Legal & Regulatory > Algeria > Localization

The ins and outs of localization in Algeria. Prepared in association with SAARPE Association, a leading law firm in Algeria, this is an extract from The Pharma Legal Handbook: Algeria, available to purchase here for USD 99.

1. Are there any rules or regulations requiring and/or encouraging localization in your country? What is the legal framework defining these localization rules and policies?

According to Article 206 of Health law No 18-11, dated of 2 July 2018 and published in the Official Gazette, the Government supports national production through incentives and encourages pharmaceutical research and development, in particular by promoting investment in this field.

The legal framework for localization rules and policies include:

• Law No 16-09, dated of 3 August 2016 and published in the Official Gazette, related to investment promotion;
• Finance Law for 2001, published in the Official Gazette, in particular its Article 39 on the exemption of imported ingredients and materials intended for the manufacturing of drugs from customs duties;
• Presidential Decree No 15-247, dated of 16 September 2015 and published in the Official Gazette, on the regulation of public contracts and public service delegations, in particular its Articles 83, 84, and 85 related to promotion of national production;
• Decree No 17-100, dated of 5 March 2017 and published in the Official Gazette, amending and completing the Decree No 06-356 dated of 9 October 2006 related to the duties, organization and functioning of the Investment Development National Agency (“ANDI” – “Agence Nationale de Développement de l’Investissement);
• Decree No 09-396, dated of 24 November 2009 and published in the Official Gazette, defining the standard agreement to be concluded between social security organizations and community pharmacies, in particular its Article 27 offering a bonus for locally manufactured products;
• Ministerial Decree, dated of 30 October 2008 and published in the Official Gazette, fixing technical conditions for import of drugs and medical devices for human use, in particular its Articles 30 and 31 conditioning import permit by local investment in pharmaceutical production.
• Ministerial Decree, dated of 9 July 2015 and published in the Official Gazette, related to import ban on drugs and medical devices intended for human use locally manufactured in Algeria.

2. Have there been any recent significant changes involving localization rules? If yes, when did they take place and what did they involve?

As part of recent significant changes in relation to localization rules:

• Finance Law for 2018, published in the Official Gazette, has extended exemption from customs duties set for in Article 39 of Finance Law for 2001, to imported ingredients and materials entering in manufacturing of medical devices too;
• Finance Law for 2017, published in the Official Gazette, has modified and completed Article 103 of Finance Law for 2003 by fixing different authorization fees for drugs and medical devices upon their sourcing status (imported or locally manufactured).

3. Is the process of obtaining a marketing authorization impacted by localization policies in your country? If yes, how so (what are the incentives received or the requirements)?

The market authorization process is in favour of locally-manufactured products, both in terms of authorization fees (6 times lower for drugs, and equal to half for medical devices: refer to answer to question 4 of “Regulatory, Pricing, and Reimbursement Overview”), and authorization timelines (assessment priority is given for local products, with approval timeframe of 5-6 months).

4. Is the pricing process for pharmaceutical products impacted by localization policies in your country? If yes, how so (what are the incentives received or the requirements)?

Priority is also given to locally manufactured products during pricing process. Their list prices are fixed in local currency (ex-factory), whereas imported products prices are fixed in foreign currency (FOB incoterm, mainly in euro).

As an incentive given to the first locally-manufactured version of a previously imported product, its ex-factory price is aligned during the first 5 years of authorization to FOB price of the imported version, even if the latter is a reference product, and the local one is a generic product (when the general rule requires a difference of 30% between a generic and the reference product).

After a period of 5 years, locally manufactured generics are required to be lower by 10% (if ex-factory price is below 200 DZD), by 15% (if ex-factory price is between 200 and 500 DZD), by 20% (if ex-factory price is between 500 and 1000 DZD), and by 30% (if ex-factory price is above 1000 DZD) compared to the reference product.

5. Is the reimbursement of pharmaceutical products impacted by localization policies in your country? If yes, how so (what are the incentives received or the requirements)?

Despite it is considered in the final reimbursement approval decision, there is no particular incentive given to locally-manufactured during the assessment process.

Nevertheless, according to Article 27 of Decree No 09-396, dated of 24 November 2009 and published in the Official Gazette, defining the standard agreement to be concluded between social security organizations and community pharmacies, a 10% bonus is offered to pharmacists on each prescription for which the prices of all the medicines sold are equal or lower than the reference tariff for reimbursement (cheapest generics) + 10% bonus if all medicines sold within the same prescription are locally manufactured.

6. Is the access to public or public tenders of pharmaceutical products impacted by localization policies in your country? If yes, how so (what are the incentives received or the requirements)?

Presidential Decree No 15-247, dated of 16 September 2015 and published in the Official Gazette, on the regulation of public contracts and public service delegations, encourages local purchase as an incentive to national production.

