Ernest Chemists: Overview of the Pharmaceutical Industry in Ghana

Interview with Yaw Bediako Sampong, General Manager of Ernest Chemists

Give us a brief overview of Ernest Chemists.

Ernest Chemists is one of the leading pharmaceutical companies in the country. We are funding all aspects of the value chain, including manufacturing, trading and retail.

Why are local Anglophone players more prominent in Ghana?

In Ghana, the local players have a stronger presence compared to the francophone West African players. They still have a lot of ties with French companies and sometimes products have to be routed through France before they come into the country which affects prices in the francophone countries. Here we have local players like Ernest Chemists that are involved in importing and distributing products. We are also able to set our own prices. Compared to the francophone nations, we have sizeable local companies. We also still have foreign companies that are involved in distribution in the country but the local companies are well-placed to compete with them.

When you are talking about foreign companies, are you talking about the big American and European companies, or Indian?

If you look at the big pharmaceutical multi-nationals that we all know about, most of them have country offices here along with scientific offices and local distributors like us. We are first-line and we buy from them but they are not involved in the distribution themselves.

Using Ernest Chemists as an example, as you said you work with the whole value chain. In terms of revenues, where do most of your revenues come from?

The split is about 20-80 with 20 to 25% from manufacturing and 75 to 80% from importation of finished products. Ernest Chemists originally started as a trading company in 1986 by the founder Ernest Bediako Sampong who was a pharmacist. It became a limited liability company in 1993. We started as a trading company working with some of these multi-nationals. We went into manufacturing in 2001 and this is now 20 to 25% of revenue and the manufacturing portion is growing.

Why did you decide to switch to manufacturing?

If you look at a country like Ghana, sometimes you will term us as a less-developed country. If you take the multi-national products which are highly priced, there are just a few people that can afford them. There is a big gap with the lower and middle income people who need products that are also of high standard but that are affordable to them. We felt there was a gap there that the manufacturing could fill. That was one of the reasons why the factory was set up, just to handle products being sold to the lower income people in Ghana while still ensuring the products were of the highest quality. Some of this was derived from existing relationships with the multi-nationals.

You have said that total healthcare should be available in Ghana at competitive prices and at the end of the day I think you have a mission to bring healthcare at more affordable prices and you are reaching a larger number of people.

We believe in total healthcare; about five or six years ago, the CEO set a vision whereby he wanted us to expand into almost all the regions in Ghana. Currently, we are present in seven out of ten regions. We want to be in all these regions so we can make our products accessible to everyone across the country.

Can you tell us about your different multi-national partners?

We have GSK that we have been working with for more than ten years. We have been importing finished products from them with ethical and branded generics. We have been dealing with them for many years and our relationship has progressed to the point at which we have collaboration with them in our factory. We bring in finished products; to be specific, we bring in Panadol painkiller. We bring it in and we package it at our factory.

We have other reputable companies like AstraZeneca and Sun Pharma also bringing in mostly ethical products and some branded generics as well. We also work with Batiste, Roche and Johnson & Johnson, just to mention a few.

You are not just present in Ghana but you are spreading out as well. What is your growth strategy?

Our objective is to become one of the top ten indigenous companies in Africa. A few years ago we used Sierra Leone as a test case and it has gone very well for us. We have done some exports to Cote d’Ivoire and Senegal and participated in exports and tenders in those countries. We have some products in Nigeria and we are looking into having a physical presence in Nigeria over the next few years. We are looking at some francophone countries as well, maybe to have a presence in one or two countries in the next five years.

We have a vision of providing leadership in Africa. As part of the vision, we don’t want to just be bound to Ghana, but we want to spread this outside of Ghana. Our basic strategy is that we go in indirect mode first and then when our products become known, after we study the viability of the markets, we go direct. That is how we started with Sierra Leone. Before we set up there, the people became familiar with our products. We had been selling the products through agents. We are participating in a lot of tenders in Cote d’Ivoire and Senegal and we want some of the products to be supplied to them. If there’s any place we want to go, then it’s better to work with others around us and that’s what we are doing. If we want to work in Liberia, we are hoping there are other companies doing ventures there.

