An Assessment of Kenyan Pharmaceutical Manufacturers

Production of 7.1% Chlorhexidine

Digluconate for Umbilical Cord Care

March 2015

MAILING ADDRESS PO Box 900922 Seattle, WA 98109 USA

ADDRESS 2201 Westlake Avenue Suite 200 Seattle, WA, USA

TEL: 206.285.3500

FAX: 206.285.6619 www.path.org

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Acknowledgments

Support for this project is made possible by the generous support of the American people through the

United States Agency for International Development (USAID) under the terms of the HealthTech

Cooperative Agreement # AID-OAA-A-11-00051. The contents are the responsibility of PATH and do

not necessarily reflect the views of USAID or the US Government.

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List of acronyms

API Active pharmaceutical ingredient

CWG Chlorhexidine Working Group

EAC East African Community

EMA European Medicine Agency

EOI Expression of interest

GMP Good Manufacturing Practices

LMIC Low- and middle-income countries

PPB Pharmaceutical and Poison Board

TFDA Tanzania Food and Drug Authority

UNICEF

UNIDO

United Nations Children’s Fund

United Nations Industrial Development Organization

USAID United States Agency for International Development

USP United States Pharmacopeial Convention

WHO World Health Organization

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Introduction

Within the overall implementation plan of the United Nations Commission for Life-Saving Commodity,

the Chlorhexidine Working Group (CWG) has been working to establish local production for 7.1%

chlorhexidine digluconate for umbilical cord care (the chlorhexidine product) in selected countries in

order to increase the product’s availability at affordable pricing.

Local production is defined as production in low‐ and middle‐income countries (LMICs) by locally

owned companies or subsidiaries of multinational companies. The potential benefits of local production

include improvement in reliability of supply, realization of foreign import savings, development of further

innovation capacity, creation of enhanced export capacity, and development of human capital. Local

production of high-quality medicines could also lead to cost savings and improvement in product quality,

depending on the product to be produced and on regular surveillance of the LMICs’ quality control

systems.i Furthermore, local production could allow products to be better adapted to local cultural

preferences.

The profile of the chlorhexidine product is appropriate for local production because:

The chlorhexidine product does not require proprietary active pharmaceutical ingredients (APIs),

equipment, or processes for manufacturing.

Pharmaceutical companies in many LMICs are capable of secondary production (i.e., the production

of finished dosage forms from raw materials and excipients) for topical medicines. Thirty‐four

countries in Africa have stated that they have secondary‐level production.ii

The API utilized in the production of 7.1% chlorhexidine digluconate for umbilical cord care—20%

chlorhexidine digluconate—is manufactured in multiple countries and is readily available for

purchase and import.

The cost of raw materials is not significantly high for the chlorhexidine product, but the costs

associated with shipment and import duties will likely constitute a large portion of the total cost (and

will, therefore, significantly affect the pricing) of the finished chlorhexidine product.

Nevertheless, local production of the chlorhexidine product will not be feasible in every LMIC.

This report describes how we came to the conclusion that local production of the chlorhexidine product is

feasible in Kenya and how we subsequently selected manufacturers in that country that are interested in

and capable of producing the chlorhexidine product.

In order to ascertain the feasibility of local production in Kenya, PATH first performed a landscape

analysis using secondary data. Throughout this process, we used the “Checklist for production decision-

making” (Appendix 1) developed by the CWG. Subsequently, PATH and United States Pharmacopeial

Convention (USP) traveled to Kenya to perform rapid assessments of manufacturing facilities and to

conduct preliminary due diligence analysis on those manufacturers interested in the production of the

chlorhexidine product. Our objective was to select manufacturers that are capable of producing a

chlorhexidine product of good quality and who would, therefore, be eligible to receive technical

assistance. In addition, representatives from USP and PATH also had an opportunity to meet with the

Kenyan Pharmaceutical and Poison Board (PPB) to confirm what regulatory mechanism would apply to

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the chlorhexidine product. The following sections summarize the results of the landscape analysis, the

subsequent rapid assessment of manufacturing facilities, our business due diligence analysis, and a

summary of our discussion with the PPB.

Landscaping the Kenyan pharmaceutical manufacturing industry

Kenya has a population of 43 million people and experiences approximately 1.5 million live births

annually.iii The pharmaceutical market in Kenya is estimated to have been US$642 million in 2013 and is

growing to reach US$1.12 billion by 2018. This growth can be attributed primarily to growth in gross

domestic product, spending on medicines due to a growing communicable and noncommunicable disease

burden, as well as growth due to an increase in both population and urbanization.iv Kenya thus presents a

sufficient and attractive domestic market for prospective local manufacturers for the chlorhexidine

product.

