaceuticals sector are immediately struck by the sense of liveliness pervading the industry. Indeed, as growth patterns in developed markets continue to flatten, and the protagonists of 'big pharma' pivot towards securing new revenue sources in emergent economies, Algeria must surely constitute one of the more exciting African prospects on offer.

Credit: Mustapha Raith, mustapha@raith.fr

What may formerly have been considered a healthcare backwater today ranks as the second largest pharmaceuticals market on the continent, worth some USD 3 billion. Add to that a population of 38 million, a double-digit sectoral growth rate and a GDP per capita projection of USD 5,694, and the investment worthiness of Algeria's healthcare and life sciences sector becomes starkly apparent.

Minister of Health, Abdelmalek Boudiaf, with the American ambassador in Algeria and GE executives at the signing of the MoU with GE

For many pharma companies, of course, the true appeal in Africa lies not so much in its size per se – the continent accounts for just three percent of the global economy – but rather in the dynamics that drive sustained growth and the mounting demand for novel treatments.

Hocine Mahdi, country manager, IMS Health Algeria

For Algeria, though, the signs look promising. This is because the Maghreb remains locked in the midst of a demographic transition in which the proportion of adolescent and elderly populations are increasing simultaneously, heralding escalating healthcare demand on both fronts. Combined, they are forecast to account for an incredible 42 percent of a 100 million strong populous by 2020. This is further compounded by a shift in epidemiological profile from infectious disease to chronic, non-transmissible 'lifestyle' illness, requiring ever more complex and costly treatments. "Algeria is the sleeping giant of a North African region that is slowly awakening," observes Professor Farid Chaoui of the Euro-Mediterranean think-tank, IPEMED.

The hyperactive state

Even when compared to its illustrious North African peers, the Algerian market would seem to enjoy a decisive edge. As neighboring healthcare systems confront a future characterized by fragmented health coverage, runaway costs and overburdened infrastructure, the Algerian model, with its unique brand of state reimbursement, guaranteed patient coverage of over 85 percent, bulging state coffers from hydrocarbon rent and wholesome public infrastructure expenditure offers an altogether more robust proposition. "It's a growing market with a large purchasing power unlike its neighbors," explains Saleh Daghbooshe, general manager of Dar Al Dawa. "Tunisia is far smaller in terms of population and Morocco does not have anything like the same customer purchase capability."

Ralf Halbach, North & West Africa general manager, Roche

"Right now is a momentous juncture for Algerian healthcare," agrees Varian's vice president for Africa, Burt Lang. "The government is showing real drive to confront chronic disease head on and that makes it an exceptional time for a multinationals like us. The business opportunity, the need and the commitment from all sides coincide. It's not like we're building the stadium and hoping that people will turn up. We already have the game!"

Peter Ulvskjold, Algeria general manager, Novo Nordisk

DREAMS, DRAMA AND DISRUPTION

At heart, Algerian pharma represents a frontier industry in which the adventurous will encounter their fair share of risk and reward. Pfizer, which enjoys the distinction of being the first multinational to take the plunge into local manufacturing, has first-hand experience of this. "We are talking about a market that is undoubtedly full of promise, but also one that is commonly regarded as one of the toughest to master," explains country manager, Amina Hamoutene. As might be expected of what she terms a "still relatively immature" market, there are plenty of quirks and unusual features. On the one hand, there is a whole array of opportunities that investors would find hard pressed to identify elsewhere in the region. "In the Middle East, you generally find pure branding markets. The main difference with Algeria is that it is both semi-branding and semi-commercial," notes Essam Farouk, the CEO of Saudi-Jordianian owned local outfit El Kendi. "This is extremely exciting for a company like us because it allows us to be bold in two different directions – both on the marketing side and the manufacturing side," Farouk adds.

Dr. Hamou Hafed, director general of pharmacy and medical equipment, Ministry of Health

Yasser Farghaly, country manager of Janssen, makes a similarly upbeat analysis. "Algerian healthcare presents unparalleled market opportunities both on the retail side and for the hospital business," he declares. "We're seeing double digit growth virtually everywhere and the physicians are increasingly brand conscious. On top of that, local manufacturing is performing well, now that it is highly backed by the government. It's a unique combination."

