Country Report: Morocco

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Morocco was among the first nations in Africa to develop a pharmaceutical industry over 60 years ago. "Our success grew from a framework where pharma companies needed to produce locally, which led to industrial investments in Morocco," explains Mohamed Houbachi, president of both Polymédic, a local producer, and AMMG, the Moroccan generics association. "This was a tremendous force in the development of the sector."

(PHOTO CREDITS: MOHAMED MELEHI | 2015 COURTESY OF LOFT ART GALLERY | WWW.LOFTARTGALLERY.NET)

But then the business model changed. "Instead of working on 100 percent local production, companies that wanted to enter the market in Morocco would launch their own products under license with local laboratories," Houbachi explains. This business model is still widely in place to this day. "Local pharma companies were only seen as providers for the local market, and not as a sector that could export and that, therefore, deserved to be developed."

"We find the following characteristics: an industry of small batches, heavily dependent on imports of APIs, with high manufacturing costs and limited economies of scale. With a situation like this, one might have doubted the future of our pharmaceutical industry, but no such thing happened for the manufacturers, who never lost confidence and faith in their industry," adds Abdelilah Lahlou, general manager of Iberma. "The infrastructure is there, and this is what has made the country successful: I have personally received representatives from other countries, who were amazed with what we managed to put in place in the country," he enthuses. "Bad days seem to be over and Morocco has found a dynamic for the development of its pharmaceutical industry which will take it further."

Morocco has clear ambitions: with a strong focus from King Mohammed VI on forging partnerships with other African countries, the country is keen to develop its pharma industrial base and export capabilities. Minister of Industry Moulay Hafid Elalamy has included pharmaceuticals in the list of "ecosystems," which will boost the Moroccan economy, according to the Ministry's Industrial Acceleration Plan.

The Moroccan market is also changing: the outcome of the 2011 Moroccan Arab Spring was very different from those of its neighbors. A referendum was held, which led to a new Moroccan constitution making access to healthcare a constitutional right. In April 2012, King Mohammed VI officially launched the Medical Assistance Plan (Regime d'Assistance Medicale – RAMED) across all regions of the country, with the aim of improving access to healthcare for the poorest segments of the population. Although universal healthcare coverage is still a long way off, RAMED now covers eight million Moroccans, with over 50 percent of the population covered with some form of social security in 2013.

Houssaine El Louardi, Minister of Health

"The social and political transformations experienced by Morocco and other Arab countries have helped raise our awareness, and changed our approach," explains Morocco's minister of health, El Houssaine Louardi, voted the country's most popular minister in January 2015. The government has put together a health sector strategy to take the country through to 2016, of which RAMED is a key component. "To overcome Morocco's health challenges, we must have mandatory, universal coverage, so that people can access care without having to pay up front," he explains.

Moulay Hafid Elalamy, Minister of Industry

SHIFTING SANDS: MARKET RESTRUCTURING

Part of the strategy for making universal healthcare achievable in Morocco is a series of price cuts: although in 2014, volumes increased 2.8 percent, the market in terms of value shrank by 4.7 percent during the same period.

Mohamed Houbachi, president, AMMG

"I believe that now, the worst is behind us: 2014 was really an annus horribilis for the sector," admits Abdelmajid Belaiche, director general of the Moroccan Association of Pharmaceutical Industry director general (AMIP). "Despite this, we hope that in 2015 things will start again on the right foot. AMIP agrees with the price cuts: they make sense in a country like Morocco, where people have difficulties accessing medicine. Medicine is not expensive in Morocco, but its citizens are poor. In this context, the cuts are very just." What the industry understood less was a four percent transfer of margins towards the pharmacy sector. "This transfer of margins hit us. We suffered more from this lowered margins than from the price lowering itself."

Abdelilah Lahlou, general manager, Iberma

Jacques-Henri Charpentier, director general of Bayer Healthcare Maghreb, explains that there are still some important steps left in the reform process. "The procedures concerning the Autorisation de mise sur le marché (AMM), the price decree, access to reimbursement, all this is still in play. The year 2015 should allow for extra clarification so that by the end of the year, beginning of 2016, we start with the politics of medicine having been clearly settled, and that will allow for the predictability that is so essential for MNCs."