Under the Article 83 of the Presidential Decree No 15-247, a preference margin (bonus) at a rate of twenty-five per cent (25%) is granted to products of Algerian origin and/or companies incorporated under Algerian law whose capital is held mainly by domestic residents.

According to Article 84, the specifications for international call for tenders must require from foreign bidders the commitment to invest in partnership, in the case of projects whose list is set by decision of the authority of the public institution or of the minister concerned, for their projects and those of the public institutions which belong to them.

According to Article 85 within the same Presidential Decree, the public contracting service must launch a national call for tenders when the national production is able to meet the needs.

Since 2015, the Hospitals Central Pharmacy (“PCH” – “Pharmacie Centrale des Hôpitaux”), responsible for purchasing drugs and medical devices for all hospitals (public tenders), has started to launch national exclusive call for tenders for products locally manufactured in Algeria, before considering international call for tenders during which the 25% bonus for local products/companies is applicable.

7. Are import tariffs, importation and/or exportation permits, trade and/or taxation of pharmaceutical products impacted by localization policies in your country? If yes, how so?

a) Import permit:

Under the Article 30 of the Ministerial Decree, dated of 30 October 2008 and published in the Official Gazette, fixing technical conditions for import of drugs and medical devices for human use, any new import authorization is conditioned by investment in pharmaceutical production, in particular by:

• The construction of pharmaceutical production plants, on behalf of or in partnership;
• The production in technical-scientific partnership within existing pharmaceutical production plants;
• The upgrade or extension of existing pharmaceutical production plants;
• The contribution through products technical dossiers representing the share of participation in an investment project.

In this case, the import permit is issued for a period of one (1) year. This permit may be renewed if the stage of completion in the realization of investment is deemed to be in conformity with the plan of execution of the commitments subscribed.

According to Article 31 of the same Ministerial Decree, the importer undertakes to make the production investment within a period of two (2) years, failing which he loses the benefit of a new import permit.

However, the Minister of Health may extend the time limit of two (2) years referred to above, according to the assessment of the project progress in relation to the implementation plan of the commitments entered into.

b) Import ban:

The Ministerial Decree, dated of 9 July 2015 and published in the Official Gazette, has fixed a list of 357 drugs and 11 medical devices intended for human use banned for import as an incentive to support their local manufacturing in Algeria.

c) Import tariffs:

Without conflicts with the free trade agreements Algeria is party to, regular customs duties are applicable to all imported finished products (drugs and medical devices).

Article 39 of Finance Law for 2001 has exempted imported ingredients and materials entering in manufacturing of drugs from customs duties, but conditioned that exemption by a prior visa granted by the Ministry of Health to authorized pharmaceutical production establishments.

Article 118 of Finance Law for 2018 has amended the aforementioned article to extend the customs duties exemption to ingredients and materials entering in manufacturing of medical devices too.

d) Value-added tax (VAT):

All authorized drugs and medical devices in Algeria are value-added tax free, indistinctly if imported of locally manufactured.

8. Are there any other incentives or advantages offered by the current local localization rules in your country? If yes, what are they?

Under provisions of the Law No 16-09, dated of 3 August 2016 and published in the Official Gazette, related to investment promotion, several tax incentives are given to companies investing in pharmaceutical local manufacturing upon submission of investment dossier to the Investment Development National Agency (“ANDI” – “Agence Nationale de Développement de l’Investissement):

a) During realization phase:

• Exemption from customs duties for imported goods directly involved in the realization of the investment;
• Value-added tax (VAT) exemption for goods or services imported or acquired locally directly in the realization of the investment;
• Exemption from the value transfer tax and the land registration tax, for all real estate acquisitions made in connection with the investment concerned;
• Reduction on the amount of the annual rental fee fixed by the estate services for the grant of land:
  o by 90% during the period of realization of the investment for investment projects located in the provinces of the North,
  o to the symbolic Dinar the square meter (m2) for a period of ten (10) years for the investments established in the provinces of the High Plateaus and other areas of which development requires a special contribution from the government,
  o to the symbolic Dinar the square meter (m2) for a period of fifteen (15)
  years for investment projects located in the provinces of the Great South;
• Exemption from property tax on real estate properties within the scope of the investment, for a period of ten (10) years from the date of acquisition;
• Exemption from registration fees on corporate deeds and capital increases.

b) During operation phase:

For a period of three (3) years for projects creating up to 100 direct jobs, and for five (5) years for those creating more than 100 direct jobs in provinces of the North, and for a period of ten (10) years in provinces of the High Plateaus and the Great South, from the start of activity established by the tax departments at the investor’s diligence:

• Exemption from corporate income tax (IBS);
• Exemption from the tax on professional activity (TAP);
• Reduction by 50% on the amount of the annual rental fee set by the estate services for the grant of land.

9. Are there discussions about the possibility of implementing localization policies in your country? If yes, what are the proposed reforms and when should they come into place?

Localization policies are already in place in Algeria, and there are no plans for reform in the short-term.