Djaouad Brahim Bourkaib, director general of social security, Ministry of Labour & Social Security

Perhaps the most attractive draw of all, however, is a distinctive healthcare system of near-universal coverage free-at-the-point-of-delivery treatment in which 'solidarity' and 'accessibility' are the watchwords. Not only does this contrast strongly with the out-of-pocket expenses systems typical across the MENA region, but it brings considerable rewards from the perspective of the pharmaceutical provider. "It is amazing that even chronic conditions such as cancer are fully reimbursed by the state. This is a real luxury that translates to guaranteed sales for the pharma companies. Even across the wealthy Gulf states, it is rare to come across an equivalent," opines Farghaly. "When you consider the comprehensive social security system you have here, you might even say Algerian healthcare is more akin to that of a South European economy," affirms Sandoz Algeria Country Head, Cherif Benguerba.

Dr. Abdelouahed Kerrar, president, National Union of Pharmaceutical Operators (UNOP)

Tempering these selling points, though, lies an equally bewildering array of characteristics that many an investor would regard as inconvenient, if not downright disruptive. For instance, "one of the eccentricities of the Algerian pharmaceutical sector has been the woeful lack of a centralized distribution," observes Deloitte Algeria's partner, Arnaud de Rincquesen. "Unlike many countries where cooperatives have been established to fulfil this function, the producers of medicines find themselves forced to shoulder the logistical burden of distributing to thousands of pharmacies, many of which are sluggish in paying for what they have purchased," he explains.

Mohamed El Hadi Benamar, general manager, Ferring

Also troublesome is the lack of market data on which to base sound decision making. Algeria is still in the starting blocks with regard to data collection at hospital level," remarks IMS Health's country manager, Hocine Mahdi. "There are currently approximately 100 private wholesalers who are operational in retail market and our panel is representing more than 70 percent of the market thus allowing us to offer a strong retail audit. Acquiring hospital data is more complex due to the monopoly of the PCH which means we require an official approval from the Ministry of Health. We are confident, though, that we can build a strong partnership with the health authorities in which strong collaborative relations with the PCH form the first step," he asserts.

Abdelmalek Boudiaf, Minister of Health

A seriously disjointed market is another hallmark, with a plethora of different actors, many of which are small family-run outfits with limited managerial and business development awareness. "It's the sort of splintered marketplace where you'll encounter a high volume of one or two-man start-ups such as the pharmacist who's set up a tiny distribution entity just to ensure a steady supply to his store," points out one industry insider. "There is certainly a general unwillingness on the part of this multitude of family firms to consolidate the market to a level where suitable size investments in R&D can be made," agrees de Rincquesen.

Growth spots and uncovered niches

CULTURAL IDIOSYNCRASIES, LOCAL ADAPTATIONS

Then there are the bountiful cultural and social endowments that render Algerian pharma a fairly unique marketplace for doing business and, more often than not, call for the adoption of improvised and non-conventional solutions. "Trying to transplant a one-size-fits-all approach over here simply won't work," affirms Roche's head of North West Africa, Ralf Halbach, "awareness of local sensitivities and adjusting your medium, message and entire marketing approach to fit the indigenous culture is of paramount importance if you strive to be successful."

Noureddine Ioutichene, executive dir. managing director algeria, MSD

Danish healthcare company Novo Nordisk is one foreign incomer that has won plaudits for actively leveraging local culture to improve treatment of a chronic disease. "We have been collaborating with the Ministry of Religious Affairs and successfully enlisting the imams in the mosques to promote diabetes prevention and raise awareness of the dangers of diabetics dramatically changing eating patterns during the holy month of Ramadan," recalls general manager, Peter Ulvskjold.

Pierre Labbé, CEO, Sanofi Aventis Algeria

Likewise, AstraZeneca is demonstrating effectiveness in harnessing local customs to realize positive healthcare outcomes with its plans to mobilize all-women ambassadorial teams to widen understanding of woman-centric illness such as breast cancer. "We understood that by far the best approach would be to work with the local culture on the ground. It was obvious to us, that women themselves would be the appropriate messengers for transmitting this knowledge," explains general manager, Habib Bennaceur.

Essam Farouk, CEO, El Kendi

Para-pharmaceutical manufacturer Faderco, meanwhile, has made inroads into overcoming the taboo of elderly incontinence by smart product placement of its adult nappies in local supermarkets and corner shop groceries as a highly visible complement to the traditional distribution channels. "We were actually the very first company to start to communicate 'femcare' products. Massive promotion across diverse media helped us to break the psychological barrier within consumers. Nowadays consumers are more open-minded and the purchase of femcare products no longer considered taboo," proudly remarks the company's general manager, Amor Habes.