Abdelmajid Belaiche, director general, AMIP

"The price decree hurt many laboratories, in particular the MNCs, and we are now waiting for accompanying measures and have already discussed this with the ministry. Indeed, the price cut is a laudable cause but now one has to ensure that the medicines are available on the Moroccan market," says Hubert de Ruty, country manager of Pfizer Morocco and president of MIS (Maroc Innovation & Santé), Morocco's association for innovative pharma companies. "The priority for us is access to treatments for patients, particularly important in an emerging country. This is likewise the priority of the minister of health, who is someone who has taken important decisions to really advance the debate and has put in place serious reforms impacting the daily lives of Moroccans."

Jacques-Henri Charpentier, director general, Bayer Healthcare Maghreb

GETTING THE GENERICS EQUATION RIGHT

"Today, generic medicine accounts for 30 to 35 percent of the market, but I truly believe that this share will grow in the coming years," says Mohamed El Bouhmadi, CEO of ZenithPharma, a fast growing Moroccan company.

"Morocco is a country highly classified by the World Health Organization, with a pharmaceutical industry that has been around for more than 60 years and plants that operate to European standards. So, the problem is not associated with the quality of generics. I believe that the generics consumption figure is low because of the lack of a comprehensive medical coverage system," says Driss Chaoui, director general of Afric-Phar. "However, with the current reforms being enacted by the government, we are seeing an improvement and believe that the consumption of generics will significantly increase."

However, it will be a long road to more than double the current rate of generics penetration, and there are still a number of legislative steps that could be taken in order to ease the transition. "70 to 80 percent of government tenders specify generic medicines. Products in these tenders are actually referred to under the international nonproprietary name (INN) system, and not under brand names," continues El Bouhmadi of ZenithPharma. "In order for generics penetration to soar, doctors should be able to prescribe using INN labels, and pharmacists should be able to substitute products. It's not possible as of today in Morocco."

Mohamed El Bouhmadi, CEO, ZenithPharma

WHY INVEST IN MOROCCO?

The long history of the Moroccan pharma sector has produced a relatively strong industry with undeniable expertise and skills.

Driss Chaoui, director general, Afric-Phar

Sanofi was one of the first companies to believe in the potential of Morocco, and today, that historical commitment shows: the company has a 20 percent market share in the country. "Sanofi has a historic presence in Morocco going back 60 years," explains Haissam Chraiteh, president and director general of Sanofi Morocco. "We were the first pharmaceutical company in Morocco with two affiliates, our own business, namely Sanofi, and a twin company, Maphar, which acts as a service provider and partner for a certain number of multinational laboratories."

Hubert de Ruty, president, MIS

Today, Morocco remains a strategic location for the company. "Ten years ago, Sanofi developed an innovative treatment for malaria. We created partnerships in Africa to deliver treatments at affordable prices. These programs developed well and at a certain point we needed to increase our production capacities. We chose Morocco as the place to do this, as it is an African country in which we already had a base and that was starting to develop in terms of regional importance. Ten years ago, we invested enormously in the production site and later in the development of export activity, " explains Chraiteh. In 2013, Sanofi renewed its commitment to Morocco, launching a new distribution platform, and receiving a visit from the company's CEO, "who opened this platform alongside the minister of health," he continues. "We needed to modernize our distribution capacity and, hence, the development of the new distribution center that allowed us to manage both our local production needs and our ambitions in Africa."

Haissam Chraiteh, president and director general, Sanofi Morocco

Another investor, Tecnimede, the Portuguese pharma company, chose Morocco as its first subsidiary outside Europe. "Tecnimede was established here in 1999," explains Khalid El Attaoui, director general of Tecnimede Morocco. Tecnimede decided in 2009 to build a new plant in the country. "We decided to opt for Morocco for numerous reasons," El Attaoui remarks. "Morocco has for quite a long time had the desire to attract outside investment and as such the necessary fiscal policies have been put in place, policies concerning the level of VAT and company tax rates. Also, Morocco, being politically open, has signed a number of free trade agreements with numerous countries which Europe does not have free trade agreements with, notably Turkey and the USA."

Khalid El Attaoui, director general, Tecnimede

"We have one production plant in Morocco, alongside two partnerships with Polymedic and Sothema, allowing us to develop local products in the country," explains Bayer's Charpentier. "Around 70 percent of what we sell on the Moroccan market is produced locally." Charpentier goes on to explain that Morocco is also serving as an export location. "This year we are going to start using our production plant in Morocco to export a certain number of products, initially to the Maghreb region and eventually to the wider African continent," he reveals.