There are currently approximately 37 licensed pharmaceutical companies in Kenya.iv Kenya is the largest

producer of pharmaceuticals in the Common Market for Eastern and South Africa region. Kenya is also a

member country of the East African Community (EAC). Approximately one half of Kenyan exports of

pharmaceuticals were destined for the United Republic of Tanzania and Uganda in 2010.v Since the EAC

is moving toward harmonizing medicine registration in the region, prospective manufacturers for the

chlorhexidine product will likely find opportunities outside Kenya when demand for the product increases

in neighboring countries. Although Kenyan pharmaceutical manufacturers face competition from

products from India and China in their domestic and export markets, they are closer to the markets in the

region, and this gives them a competitive advantage.

All pharmaceutical manufacturers in Kenya must be certified with Good Manufacturing Practices (GMP)

standards by the PPB of Kenya.v One of those manufacturers has been audited by a World Health

Organization (WHO) prequalification team and supplies their products to United Nations Children’s Fund

(UNICEF). A few of Kenyan pharmaceutical manufacturers were audited by BEGECA mbH (Aachen,

Germany) as part of the Public-Private Partnerships Project funded by Gesellschaft für Technische

Zusammenarbeit. This indicates that the Kenyan pharmaceutical industry is fairly advanced among

countries in the African continent.

Local manufacturers in Kenya produce a variety of pharmaceuticals in different product forms, including

analgesics; antacids; antibiotics; eye, nose, and throat preparations, anti-inflammatories, nutritional

supplements, antimalarials and artemisin combination therapies, antispasmodics, anthelmintics, and

antihistamines. These local manufacturers appear to be supplying less than 30% of the local demand, with

the remaining 70% of the market being occupied by imports, since donor-funded programs source

products from outside Kenya.v Considering that average operating capacity is only 53% to 67% based on

a survey that United Nations Industrial Development Organizations (UNIDO) performed,v Kenyan

manufacturers remain able and willing to add additional pharmaceutical products to their portfolios.

Government policy is also supportive of local production; the Kenya National Drug Policy (second

edition) is putting emphasis on certain key elements necessary to revitalize the pharmaceutical sub-sector

in Kenya, including ensuring equitable access to affordable medicines through public, private, and other

sectors.v

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Local manufacturers, however, rely heavily on imported raw materials, including APIs. UNIDO’s report

published in 2010 states that most companies import 80% to 90% of their raw materials, mainly APIs and

packaging materials. Importing the API for the chlorhexidine product, however, will not likely be a

significant problem, since a few companies in Kenya already produce antiseptics using the same API as

that of the chlorhexidine product and then export the finished products to other countries.

As a result of this landscape analysis, we were able to check off 7 out of 14 landscape factors on our

checklist (Appendix 1), which indicates that local production of the chlorhexidine product in Kenya is

feasible. Therefore, we decided to move forward with selecting manufacturers that would be interested in

and capable of manufacturing the chlorhexidine product.

Selecting interested and qualified manufacturers

In October 2014, USP and PATH solicited an expression of interest (EOI) by advertising in a national

newspaper in Kenya. In order to increase the response rate, we requested the Federation of Kenya

Pharmaceutical Manufacturers inform its members of the advertisement. Seven manufacturers responded

to the EOI. USP subsequently sent a list of questions to the responders in order to further investigate their

capacities and capabilities. Based on their responses, we selected the following five pharmaceutical

manufacturers for on-site assessments (listed in alphabetical order):

Dawa Limited

Ivee Infusions EPZ Ltd.

Laboratory & Allied Ltd.

Regal Pharmaceuticals Ltd.

Universal Corporation Ltd.

In November 2014, representatives from USP and PATH visited these five pharmaceutical manufacturers.

During this visit, PATH conducted preliminary business due diligence analysis through interviews while

USP conducted a rapid assessment of their manufacturing facilities.

The preliminary business due diligence focused primarily on assessing manufacturers’ level of interest,

their domestic and international distribution capacity, and their experience in working with the

government sector in the hope that the results would provide supplementary information for manufacturer

selection. A financial assessment was not part of this due diligence analysis because financial stability

will be part of the tender requirements and will be assessed at that time if the government procures the

chlorhexidine product. In addition, the due diligence analysis did not analyze cost implications of locally

producing the chlorhexidine product. This analysis will need to be subsequently made with the selected

manufacturers based on the potential demand size as well as sources identified by the manufacturer for

the API and other raw materials.