The Janssen approach to tackling Algeria’s evolving disease profile

"The fields of gynecology and obstetrics require a certain degree of cultural sensitivity in Algeria, such as ensuring that female patients are being seen by women practitioners, but demand is absolutely booming with a spate of new private fertility clinics opening their doors in the last couple of years," notes Ferring general manager, Mohamed El Hadi Benamar. "Right now there are more than 14 specialized fertility clinics in the country and more are on the way," he discloses.

Dr. Karim Bendhaou, President for North & West Africa, Merck

One rather common pitfall for new entrants, however, is to arrive in the marketplace with misconceived or outdated perceptions about Algerian society. "Algeria's business environment isn't widely known, though there are often erroneous perceptions. Generally, German firms come to Algeria with a question mark in their minds. They wonder whether the country is more West African or East African in terms of work style. First-timers then are often very pleasantly impressed when they discover that doing business in Algeria isn't that far removed from operating in Morocco or Tunisia," recounts Karim Azaiz of the Deutsch-Algerische Industrie-und Handelskammer (AHK).

Reda El Baki, general manager, CCIAF

Karim Achaibou, North Africa area manager of Innotech, is even more forthright. "Algerian culture is actually not half as conservative as it might appear at first glance. It is a complete misconception that issues such as contraception are taboo. In fact, when you compare the Algerian consumer to their peers in neighboring countries like Morocco, where superstition and non-conventional tribal therapies are rife, you will notice a stark difference. By contrast, the Algerian public tends to be well informed about treatments, brand conscious, and extremely respectful of a doctor's counsel," he reveals.

Burt Lang, senior managing director, Varian

THE VISIBLE HAND

One distinguishing trait of Algerian health and life sciences is the relentless presence of the state that permeates the entire spectrum of activities. This is manifested both in the healthcare arena, where an avalanche of state sponsored initiatives are underway to significantly raise the quality of provision, and in the pharmaceutical sector, which is directed from on high as a strategic industry of considerable national interest.

Arnaud de Rincquesen, partner, Deloitte Algeria

For his part, Algerian Health Minister Abdelmalek Boudiaf has been explicit in outlining his intent to "steer the system" to achieve positive social outcomes. "We are putting into action a coherent policy that will not only enable our pharmaceutical industry to meet the nation's needs, but ultimately to conquer outside markets as well. Algeria will not remain an eternal importer. We have the means and the opportunities at our disposal to determine the industry's future and will deploy them," he declares.

Amina Hamoutene, country manager, Pfizer Algeria

"Our priorities, apart from sustained growth of the drug market, revolve around the sorts of political lines that characterize any sensible pharmaceuticals policy: enhanced availability of and access to medication and championing the development of a strong home-grown pharmaceutical industry," concurs the ministry's director general of pharmacy and medical equipment, Hamou Hafed.

Algeria: Next clinical trial destination of choice?

"In addition to a youthful, but increasingly meddlesome regulatory framework, state orchestration of the pharmaceutical market generally takes place through two main power levers: The drug reimbursement/reference price systems and protectionism of local manufacturing against a tidal wave of foreign imported medicines," notes Abdelouahed Kerrar, president of the National Union of Pharmaceutical Operators (UNOP).

Pr. Farid Chaoui, project manager, IPEMED (Institut de Prospective Economique du Monde Mediterraneen, Euro-Mediterranean Think Thank)

Pharmaceutical companies trying to sell retail products are more or less compelled to strive for reimbursement. Failure to secure it effectively kills their product since a slice of the market will be unable to afford the costed medicine while the rest will prove unwilling, because the consumer is already in the habit of expecting the state to pay for his medication.

Boumediene Derkaoui, CEO, Saidal

"Algeria has been vigorously promoting generic products wherever they exist because it is less expensive" admits the government's director general of social security, Djaouad Bourkaib, "because, providing they conform to the requisite quality standards, they offer the same therapeutic benefits as the originator drugs, but for a mere fraction of the price." "Some actors are very critical with regard to the reimbursement committee comments, but we have no choice: the growth of drug reimbursement expenditure in Algeria has been in double digits for the last 5 years (between 15 and 20%). It is simply not economically feasible to reimburse the totality of products available on the market," He explains. The government rationale is therefore that state enouraged import-substitution, local production and generic consumption are necessary measures so as to be able to release sufficient funding to pay for the treatment plans of "each and every citizen".

