South African pharmaceutical company Adcock Ingram warned that the country’s medicine supply is under threat from continued shortages of active ingredients and rising protectionist trade policies limiting the trade of medicinal goods.
This was revealed after the company released its results for the year ended 30 June 2023 on Wednesday.
Adcock Ingram sells brands such as Panado, Gen-Payne and Myprodol, as well as Corenza-C.
Despite having three manufacturing facilities in South Africa, most of its products are produced overseas, and its local factories require ingredients sourced from other countries.
Between 50% and 60% of its entire basket sold was imported, either as finished products or as active ingredients, which were converted into products locally.
This exposes the company to global economic shocks and changes to international trade policies, which may result in shortages of active ingredients.
The company has responded to these challenges by ensuring it has multiple suppliers, stockpiling ingredients, and shifting some of its production to South Africa.
“We are seeing some global shortages of active ingredients. We see it in active ingredients in some of our cough mixtures, and we have seen it in some of the preservatives we use in our products,” Adcock Ingram CEO Andy Hall told News24.
Hall said Adcock and fellow pharmaceutical companies that rely heavily on India for importing crucial ingredients have encountered a problem.
One of Adcock’s most severely impacted products is its Panado tablets, mainly imported from India. To reduce this reliance on foreign manufacturing, the company started making tablets at a factory in Wadeville.
Some production of Myprodol and Gen-Payne is also being shifted to the same plant.
FNB head of investment research Chantal Marx told MoneywebNow that the company still has plenty of space to grow its local manufacturing.
Marx said the company’s Wadeville facility operated with an average utilisation of 23% for tablets, 48% for liquids, and 46% for creams.
Thus, it can effectively double its production from this one manufacturing facility.
In an interview with 702, Hall said that across its basket of imports, the company suffered from a 9% depreciation of the rand – effectively increasing its costs by 9% through no fault of its own.
Hall said the biggest risk was the proportion of imported goods it brought in and how rand weakness impacted that.
“That still remains our biggest risk. And that’s effectively what keeps us up at night, what is happening with the rand,” he said.