Can local producers compete with low-cost imports? A simulation study of pharmaceutical industry in low-income Africa

Abstract

The industrial policy objective of promoting local production of pharmaceuticals for stimulating economic growth is increasingly appreciated by African governments and internationally. However, questions are widely raised by health policy-makers concerning the ability of Africa-based producers to compete on price with Indian and Chinese imports and, hence, to sustain access to essential medicines for low-income populations. Data are lacking to test this influential critique. This paper uses an innovative methodology to overcome the difficulties of data access within African contexts. The analysis strongly suggests that despite higher costs than Indian producers, pharmaceutical industries in small underdeveloped countries necessarily imply neither higher prices nor unviable production operations. By ensuring sufficient market access for local producers, governments (and by extension Regional Economic Communities) in low-income Africa can promote viable local production without sacrificing the objective of affordability and accessibility.