Farid Benhamdine, president, Algerian Society for Pharmacy

The state's reference price mechanism comes into play for all reimbursed products. "We inform the custodian laboratories that they must decrease their product prices so as to end up with a preferential price in Algeria compared to the price in the home country," explains Bourkaib. "The rationale for this approach is very simple: the laboratories are well aware that the Algerian state doesn't possess the same means as some OECD countries, but is able to ensure sales volumes once it grants reimbursement. This assured volume offers laboratories enough leeway to comfortably make some concessions by revising their prices downwards."

Tips for new market entrants

Some multinationals, however, suggest that the end-effects can actually be far from comfortable. "We've experienced instances where Algerian prices for some of our products have been hammered well below their equivalents in Tunisia and Morocco, all because of an unexpected price plummet back in France," explains the Guillaume Seillier, country manager of French company Servier.

Novo Nordisk’s manufacturing facility in Tizi Ouzou

PUTTING OUT THE WELCOME MAT

Whatever inconveniences an MNC can expect to encounter as a result of state institutions tinkering with the market, there can be absolutely no doubt that foreign investment is welcomed and highly sought after by government and local private enterprise alike. FDI inflows currently stand at USD 1.5 billion, 65 percent of which represents investment in industrial sectors such as pharmaceuticals and infrastructure.

The human resourcing conundrum

According to Health Minister Boudiaf, the government has deliberately set about creating an enabling ecosystem in which pharmaceutical investment can flourish. "We have gone out of our way to foster an investment friendly environment unique to the region – a secure and solvent context, concessions, five year tax exemptions, land zoning systems and much else – because we understand that the collaboration of our foreign partners is an essential component to the realization of our vision," he points out.

Sofiane Achi, head of prescription medicine North French West Africa, Boehringer Ingelheim

Many multinationals testify to the reality of the state's efforts to entice investment and to back foreign-initiated projects that generate positive health outcomes. "Regardless of whatever specific incentives the state might offer to multinationals to invest at a single point in time, the Algerian government has a long track record of encouraging the overall growth of the sector. The intent on the part of the state is clear for all to see. The government is firmly 'with the industry' so to speak; this matters a great deal to us," explains El Kendi's Essam Farouk.

Malik Ait Said, general manager, Propharmal

"The government's action is stimulating the private market and this is precisely why we have come," agrees Varian's Burt Lang. "If your business project benefits the nation you can rest assured that the ministry will prove willing to throw its weight behind it," confirms Pierre Labbé, CEO of Sanofi.

Opening the gates to a southern corridor

What is perhaps most interesting, however, is the Health Ministry's redrawing of the rules of engagement and manner in which it wishes foreign firms to participate in the market. Foreign firms are now strongly incentivized to launch into local manufacturing and other forms of activity that maximize the opportunity for technology transfer. "We do not expect that international companies place their entire product lines in Algeria, but it is legitimate to request transfer of technologies in order to develop the domestic industry, especially since government incentives are highly advantageous to investors," clarifies Hamou Hafed.

Habib Bennaceur, country manager, AstraZeneca

"For several years now, the health authorities have been preparing the ground for pharmaceutical companies to not only 'do business' but also, to entrench themselves within Algeria and actively contribute to the evolution of different facets of the industry such as the risk prevention-side, continuous education and clinical research," confirms MSD Algeria's executive managing director, Noureddine Ioutichene. "This is an immensely positive step enabling both foreign private enterprise and the host country to blossom and flourish."

Amor Habes, general manager, Faderco

One example of this new approach has been the multi-million dollar contract awarded to Varian for the supply of linear accelerators and radiography equipment to the new ACCs being established across the country. "The ministry was very clear that they were not looking for the type of company that sells equipment and then disappears, but rather a firm that would commit to establishing a local entity offering after-sales service in the sense of training clinicians and supporting the long-term operation and maintenance. In short, a genuine partner properly vested within the country," explains Burt Lang.

Guillaume Seillier, country manager, Servier

The same can be said of tenders for the new CHUs that have been contracted out to leaders in hospital construction and management. "We have been enlisted as real collaborators to provide a real turnkey solution that will be all ready to 'plug-in-and-play' when we hand over the keys," explain Nicholas de Roquefeuil and Thomas Hinterleitner of the Bouygues Batiment International-VAMED-APHP Consortium, recently awarded the contract for the construction of a brand new CHU in Constantine. "This is about a foreign management supported hospital. We categorically don't see ourselves as the private operator. Instead we are the guys who deliver the international expertise to a local management team so as to eventually enable them to take full charge of the day-to-day operations."

