Walk into almost any pharmaceutical manufacturing plant in Nairobi’s Industrial Area and you are likely to find the same activity: blister-packing machines producing paracetamol tablets.
According to the recently released Kenya Health Products and Technologies Local Manufacturing Strategy (2026–2030), about 15 Kenyan manufacturers are producing essentially the same pain reliever, all competing in a market already flooded with about 200 imported brands containing the same active ingredient.
Meanwhile, in the same public hospitals these manufacturers supply, nurses are rationing injectable ampoules or managing without eye drops because no one is producing sufficient quantities locally.
The strategy attributes this mismatch to unsustainable unit economics across the pharmaceutical value chain, pushing manufacturers towards export markets and private buyers instead of the public health system.
Unsustainable unit economics is the cost of producing a single unit of medicine relative to what it can realistically be sold for.
“Complex products listed in the Kenya Essential Medicines List (KEML), such as eye drops and injectables, are produced less frequently due to unsustainable unit economics from a business perspective,” the strategy said.
“Most manufacturers supply only 25 percent of their production to the public sector, preferring private buyers and export markets.”
According to the strategy, Kenya’s pharmaceutical exports were valued at Sh12.2 billion, illustrating how much local production is destined for markets outside the public health system.
“The incentive to serve the local public market simply does not exist when you are waiting 18 months for reimbursement,” said one manufacturer, describing the effect of persistent payment delays.
Manufacturing paracetamol tablets requires basic equipment, readily available active pharmaceutical ingredients (APIs), relatively straightforward regulatory approval and modest capital investment.
Producing sterile injectables, by contrast, requires an initial investment of about Sh800 million, an additional 20 percent contingency for cost escalation and a further 20 percent in operating expenditure to keep the facility running continuously.
Establishing a Good Manufacturing Practice (GMP)-compliant sterile manufacturing facility alone costs between Sh700 million and Sh800 million.
“However, this investment can be recovered if market access is assured,” the strategy notes.
Missing links
The structure of Kenya’s pharmaceutical value chain also limits the local production of essential medicines.
The strategy identifies five production levels.
- Level 1 consists of importers and distributors.
- Level 2 covers packaging and labelling.
- Level 3, where most Kenyan manufacturers operate, involves formulating finished products such as tablets, capsules, syrups and creams from imported ingredients.
- Levels 4 and 5 cover the production of active pharmaceutical ingredients and research and development respectively, and are almost absent from Kenya’s industrial landscape.
There are more than 70 operators at Level 1 and 27 at Level 3. There are none at Level 4 and only one at Level 5.
“Despite the fiscal and non-fiscal incentives offered by the government to support Levels 4 and 5, the two PVC levels remain underutilised by local companies due to the high capital requirements and complex technology involved, with most of the industry focused on importation, distribution, filling, finishing, packaging and labelling,” the strategy states.
As a result, Kenya imports more than 95 percent of its active pharmaceutical ingredients from India and China.
This means every paracetamol tablet, antibiotic capsule and antimalarial syrup manufactured in a Nairobi factory begins as an imported raw material, leaving the industry vulnerable to supply chain disruptions, foreign exchange volatility and rising production costs.
Supply risks
The Covid-19 pandemic exposed these vulnerabilities. More than 70 percent of Kenya’s health product expiries during the pandemic were linked to supply chain disruptions, with products arriving too late to be used after procurement delays disrupted the entire supply chain.
Even with existing infrastructure, Kenya’s pharmaceutical manufacturing plants operate at only 40 to 60 percent of installed capacity.
“The issue is not a lack of factory space, but rather the absence of assured markets, affordable financing and predictable government procurement,” the strategy notes.
High production costs compound the problem.
Kenya’s electricity tariff of $0.175 per kilowatt-hour is one of the highest in the region, costing more than nine times Ethiopia’s tariff of $0.018 per kilowatt-hour and making energy-intensive GMP-compliant manufacturing even more expensive.
“Manufacturers are also seeking protection from unfair import competition, VAT refunds on capital expenditure and laboratory equipment, and reduced maintenance, rent and electricity costs.”
Despite these constraints, Kenya’s pharmaceutical market is valued at about Sh154.8 billion, making it one of the largest in sub-Saharan Africa. The country has more than 37 licensed manufacturers producing 694 medicine formulations.
However, only 220 of the 1,096 formulations required by the health system are produced locally, measured against the Kenya Essential Medicines List.
To address the gap, the strategy proposes a market-shaping approach involving coordinated government intervention and major procurement agencies.
“This would entail determining which medicines should be manufactured locally by guaranteeing purchase volumes, aggregating demand and providing targeted financing for complex product categories that have previously been unable to sustain themselves due to market forces alone,” it said.
The strategy also proposes a Preferential Procurement Master Roll covering 347 specific health products and technologies to make local production of complex essential medicines commercially viable.
