Bayer joins GSK in exiting direct distribution of drugs in Kenya

The logo of pharmaceuticals giant Bayer. FILE PHOTO | AFP

German pharmaceutical and biotechnology company Bayer has announced plans to outsource its distribution and customer support operations for pharmaceutical products as well as marketing and sales of over-the-counter medicines to a third party in what will affect some of its employees.

The giant pharmaceutical says the move, which takes effect in May, is aimed at ‘simplifying its value chain’ and reducing the lead time between production and distribution.

The operations will now be handled by an undisclosed “large distributor” with a wide network in the affected markets, Bayer South East Africa and West Central Africa said on Tuesday.

A spokesperson for the firm described the move as a “remodelling” of its distribution operations in East and West Africa where it currently deals with many distributors.

The adoption of the distributor-led model largely mirrors the strategy implemented by GlaxoSmithKline (GSK) in late 2022.

“We are calling this initiative ‘Smart Serve’, as it is intended to help reach and serve more people in Africa in a more sustainable manner. We shall be leveraging the expertise and networks of a third-party distributor to ensure sustained availability and access of our products and solutions,” Jorge Levinson, Cluster Lead for the Pharmaceuticals Division in South East and West Central Africa, said in a statement.

“Through this approach, we strongly believe that Bayer will be better positioned to accelerate access to our health solutions, especially in the family planning, cardiovascular, ophthalmology, self care as well as OTC [over the counter] therapeutic areas.”

Bayer’s pharmaceutical prescription products, largely for women’s healthcare, anti-infectives — medicines that prevent or treat infections — and cardiology drugs, are mainly manufactured at its plant in South Africa. The firm also markets and sells over-the-counter medications, nutritional supplements, dermatologic and other self-care products.

Read: Drugs giant GSK to exit Kenya in 2023, turns trader

The third-party distributor will take over the transportation, local warehousing, distribution and customer support for the German.

“While the opportunities and possibilities to serve our customers more sustainably are exciting, we fully recognise the potential impact this will have on the current model, including our people,” said Michael Meewes, the cluster lead for the Consumer Health in South East West Africa.

“We do not underestimate the possible disruption, and we aim to minimise its effects where possible, remaining committed to always treat everyone with respect, dignity, and care.”

The firm maintained that the initiative will not affect the crop science division, which accounts for about 92 percent of the workforce.

The crop science division deals with seeds as well as crop protection products such as fungicides, insecticides and herbicides. This comes barely two years after GSK, which mainly deals in prescription drugs and vaccines business, appointed a third-party company to supply the country with its products.

“GSK business, we would move to a direct distribution model. This means that instead of having a GSK commercial operation in the country we will supply our medicines and vaccines through a third party,” the London-headquartered pharmaceutical and biotechnology giant said at the time.

Kenya, which was the favourable location for regional production by some of the world’s leading multinationals on the continent due to its favourable business environment and connectivity, has seen a number of giant manufacturers review their operations in recent years, with some shutting production lines.

Anthony Maina, the head of communications for Bayer South East Africa and West Central Africa, said the firm’s decision was not a Kenya-specific issue and so it is not related to the current business environment in Kenya.

The Kenya Association of Manufacturers, an industry lobby, said last October that 34 manufacturing companies have shut down production plants in Kenya in less than a decade, shining a spotlight on the competitiveness of the sector.

Read: GSK denies plans to exit Kenya in response to sacking suit

The sector is key to helping Kenya reverse the rising unemployment among growing skilled youth in Kenya.

“From the feedback shared with the association [KAM], the main reason for the closure and scaling down has been general business challenges majorly fuelled by taxation, increased cost of power, ease and cost of doing business and unhealthy competition from imported finished goods. For instance, the high cost of power has detrimental effects on the economy because it renders Kenya uncompetitive against other African countries,” KAM chief executive Antony Mwangi told the Business Daily.

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