Such an approach also stands to benefit many of the old-timers in the market who have for many years been endeavoring to align their in-country strategies with the government's policy agenda and to distinguish themselves from superficially integrated competitors that set up a 'bureau de liaison' to flaunt their products and then repatriate the profits without making any kind of tangible investment. "We endeavor to marry with the local strategy of the authorities and respond to whatever the government is trying to put in motion," reveals Pfizer's Amina Hamoutene. "The gusto with which we have embraced local manufacturing demonstrates this. We are keen to impress upon the government that we are the real deal, an authentic partner."

KÃ¥re Schultz, president & COO, Novo Nordisk

PROTECTING ONE'S OWN

Any foreign investor seeking to engage in a joint venture with a local entity is obliged to abide by Algeria's notorious 49/51 ruling, which limits the participation of a foreign investor in a local company to a maximum shareholding of 49 percent. First implemented in 2006 for the hydrocarbons industry, the regulation was expanded in 2009 to cover investments in all sectors of the economy, thus impacting the pharmaceutical community. Despite its initial controversy and fears that the measure would dampen investor confidence, the volume of foreign firms engaging in local partnerships nonetheless continues to increase unimpeded.

Ismael Chikhoune, president & CEO,US-Algeria Business Council (USABC)

On an intellectual level, if you follow the logic of a foreign investor, this is of course looks terribly out of kilter with the norms of globalization, but appearances can be deceptive as Karim Bendhaou, Merck Serono's President for North and West Africa, explains: "The 49/51 percent ownership requirement could be a matter of concern for a foreign investor out of fear of losing control over business. Nevertheless, contracts still permit to influence the structuring of the factories and the fabrication units, so in this regard Algerian law does allow for a certain degree of flexibility and permissiveness between pact partners."

Jeffrey P. Kemprecos, executive director Emerging Markets Public Policy, Merck/MSD

"Indeed, the rule stipulates that, in any joint venture, the Algerian partner must necessarily be an Algerian incorporated entity owned 51 percent by Algerian nationals who are at the same time Algerian residents. It does not say the partnership has to be necessarily structured as a 49/51 percent joint venture so that in itself allows for workarounds such as the subcontracting of local content by foreign bidders," explains Samir Sayah, lead partner at CMS Law firm. "Besides, any foreign investment in partnership which contributes to the transfer of know-how towards Algeria, automatically benefits from tax and tax-like benefits so there are ample financial incentives to offset concerns about the rule itself."

Saleh Daghbooshe, general manager, Dar Al Dawa

"It is certainly the case that Algerian pharma is the kind of market where companies fall on their feet; there's something in it for everyone," muses the general manager of the French-Algerian Chamber of Commerce (CCIAF), Reda El Baki. "None of our members have quit the market over JV rules. They're all too busy making a profit. With return on investment generally of the order of 10 to 12 percent out here, the mood is buoyant; so much so that our members have felt fairly insulated from the global economic downturn."

Others, however, disagree and claim that the inflexible joint venture rules create what Deloitte's Arnaud de Rincquesen terms a "lopsided and distorted market" in which an entire strata of international SMEs is absent. "While big pharma can leverage their influence in other ways, the very SMEs usually tasked with pioneering innovation find themselves unable to relinquish that amount of control so are effectively locked out of the market," he says. In his analysis, it would be unwise to overlook the importance of these SMEs because it's "precisely those companies that are dynamos to growth, not the giants."

Meanwhile, Karim Azaiz of AHK argues that he has himself witnessed this very trend amongst the chamber's members with "technologically innovative family-run German enterprises dissuaded from entering into fully fledged joint-ventures and opting just for distribution agreements instead."

RAGING AGAINST THE MACHINE

In many respects, it is not the rules themselves that stakeholders have a problem with, but more the manner in which they are applied and the regularity with which they are amended. Compared with developed countries, Algerian tax codes and fiscal burden can be described as neither complex nor onerous, but they can be faulted for a lack of stability. References to the "bureaucratic black box" and "revolving door of health ministers" (no fewer than seven in the last ten years, each with their own entourages and ideas) are commonly voiced.

"We want to improve our ranking but ultimately there are entrenched hurdles that are hampering our progress – essentially the long timeframes for getting new products registered and the unpredictable and opaque regulatory and legal frameworks. Pfizer is essentially an R&D company. The mainstay of our business should therefore be introducing new molecules that are too difficult to manufacture on the ground in Algeria" laments Pfizer Algeria's Amina Hamoutene.