The rapid assessment of manufacturing facilities was conducted in order to identify significant or gross

deviations from WHO GMP and to determine which manufacturers would be worthy of a full GMP

assessment, the next step in identifying areas for improvement.

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Summary results of preliminary business due diligence analysis

All five of the companies that PATH and USP visited are interested in the chlorhexidine product. Among

them, four companies—Dawa, Universal, Regal, and Laboratory & Allied—currently produce or have

previously produced antiseptic products (solutions) containing chlorhexidine digluconate by importing

the API from India. Therefore, they are already aware of sources of the API for the chlorhexidine product.

In fact, some of their interest stems from their desire to leverage the API that they are procuring to expand

their product portfolios.

In addition, Universal and Regal have already started developing the chlorhexidine product both in liquid

and gel forms. Universal has already put samples of the chlorhexidine product of both forms into stability

chambers, and Regal was about to start stability tests on both forms at the time of our visit. These actions

indicate how significant their interest is in the chlorhexidine product.

Except for Ivee Infusion, all the other four companies have capacity to produce both topical solution and

semisolid pharmaceuticals (such as gel). In addition, these same four companies have capacity to fill

multiple sizes of tubes and bottles. Therefore, they will be able to produce either the liquid or gel form of

the chlorhexidine product for multiple-day application—the administration regimen that the Kenyan

Ministry of Health has decided on. Ivee Infusion has capacity and capability to produce only the solution.

Also, Ivee Infusion’s specialized production process was limited to accommodating only the larger sizes

of containers required for multiple-day application.

All five companies use distributors to sell their products in Kenya and other countries; however, the

revenue structure varies among companies. Dawa, Regal, Laboratories & Allied use distributors to sell

their products to both the government (through tenders) and retailers. They also generate a larger portion

of their revenues from sales to the domestic market, although they have capability to export their products

to other countries. Regal also distributes its products to United States Agency for International

Development (USAID) programs. Unlike those three companies, Universal use to sell its products to

governments through tenders; however, it no longer participates in government tenders and has shifted its

sales to international organizations such as UNICEF while generating some revenue from sales to the

private sector in Kenya. Ivee Infusion has not directly participated in government tenders although its

distributors might have, and its primary focus is on export markets.

Based on this preliminary business due diligence, we recommend selecting Dawa, Laboratories & Allied,

Regal, and Universal to proceed to the next step of GMP assessment. We excluded Ivee Infusion from our

recommendation because: 1) its distribution channel primarily focuses on export markets and the private

sector in Kenya, and it does not have substantial experience in working with the government sector and 2)

its production facility is too specialized to accommodate producing the chlorhexidine product in either gel

or liquid forms for multiple-day application.

Summary of rapid assessment of manufacturing facilities

USP and PATH visited the five Kenyan pharmaceutical companies to tour their manufacturing facilities.

Observations made during the facility tours and meetings are provided below. The focus of the rapid

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assessments is to determine if manufacturers have the basic facilities in place to manufacture

pharmaceutical products. Key findings from manufacturers visited are outlined in Table 1.

Table 1. Key findings from Kenyan manufacturers visited

Company Key Findings

Dawa Limited Current production facility includes non-beta lactam, including topical gels and liquids, beta

lactam and injection plants with the latter having an automated liquid line.

A manufacturing facility upgrade is planned to be completed by June 2015 that will be built

to meet GMP requirements.

Ivee Infusions EPZ Ltd.

The current facility has been producing products since August 2013 and can produce liquid

only.

Chlorhexidine API is sourced from India.

The company has developed a chlorhexidine solution that has completed 6 months of

accelerated stability studies and has also compiled 10 months of real-time stability data.

The company makes its own bottles via an automated infusion process that is also part of

its automated product manufacturing process. Current bottles have a 10-ml capacity. The

manufacturer has the potential to increase the bottle capacity to a maximum of 15 ml.

The company’s primary focus is injectable medicines, thus its water system must be able to

meet the requirements for water for injection. If used in chlorhexidine solution production

this may unnecessarily drive up product cost.

Small but adequate quality control lab with essential equipment.

Laboratory & Allied Ltd.

The company has the ability to make all dosage forms including gels and liquids.

The company has the essential utilities and equipment needed to manufacture

chlorhexidine gel and/or liquid.

The water system was indicated to have been validated and appropriately set up to control

for water quality.

The design and construction of the new facility was optimal for manufacturing and

preventing cross-contamination. This is important given the manufacturer also produces

beta-lactams.

Regal Pharmaceuticals Ltd.

