VZCZCXRO4155
RR RUEHTRO
DE RUEHAS #0030/01 0111644
ZNR UUUUU ZZH
R 111644Z JAN 09
FM AMEMBASSY ALGIERS
TO RUEHC/SECSTATE WASHDC 6842
INFO RUEHBP/AMEMBASSY BAMAKO 0830
RUEHEG/AMEMBASSY CAIRO 1144
RUEHNK/AMEMBASSY NOUAKCHOTT 6625
RUEHFR/AMEMBASSY PARIS 2998
RUEHRB/AMEMBASSY RABAT 2650
RUEHTRO/AMEMBASSY TRIPOLI
RUEHTU/AMEMBASSY TUNIS 7508
RUEHCL/AMCONSUL CASABLANCA 3623
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 03 ALGIERS 000030 
 
SENSITIVE 
SIPDIS 
 
STATE PASS TO USTR PBURKHEAD, JGROVES AND BGRYNIEWICZ 
 
E.O. 12958: N/A 
TAGS: ETRD ECON PREL AG
SUBJECT: ALGERIA IMPLEMENTS THREATENED BAN ON PHARMA IMPORTS 
 
REF: 2008 ALGIERS 1003 
 
¶1. (U) SUMMARY: With no fanfare or public announcement, the 
Algerian government has implemented a ban on the importation 
of a wide range of pharmaceutical products that are also 
manufactured in Algeria.  The ban, which took effect on 
January 1, is designed to spur the development of the 
Algerian pharmaceutical manufacturing sector and to cut the 
cost of government medical benefits provided to Algerian 
consumers.  The health ministry released a list of chemical 
compounds for which imported versions are banned, affecting 
at least 400 international products.  Another, shorter list 
is expected soon.  But it is unclear if Algerian 
manufacturers have the capacity to meet demand, and shortages 
of key drugs have already been reported.  The ban represents 
another Algerian policy supporting "economic patriotism," and 
was done in full awareness that WTO members would consider 
the move counterproductive to Algeria's effort to join the 
organization.   END SUMMARY. 
 
OLD SCHOOL ECONOMICS 
-------------------- 
 
¶2. (U) International pharmaceutical manufacturers confirm 
that Algeria has implemented a ban on the importation of 
medications that are produced domestically.  The ministry of 
health first announced the government's intent to institute 
such a ban in late October 2008, and industry sources tell us 
it became effective January 1 after having been officially 
published on December 14, 2008.  The government's 
communication minister publicly stated that the goal of the 
decree was to help spur development of the Algerian 
pharmaceutical industry, particularly in the generics sector. 
 Industry development is not the only motivation.  The 
government's cost of reimbursing consumers for medications 
has been increasing dramatically in recent years: according 
to reported customs statistics, the country imported a volume 
of pharmaceuticals worth nearly USD 1.4 billion in the first 
nine months of 2008 alone.  The French-language daily Liberte 
reported on December 7 that the government will save more 
than 200 million euros in 2009 by limiting its expansive 
insurance reimbursement plan to domestically produced 
generics. 
 
EVERYTHING IS BANNED 
-------------------- 
 
¶3. (U) The ban took effect without fanfare or public 
statement, in contradiction to the extensive press coverage 
that followed the October announcement of the ban's 
development.  More than 400 known products are affected by 
the ban.  The health ministry listed approximately 180 
chemical compounds that may no longer be imported to Algeria, 
known as international common denominations (DCI in French), 
covering almost all kinds of medications including 
antibiotics, analgesics and antihistamines, as well as 
medications for chronic illnesses including anti-cholesterol 
and psychotropic medications. 
 
¶4. (SBU) The country manager of a U.S.-based pharmaceutical 
company told us on January 6 that at least 15 of the firm's 
products are now blocked from the Algerian market, and orders 
that were placed before the ban was announced would not be 
allowed to enter the country.  The executive also said that 
importers, distributors and manufacturers were told by the 
ministry of health to remove from their annual import lists 
any product that may fall into one of the categories of 
banned chemical compounds.  Each company submits to the 
ministry a list of products it intends to import during the 
calendar year, and the Algerian customs service only allows 
the importation of products approved by the ministry. 
 
PRODUCE, OR ELSE 
---------------- 
 
¶5. (U) It remains unclear if Algeria has the capacity to 
produce the volume of pharmaceuticals that consumers have 
come to expect.  Liberte reported that Algerian manufacturers 
covered only 34 percent of the entire Algerian drug market in 
2008, and produced less than 15 percent of medications 
 
ALGIERS 00000030  002 OF 003 
 
 
considered essential.   A small, Arabic-language paper 
reported on January 4 that 40 drugs were already in short 
supply in Algeria, including medications for chronic 
conditions such as diabetes, heart and renal difficulties, 
and mental illness. 
 
¶6. (SBU) We were told by Algerian drug manufacturers that the 
health ministry did not seek counsel from the industry before 
announcing the ban.  A representative of an Algerian 
pharmaceutical firm told us that domestic manufacturers were 
first contacted by the ministry in mid-November, and each was 
required to sign a specific production commitment to take 
effect upon the implementation of the ban.  Another domestic 
company representative told us that if a manufacturer falls 
below its production commitment, it will lose its licenses to 
import other medications. 
 