"Product registration procedures are long and there is ordinarily a lag time of several years between the introduction of a new molecule in Europe and its arrival in Algeria," explains Chiesi Algeria's country manager, Karima Sadok. "All too often, Algerian doctors misinterpret this and think that international firms are reserving their latest generation products for their home markets. This is far from the case. We are trying our very best, but battling the bureaucratic machine is heavy going."

The government, for its part, is sympathetic to these concerns and realizes that the bureaucracy still has much to do to optimize its standard operating procedures so as to speed up registration times. Director General of Social Security Djaouad Bourkaib is nonetheless keen to assure all stakeholders that the registration and reimbursement processes are clearly defined and conducted in a highly scientific manner. "Every decision taken is grounded in scientific fact taking into account therapeutic value, side-effects, effectiveness of active ingredients, the risk-benefit balance and cost-benefit ratio," he reaffirms.

Though she jokes that "Algeria must have inherited its bloated bureaucracy from France," Nadia Oka-Bousbia, bioMérieux's country manager, is not so much concerned by the turpitude of the system, which she sees as "gradually improving," as the fact that the rules of the game can change at a moment's notice. "Laws are so fluid and subject to amendment that it is tremendously difficult to formulate a development strategy that you can actually stick to," she sighs.

For some, the "chopping and changing" is symptomatic of a lack of direction. "What we really need is a dialogue involving all stakeholders so we can debate frankly what sort of industry and healthcare system would be optimal for Algerians as a nation instead of attempting to copy all sorts of existing models, not well adapted to our country," suggests the general manager of GSK Algeria, Mohamed Benali Khoudja.

For others, it is because power is dispersed across the bureaucratic apparatus, leaving no single agency fully in control. "There is an ideological choice to make: between a 'supermarket' healthcare system, where the individual gets treatment based on what he can afford, and a system that makes the case for solidarity and equity. Algeria has yet to settle the question, because there is a clear discrepancy between the official political discourse, which advocates for solidarity, and administrative reality that seems to favor the haves," remarks IPEMED's Farid Chaoui.

PICKING WINNERS?

One area where Algeria has scored notable successes has been in developing a homegrown pharmaceutical manufacturing base, even if the government's ambitious target of 70 percent local production still remains some way off. A cursory comparison with neighboring Morocco and Tunisia reveals the scale of this achievement. In contrast with other Maghreb markets that are dominated by foreign firms, 80 percent of Algeria's medicine manufacturing capabilities are owned by Algerian nationals, with many having proved more than capable of holding their own against incoming foreign competition.

Boumediene Derkaoui, CEO of Saidal, Algeria's state-owned pharmaceutical company, urges people not to underestimate the feat of growing an industry like this from scratch in such a short space of time. Saidal was created in the so-called 'dark years' of the 1990s, essentially to kick-start the government's agenda of pharmaceutical import-substitution and even today, continues to cast its influence, signing production agreements with foreign multinationals at a rate of roughly five per year. "We are proud of what we have built and Saidal's own specific contribution to the task," affirms Derkaoui. "Nowadays our laboratory is also regularly used as a reference price for calculating reimbursement."

Farid Benhamdine, president of the Algerian Society for Pharmacy, agrees that the local pharma industry is a "source of great national pride" and a great example of the country "pulling itself up by its bootstraps and learning the right lessons." He shares concerns of many, however, when he notes that "too much emphasis is being placed on volume and not enough on scaling the production value chain."

Indeed, a comprehensive study conducted in 2012 uncovered significant imbalances in the manufacturing base in terms of responding to market demand. While dry and suspension forms catered to 81 percent of consumption needs, there was a massive overcapacity of 70 percent for paste forms, ointments and syrups, representing an advance of 20 years on the market's need! Meanwhile injectable forms only met a mere 16 percent of consumption needs and other areas such as hormone production none at all. How to explain this market failure?

"This issue has nothing to do with our production capacity nor means" offers Mohamed Habbes, CEO of iconic indigenous producer Laboratoires Biocare "The problem stems from the fact that everyone does the same and produces identical products, especially when it comes to generics. We need to develop new molecules, expand the product lines. Algerian companies need to stop mutual infringement and copying."