The company appears to have adequate facilities and processes in place to manufacture

according to GMP. For example the raw materials storage area as well as other holding

areas have undergone thorough temperature mapping studies to understand and control

environmental temperature. The facility layout was also designed to prevent mix-up and

cross-contamination.

The company currently produces gels as well as liquids, thus the required manufacturing

equipment is currently in house.

Chlorhexidine product development is still under way, but development was to be

completed soon.

The firm indicated that in April 2014 the facility underwent an audit by Pharmaceutical

Inspection Convention and Pharmaceutical Inspection Co-operation Scheme member

organizations.

Chlorhexidine API is sourced from a supplier with a drug master file.

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Company Key Findings

Universal Corporation Ltd.

The company has shown that it can manufacture products under GMP. The quality control

laboratory is well equipped with modern analytical equipment with as many as nine high-

performance liquid chromatography instruments.

The company currently produces gels as well as liquids, thus the required manufacturing

equipment is currently in house.

In October 2011, Universal received WHO prequalification for the HIV medicine

lamivudine+zidovudine tablets.

Universal began developing chlorhexidine gel and liquid formulations; both are in stability

studies.

Chlorhexidine API is sourced from an Indian supplier.

The company was previously inspected by UNICEF and USAID.

Summary of discussion with PPB

The PPB is responsible for registration and evaluation of pharmaceuticals as well as GMP inspections of

pharmaceutical manufacturing facilities. Pharmacovigilance is not included in its scope of work. They are

currently trying to expand their scope of work to include medical devices and diagnostic tests.

Product classification:

- The chlorhexidine product will be classified as an over-the-counter medicine since it will make a

medical claim. Antiseptics containing chlorhexidine digluconate are considered to be borderline

products as long as they do not make medical claims (this does not apply to chlorhexidine for

umbilical cord care).

- The registration process for over-the-counter medicines and prescription drugs are the same. If a

product is categorized as a borderline product, evaluations for quality, safety, and efficacy are not

required.

Registration timeline:

- A fast-track process (regulatory dossiers are evaluated within 30 days from the date of dossier

submission) is available for locally produced pharmaceutical products. Imported pharmaceutical

products require 12 months for evaluation.

- The registration fee is US$500 per product for local manufacturers. The fee becomes US$1,000

for an imported product.

- Six-month stability tests (both accelerated and real-time stability tests) are required for product

registration. Pharmaceutical manufacturers are required to continue to perform real-time stability

tests up to 24 months.

- Evidence that shows that products have been submitted for analytical testing is required at the

time of regulatory dossier submission. Analytical tests do not have to be completed by that time.

- European Medicine Agency (EMA) Article 58 is recognized in Kenya.

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Regulatory harmonization in the EAC:

- The process is similar to that of the EMA. Products for neglected tropical diseases and those

identified as lifesaving commodities under the UN Commission are eligible to take advantage of

EAC harmonization.

- Tanzania Food and Drug Authority (TFDA) is the coordinating agency. Pharmaceutical

manufacturers must submit regulatory dossiers to the TFDA. Copies will be sent to the national

regulatory authority of the country in which the pharmaceutical company is located. GMP

inspection, certification, and evaluation will be conducted jointly with the TFDA and the relevant

national regulatory authority.

Recommendation and next steps

Based on the rapid assessment of manufacturing facilities and the preliminary business due diligence

analysis that we performed in November 2014, we believe that there is no significant concern in

designating the following three companies as potential manufacturers of the chlorhexidine product.

Especially since Regal and Universal have already started product development and their products are

likely to be in the market in the near future, we do not see any supply gap in Kenya.

Laboratory & Allied Ltd.

Regal Pharmaceuticals Ltd.

Universal Corporation Ltd.

We will need to assess Dawa’s manufacturing facility after it completes its ongoing renovation in order to

fairly assess its manufacturing capacity and capability.

As next steps, USP and PATH will continue to assist the three selected manufacturers until they succeed

in registering the chlorhexidine product in Kenya. Assistance will include a full GMP assessment,

identification of areas for improvement, and development of corrective action plans by USP. USP will

then need to continue to follow up with manufacturers to ensure that corrective action plans have been

properly implemented and that regulatory dossiers have been created to meet the standards of the PPB.

In addition, PATH initiated a market research study in 2014. The results of that market research study and

the demand forecasting that PATH did based on the results of that study will be shared with the Ministry

of Health, manufacturers, and other key stakeholders. This information should be helpful to

manufacturers as they formulate effective introduction plans. The CWG will also continue to work in

other countries in Africa to raise awareness about the chlorhexidine product. These countries might

become potential markets for Kenyan pharmaceutical manufacturers.

