The need for antiretroviral treatment in South Africa is acute. Without significant changes, current projections indicate that 3.5 million South Africans will die of AIDS-related infections by 2010. In 1997, Stephen Saad sold his shares in the Covan Zurich pharmaceutical company and, along with two others, founded Aspen Pharmacare with $7 million. Its goal: to build a major pharmaceutical manufacturer capable of supplying the South African market with brand name, generic and over-the-counter medicines at affordable prices. Aspen is now the largest producer of tablets and capsules in Africa, recording a net profit of $75 million in 2005. The case describes how Aspen's business model and innovations have responded to a challenging environment, complicated by humanitarian, governmental and legal demands.
In a conservative investment climate, Stephen Saad saw opportunity, and in a reparative health policy environment, he saw need. The opportunity: to build a major pharmaceutical manufacturer capable of supplying the South African market with brand name, generic and over-the-counter medicines at affordable prices. The need: to supply South Africans with the essential medicines required for the treatment of life-threatening diseases such as HIV/AIDS, tuberculosis and malaria.
Through a series of well-planned deals and calculated risks, the greatest being the 2.4 billion rand (US$340 million) acquisition of SA Druggists, Saad turned Aspen Pharmacare into the largest producer of tablets and capsules in Africa. By building the largest manufacturing plant in the country, Saad put Aspen Pharmacare in a position to supply South Africa’s national anti-retroviral treatment programme with approximately 60 percent of its current requirements.
Five and a half million South Africans are infected with HIV/AIDS, and more than 837,000 individuals urgently require access to life-prolonging antiretroviral medicines (ARVs). As is well-known, the national government could be doing more: only an estimated 21 percent of people living with the human immunodeficiency virus (HIV) who require antiretroviral treatment (ART) have access to such treatment in public clinics and hospitals. Unless the roll-out of the national ART programme expands significantly, 3.5 million South Africans will, according to current projections, die of AIDS-related infections by 2010.
The South African Government has started to move in the right direction. In 2004, it initiated a long-anticipated, free national antiretroviral treatment (ART) programme for its HIV-infected population. However, delays in the implementation of the ART programme have been widespread. In March 2004, the South African Department of Health, pressed by the threat of legal action by national activist organizations, declared that they would need to purchase an emergency supply of antiretrovirals (ARVs) as a stop-gap measure until the formal public sector tender process for drug procurement was concluded. In May 2004, despite the emergency supply, drug shortages continued to be well-documented. Commentators observed that the South African Government was in the unenviable position of possessing “some generic medicines — sitting with the Medicines Control Council [South African equivalent of the US Federal Drug Administration] for more than a year awaiting registration”— while still being obliged “to purchase [ARVs] from brand name sources” at substantially higher prices.
As the South African Department of Health has acknowledged, the solution to this dire situation— a free, sustainable, universal ART programme— depends upon both lower drug prices and an uninterrupted local supply of ARVs. Companies such as Aspen Pharmacare have recognized that the Government’s best hope for meeting public health needs over the long-term term rests on the state’s ability to nurture the country’s nascent generics industry (such an industry could also supply drugs to other African countries at affordable prices). While observing that the creation of such an industry posed an immense challenge for both governments and big business, The Economist magazine noted that Aspen Pharmacare provides a model for local generic firms and is currently “doing the most to supply the market with… generic drugs.” ...
Citation: Sprague, Courtenay and Woolman, Stu. "Aspen Pharmacare." GIM Case Study No. A007. New York: United Nations Development Programme, 2008