For Salim Habes, CEO of another of Algeria's more successful pharma manufacturers, INPHA-MédiS, the reason is primarily down to an "asymmetry of information." "Entrepreneurs setting out in the market gravitate towards the easiest forms of production with little information as to what competitors are doing and end up engaging in duplication and market skimming." "The responsibility therefore lies squarely with the government to impose some form of corporate strategy externally," he suggests.

"What is actually required," argues Benhamdine, "is an independent and autonomous National Agency for Pharmaceuticals to carry out this function by centralizing the technical and administrative validation activities. This is because current responsibility is split across the Ministries of Health, Industry and Labor, which leads to the prevailing inaction and impasse."

Others diagnose the root problem as being more to do with a widespread and systemic lack of quality standards. "This all stems back to a landmark decision taken by the authorities to promote local production at the expense of imports," explains Propharmal's general manager, Malik Ait Said. "Basically, the state decided to exempt local manufacturing from the sorts of bioequivalence studies that imported generics are subjected to. To me this move was just as significant as the 2008 regulation prohibiting the import of any molecule already produced locally. It may have boosted local manufacturing in the short-term, but has damaged its quality in the long-term and stymied its potential for value advancement."

What seems likely is that government and the local business community alike are banking on joint ventures and technology transfers to help liberate local manufacturing from the doldrums and propel it to the next level. Fortunately, foreign multinationals appear more than ready to answer the call. "Many local plants are not operating to full capacity and their business processes may be below par, and this is precisely where international companies like BI can be of real assistance, by leveraging and sharing our globally validated expertise," proposes the Boehringer Ingelheim's Sofiane Achi.

"Private enterprise has the potential to play a very active role in the development of Algeria's pharmaceutical industry in terms of training, technology and know-how transfer, such as good manufacturing practices, quality assurance and pharmacovigilance," says Merck's Karim Bendhaou.

LEADERSHIP PROWESS

To what extent, then, can Algeria realistically be considered a regional pharmaceutical leader? From a business development perspective, the high volume of multinational pharma companies opting to base their regional headquarters in Algeria is demonstrative of the strategic importance attributed to the country and market. AstraZeneca, the latest entity to follow the trend by converting its Algerian operations into a hub for francophone Africa, took the decision because "the right geo-strategic fundamentals were judged to be in place from favorable fiscal concessions to geographical positioning to political stability," according to country manager, Habib Bennaceur. Indeed, what makes Algeria an almost irresistible choice in the eyes of Faderco's Amor Habes, is "its physical location right at the gates of the African continent and the proximity to both positive demographics and a blossoming industrial base."

In terms of market size and value, the Algerian pharmaceutical sector would also appear to be well out in pole position relative to the rest of the region. "The Algerian market is one of the biggest in Africa and continually growing with a good social security coverage compared to many other countries in Africa. Hypertension, Diabetes, Heart Failure or tumours are becoming very substantial diseases and a key proportion of the Servier portfolio is well adapted to treating patients, who suffer from these conditions, more effectively. announces Servier's country manager for Algeria, Guillaume Seillier. In Algeria, an impressive governmental hospital development programme is in process and this is an opportunity for Servier to increase its cooperation with key actors from the hospitals for the mutual benefit of the patients. "Algeria has already turned the corner and matured into a great country," asserts Boehringer Ingleheim's Sofiane Achi. "It can be described as a healthcare locomotive for the Maghreb, maybe even for Africa."

When asked about the pre-eminence of the 'Made in Algeria' brand, however, opinions are much more divided. "I honestly don't think there's that much consumer consciousness of locally branded medicines," reflects Jamal Salem, deputy managing director of Salem Laboratories, "industry insiders are aware that the quality of certain domestically produced pharmaceuticals is now very high indeed, but the Algerian public tend to remain fixated on European brands." "It will take quite some time before 'Made in Algeria' achieves the recognition it deserves," agrees INPHA-MédiS's Salim Habes. "We're still trying hard to bolster the image of domestically produced pharmaceuticals on the home market, let alone regionally.

EXPORT SHYNESS

If there is one factor impeding Algeria from assuming the title of North African pharmaceutical giant, then it is undoubtedly the curious absence of the export-side of industry. Stories abound of pharmaceutical entrepreneurs and multinationals striving to export Algerian manufactured medicines to the surrounding region, but giving up because of the administrative complexities involved.