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i Kaplan W, Ritz L, Vitello M. Local production of medical technologies and its effect on access in low and middle income

countries: a systematic review of the literature. Southern Medical Review. 2011;4(2):4‒14.

ii United Nations Industrial Development Organizations (UNIDO). Pharmaceutical Manufacturing Plan for Africa. Addis Ababa,

Ethiopia: UNIDO; 2012. Available at:

http://www.unido.org/fileadmin/user_media_upgrade/Resources/Publications/Pharmaceuticals/PMPA_Business_Plan_Nov2012

_ebook.PDF. Accessed December 3, 2012.

iii United National Children’s Fund (UNICEF). State of the World’s Children 2015 Country Statistical Information. Available at: http://www.unicef.org/infobycountry/kenya_statistics.html. Accessed February 18, 2015.

iv Business Monitor International. Kenya Pharmaceuticals and Healthcare Report; Q1 2015. Business Monitor International;

2014.

v UNIDO. Pharmaceutical Sector Profile: Kenya; UNIDO; 2010. Available at:

http://www.unido.org/fileadmin/user_media/Services/PSD/BEP/Kenya_Pharma%20Sector%20profile_TEGLO05015_Ebook.p

df. Accessed February 18, 2015.

A-1

Appendix 1: Checklist for production decision-making

Questions Column A Column B Column C

Landscape Manufacturing assessment

Remark

Yes/No Yes/No

Capability and capacity of pharmaceutical companies

Are there any pharmaceutical manufacturers in your country that have a Good Manufacturing Practices (GMP) certificate issued by the local regulatory authority and have a manufacturing license for their current products?

☒ Yes

☐ No

☐ Yes

☐ No

Are there any pharmaceutical manufacturers in your country that already produce topical medicines in liquid or gel form?

☒ Yes

☐ No

☐ Yes

☐ No

Is the existing capability of pharmaceutical manufacturers adequate for manufacturing 7.1% chlorhexidine digluconate for cord care? [Note: The adequacy of manufacturing capability should be assessed by trained GMP auditors].

☐ Yes

☐ No

☒ Yes

☐ No

Are pharmaceutical manufacturers knowledgeable about where to obtain quality active pharmaceutical ingredient (API), excipients, and other raw materials?

☒ Yes

☐ No

☐ Yes

☐ No

Do these pharmaceutical manufacturers have a good record of financial stability over time? [Note: Financial statements over the past 3 to 5 years could be used as verification].

☐ Yes

☐ No

☐ Yes

☐ No

Needs further evaluation

Given the domestic market size for 7.1% chlorhexidine digluconate, are there pharmaceutical companies willing to sell the product to public-sector purchasers at affordable prices?

☐ Yes

☐ No

☒ Yes

☐ No

Affordability

Given the domestic market size for 7.1% chlorhexidine digluconate for cord care, can the API, excipients, and other materials be obtained from quality sources at reasonable costs?

☐ Yes

☐ No

☐ Yes

☐ No

Needs further evaluation

[If the API is imported] Do the tax and import duties for the API significantly affect the price of the finished product?

☐ Yes

☐ No

☐ Yes

☐ No

Needs further evaluation

Can 7.1% chlorhexidine digluconate for cord care be produced more inexpensively locally than importing a 7.1% chlorhexidine digluconate product? [Note: Price and cost associated with importing a product from Lomus or purchasing from the United Nations Children’s Fund Supply Division Catalogue can be used as a bench mark.]

☐ Yes

☐ No

☐ Yes

☐ No

Needs further evaluation

Sustainability

Are pharmaceutical manufacturers able to sustain the supply of 7.1% chlorhexidine digluconate, given the domestic market size, product pricing, and cost of production of the product?

☐ Yes

☐ No

☐ Yes

☐ No

Needs further evaluation

If the domestic market size is too small to sustain the supply:

Are there viable markets in neighboring countries into which the 7.1% chlorhexidine digluconate could be exported?

☒ Yes

☐ No

☐ Yes

☐ No

Are there any trade zones or regulations that could facilitate the export of 7.1% chlorhexidine digluconate for cord care while maintaining affordable end-user pricing?

☒ Yes

☐ No

☐ Yes

☐ No

Are pharmaceutical manufacturers in your country able to meet any larger regional demand?

☒ Yes

☐ No

☐ Yes

☐ No

Are pharmaceutical companies in your country capable of exporting and marketing medicines to neighboring countries?

☒ Yes

☐ No

☐ Yes

☐ No