¶7. (SBU) An Algerian drug producer told us in December that 
he believed the ban would ultimately help increase Algerian 
companies' domestic market share.  But he warned that current 
capacity was insufficient to meet consumption, and that few 
firms would be able to meet their production commitments. 
Members of the pharmaceutical producers association (UNOP) 
said publicly in December that they knew of firms currently 
making roughly five million units per year of various 
medications that had committed to producing 30 million units 
within the first six months of the ban.  UNOP complained that 
the ministry accepted these commitments without field checks 
of capacity.  Further exacerbating the capacity situation, a 
U.S.-based drug firm told us January 9 that the company 
feared its plans to build a plant to manufacture an analgesic 
syrup -- its first real foray into the Algerian market -- 
might be delayed because the segment of the Algerian 
construction industry capable of such projects could not be 
able to keep pace with the demand created by the ban. 
 
YES WE WANT TO JOIN WTO, BUT THIS IS IMPORTANT 
--------------------------------------------- - 
 
¶8. (SBU) The government implemented the ban knowing that 
doing so would run counter to its effort to join the World 
Trade Organization (WTO).  When a visiting delegation of 
MEPI-funded WTO accession consultants asked health ministry 
officials in November about the ban, the officials responded 
that the policy was not open for discussion and that Algeria 
maintained the right to implement policies aimed at 
protecting and expanding key domestic industries such as the 
pharmaceutical sector. 
 
CUTTING COST ALSO A PRIORITY 
---------------------------- 
 
¶9. (U) Along with the goal of spurring domestic 
pharmaceutical production, the government has an interest in 
reducing the cost of its social insurance program by reigning 
in the number and type of medications for which it provides 
reimbursement to consumers.  The Algerian social security 
administration had been reimbursing Algerians for a portion 
of their drug purchases according to a reference list of 
chemical compounds.  Several American drug companies told us 
in 2008 that, until the import ban, the reimbursement 
reference price was the biggest challenge they faced in 
Algeria, because since 2006 the government had been 
precipitously reducing the amount it paid for drug 
reimbursements, usually based on the lowest-price generic. 
Thus, brand-name imports were steadily being priced out of 
the reimbursable market. 
 
¶10. (U) Djouad Brahim Bourkaib, a director general at the 
Ministry of Social Security, Work and Employment, was quoted 
by Liberte on December 7 as saying that the reimbursement 
program had been very generous over the years.  He said that 
at its peak, 3200 brands were reimbursable under 1200 
international common denominations (DCI), when in reality, 
only 600 DCI are really necessary.  Liberte also reported 
that the drug reimbursement reference price would again be 
lowered across a range of products. The same December 14 
edition of the official gazette that carried the new list of 
banned imports also carried an updated reference price list. 
Liberte further reported that, in the future, only "essential 
 
ALGIERS 00000030  003 OF 003 
 
 
medicines" would be reimbursable. 
 
COMMENT: ECONOMIC PATRIOTISM WITH A DOSE OF PRAGMATISM 
--------------------------------------------- --------- 
 
¶11. (SBU) The future cost-savings for the Algerian government 
from banning imported brand-name drugs will likely be real 
and possibly significant, but the same effect could have been 
had by simply reimbursing only generics whenever available. 
Ultimately, the pharmaceutical import ban represents another 
step in the government's reprisal of nationalistic policies 
that government officials and local press have dubbed 
"economic patriotism" (reftel).  Since Prime Minister Ouyahia 
took office last June, the government has made a series of 
tax and investment policy shifts with a stated goal of 
boosting domestic production or increasing revenue capture. 
The moves have also provided a means to vilify foreign 
corporate interests in the run-up to the 2009 presidential 
elections, and the Algerians make no apologies for the 
policies' inconsistency with WTO norms. 
 
¶12. (SBU) Just as key ministers have been touting Algeria's 
lack of economic integration with world financial systems as 
having saved the country from the global financial crisis, 
nationalistic economic policies such as the drug import ban 
are widely praised by both politicians and business leaders, 
even as both groups call for more foreign investment in 
Algeria.  The investment they seek seems limited, however, to 
local production with local partners.  U.S.-based 
pharmaceutical companies tell us that with such 
unpredictability in market regulation, as highlighted by the 
falling reimbursement reference price and by the import ban, 
they are not interested in starting or expanding Algerian 
production for fear of further marketshare and capital 
investment loss.  This message does not seem to be resonating 
in Algerian policy circles, despite our best efforts to 
deliver it.  Further, while Algeria periodically reiterates 
its desire to accede to the WTO, Algerian negotiators often 
complain about the complexity of the process, and the prime 
minister recently said publicly that accession is "very 
difficult, and will not happen tomorrow."  The pharmaceutical 
ban is another indication of Algerian hesitancy to make the 
necessary trade-offs in its domestic policy to gain 
membership in the WTO. 
PEARCE