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The health department’s narrow focus on price is squeezing local pharmaceutical companies out of crucial state contracts and jeopardising the government’s hopes of reducing South Africa’s reliance on imports, an industry association told parliament on Thursday. The share of pharmaceutical tenders awarded to domestic firms has steadily shrunk in recent years as the health department’s procurement policies have failed to give any weight to local production, according to Pharmaceuticals Made in South Africa (Pharmisa). As a result, the sector has shed more than 2,500 jobs in the past 18 months, medicine shortages in the public health sector are at an all-time high and the pharmaceutical trade deficit is widening, said Pharmisa chair Stavros Nicolaou.“During Covid-19, South Africa was at the back of the queue for countermeasures [such as vaccines]. It is exceedingly disappointing that ... we have not heeded those lessons,” he told the portfolio committee on trade, industry & competition, which has this week been consulting business groups and government departments about the state’s new industry development strategy. Pharmisa’s analysis shows the health department awarded just 28% of the value of its 2025 Aids drug tender to local manufacturers in 2025, down from 72% in 2008. A similar trend was evident in its tender for pills and capsules, which saw the share by value awarded to local firms fall from 56% in 2014 to 18% this year. The local pharmaceutical manufacturing industry is being squeezed from all sides, said Nicolaou. Companies are battered by rising input costs, a below-inflation price increase permitted this year for private-sector medicine sales, and flawed procurement processes that prioritised price above all, he said. “We are in crisis,” he said, sketching a picture of an industry with diminishing production capacity. South Africa’s only facility for making oral contraceptives has shut, and there is no longer any domestic capacity to formulate penicillin or produce the active pharmaceutical ingredient for paracetamol, he said. Nine contract manufacturing organisations have closed recently, disrupting the supply of folic acid (taken by pregnant women to prevent neural tube defects), plasmoquin (used to treat malaria) and various types of eye drops, he said. The local pharmaceutical industry needs preferential procurement regulations and tax incentives, along with greater certainty that companies will see a return on investments in new or upgraded facilities, Nicolaou said.The industry’s request to the health department to award longer contracts of up to seven years, instead of the current three-year terms, had fallen on deaf ears, he said. “We need long-term investment cycles that will promote technology transfer and foreign direct investment.” The health department has yet to respond to the pharmaceutical industry’s request in April for an adjustment to this year’s single exit price (SEP) increase, which was set at just 1.47% and thus significantly below consumer price inflation (3.6%) and sectoral wage increases (6%), Nicolaou said.The Pharmaceutical Task Group has asked for a 1.73 percentage point increase to take the SEP for 2026 to 3.2%, arguing at the time that the adjustment was made all the more urgent by the war in the Middle East, which had driven up fuel prices and triggered a depreciation in the rand.The DA’s Toby Chance said the problems catalogued by Pharmisa echoed challenges described by other industrial sectors earlier in the week. “The opportunities are there for the taking, across all the sectors we have seen. It’s extraordinary [that we are making] so many decisions that defy logic. It really is a tragedy,” he said.