How open are you to investors and partnerships?

We are definitely open to that because with the competition and size of the market and the way it is growing rapidly, there will have to eventually be consolidation. As I mentioned, we have started something with GSK for the packaging of one of their painkillers. We want to deepen that relationship to potentially include blistering and manufacturing of other products beside tablets such as liquids.

We are also investing a lot in our manufacturing division to position ourselves. The time will come in the regulations that some products may be banned, such as painkillers. Some may be banned because of price competitiveness and it may be impossible to import some of these products. We want to position ourselves in such a way that we become like partners to some of the multi-nationals that would want to import products but because of the competitiveness or uncompetitiveness of their product in terms of price, we are ready to work with them and possibly manufacture some of these products to make them more affordable to the masses.

We are definitely looking at joint ventures in the future. The door is not closed; I’m sure eventually we might be looking at that but for now we aren’t.

What is your vision for the company in three to five years’ time?

First of all if I limit myself to West Africa, maybe within five years I would like to be in the top three in indigenous businesses and also to be present in more countries in West Africa. We want to be able to find our products all over the sub-region. Then we look at sub-Saharan Africa outside of the West African region as well. So in the medium-term, within five years, we are looking at becoming one of the top three indigenous pharmaceutical companies within the West African sub-region.

We have had collaboration with multi-nationals and we are hoping to leverage the relationship we have with them. We had to go into manufacturing because we had some collaboration with multi-nationals. We know that it is important; quality is key. We will not compromise. Also you may have a situation where they will want you to participate in the chain of the product when they see that you have something good to offer. People collaborate with multi-nationals and through this partnership, we will be able to leverage that experience for our customers in Ghana and the rest of the West African countries we are working in. We take our relationship with the multi-nationals very seriously and we have learned a lot from them.

What are the challenges that the company is facing?

The competition is getting stronger every day. We have competitors coming from India and China with access to capital in their home countries that allow them to do massive expansions. We don’t have that. Going forward, we believe that the economic situation of the country will improve and that there will be more access to credit so we can expand and be competitive with some of these companies coming from the east.

What is your view on Ghana as a country and its economy?

It’s picking up gradually; we hope that it will be better than what it is right now but I think it is picking up gradually. The growth rates are not bad but I think there is more that can be done in terms of infrastructure. If for example you supply medication to some of the hospitals, it takes a long time before you are able to get your money back, to be reimbursed, so we hope that in the future some of these things can be resolved. When you give out credit to some of these institutions, you can’t charge interest even though we have paid for the products through the bank with interest. Sometimes this creates some imbalance in our internal systems. This is one of the areas that can be addressed moving forward. In general, the picture is not too bad. Hopefully more can be done in the future.

There are quite a few challenges but people face challenges in all areas of life. We can move past those challenges and create a better environment.

The rate of credit is so high that you have to get access to an international player that has access to European rates for example. Is it of interest to access that?

We are absolutely amenable to some of these things that may help. You can look at the numbers and see how high it goes. As the saying goes, necessity is the mother of invention. We are going through a lot of challenges and we will have to come up with some innovative ways of dealing with them. Yes, the situation could be better but if you talk to government, sometimes we look at the difference between the central bank rates and what the individual rates charge, we think it is quite high. The government’s prime rate is about 15% and the banks are charging more. Sometimes it’s not always about government policy but the banks should also look at their rate profile. We hope that things will normalize.

We will definitely review what foreign investors’ plans are in the medium and long term and see if it fits with our strategy but we are open to discussions. Lately you have the situations like the World Bank IFC that have come and are setting up an office here as well as offering more competitive rates and better terms – good terms. Definitely with that happening, it creates more competition within the banking system.