UK drugs giant GlaxoSmithKline is expanding its presence in Africa, demonstrating a trend for big pharmaceutical companies to expand their global footprint into emerging markets despite regulatory risks.

The pharmaceutical giant is in talks to acquire a 10% share in South Africa’s Aspen Pharmacare. Demand for cheaper, generic drugs has seen many big pharmaceutical companies broadening their product ranges in order to establish operations in growth markets to offset losses in more traditional prescription medicine in the West.


But as companies enter new markets such as Africa, the risk of parallel trading and counterfeiting increases. The US Food and Drug Administration estimates that about 10% of all medicines sold worldwide are counterfeit, with the problem being much worse in developing countries. Over half the anti-malarial treatments sold in Africa are believed to be fakes.

The issue of counterfeit drugs in Africa was highlighted in March, when Dutch authorities seized consignments of Indian-made medicines shipped via Amsterdam Airport for distribution in Nigerian clinics. Unitaid, the Geneva-based agency which paid for the medicines, claimed the charges were untrue, highlighting tensions between EU legislation and special patent exemption rules on medicines agreed by the World Trade Organization for poorer countries.

According to Pricewaterhouse­Cooper’s South African pharmaceutical specialist Denis Von Hoesslin, it is important to note that Africa comprises disporate markets. “The South African environment is strictly controlled so counterfeiting is not a problem and is not a problem that keeps the CEOs of major pharmaceutical companies awake at night,” he said. Instead, many multinationals across all industries are establishing themselves in South Africa in order to launch into the rest of the continent because it has sophisticated intellectual property protection laws and a good regulatory framework.

And despite growth potential in Africa, in March the International Monetary Fund (IMF) warned that average economic growth in sub-Saharan Africa is set be to just over 3% in 2009, half the average of the past decade, as the continent suffers the continual effects of the global economic crisis.

Growth in Africa over the past few years has been driven by rising commodity prices, larger inward investment flows and better management of public finances, banks and ­inflation.

Antoinette Sayeh, director of the IMF’s Africa department, said the global crisis has hurt Africa through lower global commodity prices, tighter credit markets and depressed external demand. “It is a big shock,” she told the Financial Times, adding that the IMF’s growth forecast of 3.25% could be revised down further if the world economy appeared set to contract.