Brahim Oulammou, director general, Promopharm

Will companies continue to find Morocco an attractive investment destination, given its relatively small market size? In 2011, Jordanian pharma company Hikma acquired Promopharm, a local Moroccan player. "For Hikma, Morocco is very important, first for its own domestic market but also due to the many opportunities for entry points it provides into the region and Africa," explains Brahim Oulammou, director general of Promopharm. "While there isn't a pharma company in Morocco that hasn't found the last few years difficult, it is important to take a long-term perspective. Hikma remains convinced that Morocco is a good investment."

Ayman Cheikh Lahlou, director general Cooper Pharma

THE GATEWAY TO AFRICA

"In the past, Morocco always looked towards the north but never towards the south," says Adil Zanfari, president of Genpharma, a local generics player. "When we compared ourselves, it was always to Spain, France and England, but never to the likes of Senegal. Before when we wanted to travel to Africa we had to go via Brussels, London or Paris. Now we can take a plane directly to Africa."

Sanofi’s offices in Morocco

Cooper Pharma, a leading Moroccan company, has been in Africa since the late 1990s. "There is a real coherence with regards to this Moroccan strategy, a relationship not based on exploitation but on working together to evolve together in a win-win cooperation for all the countries concerned," explains Ayman Cheikh Lahlou, director general of Cooper Pharma. "We have signed a project to promote local manufacturing in the Ivory Coast and we believe that just as Morocco has a certain degree of self-sufficiency when it comes to the production of medicines, with a high level of manufacturing quality, that other countries in Africa should develop the same capacity."

Bayer’s manufacturing plant

"Morocco, indeed, has the potential to become a hub for the pharmaceutical industry in Africa, because it is endowed with considerable assets," says Myriam Lahlou Filali, the CEO of Pharma 5 Group, a leading Moroccan generics company that recently invested MAD 250 million (USD 24.82 million) in a new production plant. "Firstly, its strong industrial base makes the difference with Algeria and Tunisia. Morocco also enjoys an excellent reputation and the trust of our African partners. Moroccan drugs are well recognized for their quality; the professionalism of the teams, the francophone culture, and the geographic proximity are also assets. Our African partners actually tell us that Morocco could eventually have the potential to supplant Indian and Chinese products, which suffer from an increasing deficit in trust."

Lamia Berrada, Chairman, Azzedine Berrada, President, Samir Bachouchi, General Manager, Bottu

However, Moroccan regulation does not make direct exports to Africa easy, as Mohamed El Bouhmadi of ZenithPharma points out. "It is extremely difficult to reach out directly to Africa because of the lack of structure currently in place in Morocco: we have to use French companies as intermediaries. I hope that authorities consider as a priority to set up in Morocco a hub that will allows us to go straight to Africa without any European intermediaries, which increase delays and distributing costs of drugs on the African continent."

This view is shared by Lamia Berrada and Samir Bachouchi, chairman and general manager of Bottu, a Moroccan market leader. "Unfortunately, Moroccan legislation does not allow the creation of a direct export platform. It is a pity that our products go to Europe to be distributed in Africa! For a direct platform to be viable, it should be able to distribute in Africa products that originated outside of Morocco. We can either opt for an offshore structure or ask for permission and support from the authorities to create a regulatory framework to open the door to this project. This is something that manufacturers want, and they are working on it to make things happen, for this is a priority for the sector," they conclude.

Bottu offices

However, the challenges of entering African markets are numerous: taken individually, markets are generally small, with poor infrastructure and low access to medicine. Will the African strategy be enough to grow the Moroccan industry sustainably? For Zanfari of Genpharma, "to build a Moroccan pharmaceutical giant company we need to go beyond our borders. This is our objective on a long-term basis. Becoming an African regional player with a presence in all 54 countries in Africa."

Myriam Lahlou Filali, CEO, Pharma 5 Group

Laprophan, one of the leading Moroccan companies, has its sights on more developed markets. "We are targeting Europe and North America especially for our patented medicines," explains Ali Bennis, the company's president. To do this, it is building "a huge state-of-the-art new manufacturing plant of 92,000m²" that will conform to FDA and EMEA standards. "We can benefit from the free trade agreement with the United States to enhance our exports to this high potential pharmaceutical market," he explains.

Ali Bennis, President, Laprophan

Others believe the industry needs a change of strategy. "We need to find the means to innovate, even if these are incremental innovations," says Cheikh Lahlou of Cooper Pharma. Some, such as Abderrahim Derraji, founder of the website Pharmacie.ma, advocate a more collaborative approach with representatives of the industry speaking with a unified voice.

"What matters is that Morocco is a country where nothing is impossible," concludes AMMG's Houbachi. "Morocco is a country where we know how to take up challenges-the first of them being stability."