Laboratoires Salem, a local entity famed for having bought up BMS's Meymac facility in France, had been exporting as far back as 2007, but abandoned the strategy in recent years to refocus on the much more lucrative home market. Sandoz meanwhile, despite enjoying a global positioning at the forefront of bio-similar production, is refraining from introducing that technology to Algeria because of the difficulties associated with export. "We cannot produce bio-similars in Algeria or engage in manufacturing involving living organisms if we don't see an easy way of exporting what we produce. The local market would simply not be big enough to justify the investments that we would have to make for these types of manufacturing techniques," explains Cherif Benguerba.

Nadir Abderrahim, general manager of Industries Médico-Chirurgicales (IMC), which supplies medico-surgical devices to markets as diverse as Russia and Iraq, describes a daunting array of obstacles that prevent the execution of a smooth export strategy. "Not only are there the well-known difficulties in doing currency exchanges and navigating products through customs, but on top of all of that, the Algerian economy is so import-orientated that there is never sufficient outward bound container space. This means that your products end up sitting at the ports for months on end before boarding vessels, resulting in a considerable increase of logistics costs."

"Criticism of the export environment is legitimate, but less to do with the laws per se than about the reluctance of the bureaucracy to relinquish supervisory control over money transfers," clarifies Samir Sayah of CMS Legal. "When you export you are actually exempt from taxes, so this is more about the institutional mind-set of the bureaucracy, inherently suspicious of any kind of behaviour that could constitute repatriation of profits," he adds.

"These cultural relics from the Boumediene era that inhibit currency transfer risk clipping the potential of a sector that holds a great deal of promise," says Dar Al Dawa general manager, Saleh Daghbooshe. "In Jordan, you actually have the opposite story. Over there, everything is centered on a culture of export and you are encouraged to release your products on international markets from an early stage. I would very much love to see that sort of mentality transposed and nourished here in Algeria."

"To my mind, the Algerian government is missing an opportunity" declares Kåre Schultz, global president and COO of Novo Nordisk. "It is indeed a very peculiar situation when a country renders it easier to import than to export. Development models from across the world from China to India to Mexico testify to the national benefits accrued from having a strong export sector". "To be a regional leader it's imperative to have good interactions with other countries in the region, and that means free-flowing goods, people and payments. The irony is that the 'Made in Algeria' brand has huge potential, if only the authorities would allow other markets to familiarize themselves with it."

BETTING ON BIOTECH

Testament to Algeria's genuine ambitions of regional healthcare dominance, in June 2014 the authorities signed a memorandum of understanding entitled "Algeria Vision 2020" with the members of the US association PhRMA, with a view to establishing the country as a MENA-wide biotechnology hub by the end of the decade. Algeria would thus rank as the fourth such hub after similar ventures in the Boston, Dublin and Singapore.

Ismael Chikhoune, president of the US Algerian Business Council (USABC), which assumes a role of observer and arbiter to the 2020 initiative, explains that "Algeria was selected as the optimum location for a biotech cluster primarily in view of its strategic position as a gateway to Africa and the Middle East, its long track record of stability, sizable educated population and 'hands on' health policy."

The response of the international pharmaceutical companies to this news has been overwhelmingly positive, even if many consider the timeframes to be unrealistic. "Algeria should go slow and first start with "fill-and-finish" manufacturing before setting up a biotech industry. That way the local industry can gain experience by learning how to handle live products where the dosage and temperature require a high level of control and where high attentiveness to avoiding contamination is imperative" adds Merck Serono's Karim Bendhaou.

"It would certainly take real guts on the part of the biotech companies to manufacture biosimilars outside of their own facilities", ventures one industry insider. This is because the bulk is ordinarily manufactured only in one location so as to minimise the risk of ending up with two substantially different products.

"We are enthusiastic about Vision 2020 because this project speaks directly to our industry's two broad goals in Algeria: to advance human health and strengthen the innovative medicines segment," affirms Jeffrey Kemprecos, executive director of MSD Eastern Europe, Middle East and Africa. "While there is much low hanging fruit that government and industry might agree to pick, we also appreciate that business cycles are generally 90 days while changes in policy and legislation may occur on more of a 900 day cycle, so we won't despair if the process is sometimes slower or bumpier than we'd like. The main thing is we're heading in an excellent direction," he adds.

The ministry's director general of pharmacy, Hamou Hafed, seems calm and confident. "Biotechnology can be harnessed as an effective lever of scientific, technological and economic development," he notes. Thus, by sticking the course with Vision 2020, "Algeria should ultimately find it possible to generate sufficient critical mass to ensure substantial technology transfer."