South Africa's government is finalising a list of more than 70 medicines which state organisations must in future procure from domestic manufacturers.

The policy will benefit South Africa both in terms of health and economy, according to Trade and Industry Minister Rob Davies. "The intention is to create security of demand for domestic production, attract foreign and domestic investment and to further industrialise the economy. This will create an opportunity to enhance local manufacturing to create decent jobs, add value and build export platforms," said Dr Davies.

The purchasing of pharmaceuticals is the fifth largest contributor to South Africa's import burden, and reversing this is an important challenge while still ensuring that affordable healthcare is available to the private and public sector, the Minister added.

Medicines are being included in the second wave of products being designated for domestic procurement only, under the amended Regulations to the Preferential Procurement Policy Framework Agreement Act (PPPFA), and will include an oral solid dosage tender, worth 2.5 billion rand over two years. This tender, which represents the second-largest acquisition by the public health system after antiretroviral drugs, will require that at least 70% of that procurement should come from local manufacturers. The remaining 30% will be on an open tender but could go to domestic producers as well, he said. 

Prices will be benchmarked internationally and, in order to qualify for preferential procurement, local manufacturers will have to ensure that these benchmarks are not exceeded, thereby ensuring that medicine prices remain affordable, said Dr Davies. To ensure supply, the government will continue to source some of its medicines from importers, he added.

The move represents "an opportunity for local manufacturers to put a toe in the dollar and to be pressured to become competitive," local reports quote the Minister as stating. The designation process "is not an opportunity for ransacking or ripping off the state - we will have to operate according to that reference pricing system,” he added.

The decline in South Africa's production and export of pharmaceuticals has resulted in many job losses and a rise in imports of products which had previously been made in the country, said Dr Davies.

However, a trade association representing generic drugmakers and distributors in South Africa has that warned that the preferential procurement drugs list - which the Treasury is expected to publish shortly - is likely to penalise its importing member companies. The list has been structured in a way that "compromises cheap and affordable medicines," because if importers are no longer able to bid for government contracts, this will reduce competition and prices could go up, said Charles Mothata, chief executive of the National Association of Pharmaceutical Manufacturers (NAPM). 

Locally-made drugs will not necessarily be cheaper than imports, he said, adding that the Association supports incentives for the industry, but not to the detriment of importers.

* The first wave of designations under the amended PPPFA Regulations came into effect last December, and included products such as buses and rolling-stock, canned vegetables, clothing, textiles and footwear.