The tremendous economic and industrial developments of the Middle East countries have made them a flourishing market for pharmaceutical industry.
According to a Deloitte report, the GCC states, which include Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates, comprise a dynamic life sciences and healthcare market, due to their growing and ageing populations and increasing total healthcare expenditures per capita.
The affluence in these nations has led to rise in obesity, diabetes and cardiovascular diseases. Prevalence of Diabetes Mellitus (type-2) in Middle East makes most of the countries stand in the list of top 10 in terms of prevalence of type-2 diabetes globally.
In the Middle East, Saudi Arabia is the largest pharmaceutical market with 60 per cent of regional share, and has one of the most sophisticated healthcare systems in the region. Though healthcare has been given a high priority by the government, Saudi Arabia is the fifth highest country in the world in terms of obesity rates, weighing in at a prevalence rate of 33 per cent. Prevalence of diabetes mellitus (type-2) is also on higher side among the population of the Saudi Arabia. Apart from the huge demand for quality medical services, Saudi patients also strongly favour imported branded products over generics, offering significant potential for multinational companies (MNCs). The Saudi Arabian pharmaceutical market is forecast to expand by 4.7 per cent a year to reach $4.7 billion by 2016.
Healthcare has been given a high priority by the government. All citizens and expatriates working in the public sector have free access to all public health services, and public expenditure contributes to 78 per cent of total healthcare expenditure. Saudi Arabia has a growing and exceptionally young population, with around two thirds of it below the age of 30. Like the rest of the Gulf countries, the real health challenge lies in the alarming increase in chronic diseases.
Saudi Arabia has the largest manufacturing segment in the Gulf, however, most of the local production is destined for export markets. Domestic production accounts for around 15% of the overall supply of pharmaceuticals in the market. There are around 15-20 pharmaceutical manufacturers operating in the kingdom including indigenous companies and subsidiaries of multinational pharmaceutical giants. Leading local players in the kingdom include SPIMACO, Jamjoom Pharma, Tabuk Pharmaceutical Manufacturing, and Jazeera Pharmaceutical Industries. The locally-grown companies primarily make generic drugs, while some also undertake under-licence manufacturing on behalf of multinational pharmaceutical companies for supply in the domestic and regional markets.
This sizable area of untapped growth makes Middle East especially Saudi Arabia a destination for MNCs to expand. In November 2012, Sanofi laid the foundation for an industrial facility in King Abdullah Economic City in Saudi Arabia. It would be the first global pharmaceutical company to establish a manufacturing plant with 100 percent foreign direct investment in the country. This project highlights how important Sanofi considers the rapid expansion of its presence in emerging markets in order to maximize revenue-earning opportunities.
The corporation also recently received a land concession for a planned investment of $93 million in Sidi Abdellah, near Algiers, the largest French pharmaceutical complex in the Middle East and North Africa region. Medicine production should begin within three years. Pfizer has partnered with Tabuk Pharmaceuticals to commercialise its products in Saudi Arabia.
A vast majority of manufacturing plants in the GCC are located in Saudi Arabia. Major indigenous pharmaceutical producers in the region include the Saudi Arabia-based Saudi Pharmaceutical Industries and Medical Appliances Corporation (SPIMACO) and the UAE-based Gulf Pharmaceutical Industries (Julphar). Leading multinational companies like GSK and Abbott Laboratories have also set up manufacturing units in the region.
The GCC pharmaceutical market is dominated by patented drugs, with generics having only about a 5%-6% market share. Since the domestic manufacturers primarily focus on generic drugs, they have managed to capture only a small portion of the overall market value. However, non-GCC markets like Iraq, Lebanon, Afghanistan, Egypt, Libya, and Yemen are major sales avenues for many of the local manufacturers who typically export a significant percentage of their annual production. Nevertheless, the region ranks low in the context of capabilities within the overall pharmaceutical industry value chain, and particularly with respect to research and discovery of innovative products. Foreign drug manufacturers are required to sell their products in a GCC country only through local importing and distribution companies registered with the health ministry. Entry of foreign investors in the pharmaceutical wholesale and distribution segment is restricted. Hence, local distributors play a larger role in the market than the domestic manufacturers. Large distributors operate their own warehousing facilities and distribution networks for delivering products to pharmacies, hospitals & clinics, and government agencies.
These companies own exclusive import and country-wide distribution rights for supplying products from a number of regional and foreign manufacturers. Some of the distributors are vertically integrated and have their own pharmacy operations for selling medicines directly to the end-users. Leading names in the private pharmaceutical distribution segment in the region include the UAE-based Pharmatrade, Banaja Holdings and Tamer Group in Saudi Arabia, Kuwait-based Al Mojil Drug Company, Al Baker Trading Establishment and Ebn Sina Medical in Qatar, and Bahrain Pharmacy.
Generics, all of which are typically manufactured at the local plants, account for less than 20 per cent of the Saudi Arabian pharmaceutical market. The Saudi population has a strong preference for imported and branded drugs and economic well-being permits them to be able to afford the costlier version of drugs available. However, the government is focused on promoting local production of generic medication in order to curtail the increasing healthcare spending and alleviate unemployment among the citizens. The government encourages establishment of more locally-grown drug manufacturers through measures such as facilitating faster entry of locally-manufactured medicines into the market and requiring only imported pharmaceuticals to be tested before registration.
At the same time the growing incidence of lifestyle-related chronic diseases has boosted demand for high-value prescription medication in Qatar. The country’s population is also becoming increasingly aware about personal healthcare. This has boosted sales of OTC products such as analgesics, cold and flu medication, digestives, pseudo-pharmaceuticals, and topical creams. However, regulations on advertising and retail sales through licensed pharmacies only have partially stunted the growth of OTC segment. Under Qatari laws, some typically OTC drugs are categorised as prescription medicines, while some drugs generally available under prescription only are dispensed as OTC.
Almost the entire drug consumption in the country is composed of imported products and local manufacturing activities have been very limited so far. High market prices coupled with a strong ability to spend have made the country’s consumers among the highest healthcare spenders in the region.
The Qatari pharmaceutical industry will benefit from the forthcoming implementation of the national health insurance programme, which envisions covering all the residents and visitors in the country under the scheme. Further, potential signing of a free trade agreement between the GCC and India, thus paving the way for cheaper imports of generics, can alter structure of the pharmaceutical industry in the country.
At the same time in Bahrain the govt is increasingly encouraging the use of generic medicines among the doctors and patients. Patients are allowed to claim reimbursements on prescriptions of generic products. Moreover, the import of generic drugs into the Bahrain market should increase once the free trade agreement between the GCC and India is signed.
The healthcare industry in Bahrain is primarily funded by the government with public finance contributing around 70 per cent of the total healthcare expenditure every year. The government provides healthcare services to the local population through public hospitals and dispensaries free of cost, while the services for expatriates are subsidised.
Consumers are generally inclined to purchase branded medication thanks to strong spending power and a general perception that branded drugs are superior to generics. However, traditional medicines are also still in demand in the country, and there are a number of companies making herbal pseudo-pharmaceuticals. A large part of the Bahrain pharmaceutical market is composed of prescription drugs. However, a strong buying power and increasing health awareness have created a growing market for OTC products and pseudo-pharmaceuticals like weightloss products, vitamins, and pro-biotics. Suppliers of OTC drugs, especially branded products, benefit from wide availability of these products at pharmacies, supermarkets, and specialist stores.