Bay-based manufacturer clinches 20% of R14bn contract over three years.
ASPEN Pharmacare has clinched 20% of a R14-billion tender to supply antiretroviral medicines over the next three years in South Africa.
The 20% stake amounts to R2.7-billion, less than the half Aspen was aiming to nail when bidding for the contract last year.
The contract, to supply and deliver antiretroviral (ARV) medicines to the national Health Department from April 1 to March 31 2018, is believed to be the largest of its kind in the world.
Aspen said it was pleased with winning a number of key products in the tender, “in spite of strong competition”.
In particular, it was pleased with the 25% share Aspen received for supplying the fixed-dose combination (FDC) drugs for first-line adult treatment, which forms the core of the government’s HIV programme.
Aspen said the ARVs would continue to be produced at the “world-class” manufacturing facility in Port Elizabeth and that Aspen would not consider outsourcing any of its manufacturing to other companies that were also awarded a percentage of the tender.
Aspen produced 45% of South Africa’s one-a-day ARV tablets with the previous tender, while 55% had been imported from Asian firms.
Late last year, while visiting the pharmaceutical plant in Port Elizabeth, Aspen Pharmacare group chief executive Stephen Saad said he would not apply for more than 50% of the tender, as it would be best for the department to have more than one supplier to ensure security of supply.
Saad also cited the erratic off-take of HIV drugs as a challenge, with the cost to the company staying the same, affecting group profit flow and operations.
Only 20% of Aspen’s revenue is made up of products sold in South Africa, with most of the products being exported to 150 countries, including Australia and the US.
Since inception of the HIV programme, Aspen has been a leading supplier to the tender. The government awarded Aspen the lion’s share of its first ARV tender – 58% by volume – and more than 70% by volume of the second ARV tender.
This year’s R14-billion ARV tender had an indicative target of 70% South African procurement, which was not specified in the previous ARV tenders.
The contract for the generic FDC Atripla‚ which combines tenofovir‚ emtricitabine and efavirenz‚ is to be split between Sonke Pharmaceuticals (30%)‚ Mylan (28%)‚ Aspen (24%) and Cipla Medpro (18%).
Wilhelm Hertzog, an analyst at Regarding Capital Management, said the winning companies were not a surprise‚ but the question was whether they could make profits.
HIV/Aids drugs are typically high volume‚ low-margin products that do not make a material contribution to a company’s profits. But they help keep overheads down in factories running at full steam‚ Hertzog says.
The volumes called for in the latest tender are about triple those of the previous one‚ reflecting the state’s drive to reach more patients and initiate treatment earlier in the course of the disease.
There are about 2.7 million people on treatment‚ and the government aims to reach about five million patients within the next three years‚ according to the Treasury.
A total of R29.39-billion has been budgeted for HIV/ Aids in 2015-2016‚ of which 80.7% comes from the government and 19.3% from donors.
– Cindy Preller and Tamar Kahn