The pharmaceutical industry in the Middle East is in a state of flux today. It is undergoing a revolution of sorts with WTO regulations on the backdrop. The region is witnessing a spurt of new companies with tremendous desire to become self-reliant by establishing own manufacturing facilities. There, also, are genuine efforts to formulate fresh drug policies by individual countries.
With more than 200 companies, the pharmaceutical industry in the Arab world is a complex paradigm composed of stiff competition, escalating trade barriers, and new drug policies. Amidst a host of conflicting issues, a country like Oman, which has been importing pharmaceutical products from the US and Europe, is talking about an industrial change by getting its first pharmaceutical company onstream, and has announced the construction of another two.
Consumption of pharmaceutical products within the Arab market is around US$6 billion, out of which the Gulf Cooperation Council (GCC) region accounts for US$1.6 billion. Saudi Arabia has a (private sector) market size of around US$1 billion, followed by the United Arab Emirates (UAE) at US$350 million, Kuwait - US$160 million, Qatar - US$80 million, Oman - US$ 60million, and Bahrain - US$30 million. IMS health estimates that the market is poised to grow 10 per cent per annum over the next three years.
Saudi Arabia has the largest number of generic brand manufactures such as Spimaco, Tabuk, Al Jazeera, Dar al Dawa, and Riyad Pharma. Julphar is the leading player in UAE, Kepisco in Kuwait and NPI in Oman. So far, Qatar and Bahrain do not have any significant manufacturing facilities.
Jordan and Egypt are over 90 per cent self sufficient in terms of pharma-ceutical products, whereas the rest of the Arab countries are producing less than 20 per cent of their requirements. Valued at US$1.5 billion in 2000, the Egyptian drug industry is the largest producer and consumer of pharmaceuticals in the Middle East and North Africa region.
In Jordan, the pharmaceutical industry is second only to the mining industry in terms of export earnings. In the year 2000, exports exceeded US$175 million dollars and reached more than 60 markets worldwide. For the past 40 years the Jordanian industry has grown to 17 companies and has become export driven. With a capital investment of over US$400 million the pharmaceutical industry has become an important source of foreign currency.
Rising competition remains a major issue facing the Arab pharmaceutical industry, as it shuns the prospects in the regional as well as potential global markets. In addition to this, most of the companies in the Arab countries rely on foreign markets for their raw materials. Reports suggest that 90 per cent of the raw material used by the local pharmaceutical companies is imported from outside the Arab nations.
Furthermore, the operating pharmaceutical plants lack adequate scientific research and development centres. In Egypt alone, with local drug industry focusing on manufacturing rather than on research, 85 per cent of the raw materials are imported from France, Switzerland, Belgium, Germany and the United Kingdom.
Official sources have estimated the average per capita annual spending on pharmaceuticals in the Gulf states at US$60. Recently published statistics estimate the pharmaceutical industry is employing more than 70,000 workers and specialists.
By far the GCC market is clearly bifurca-ted into government and private business. The government institutions, of course, are the major market because healthcare is free for most of the Gulf countries and the private market caters mainly to expatriates and those citizens who do not wish to avail government hospital facilities. In Oman the total pharmaceutical market is divided between the government sector - 70 per cent and private sector - 30 per cent.
In Bahrain the market is almost equal for both the sectors - 50 per cent each, for Qatar, government business constitutes 64 per cent, whereas private sector forms 36 per cent, in Kuwait government accounts for 65 per cent, private - 35 per cent, and in UAE, the government business is around 45 per cent and private - 55 per cent.
The marked increase of pharmaceutical business in the private sector of UAE is due to the fact that the country has recently decided not to provide any more free medical assistance to the expatriates. Naturally, this has affected the insurance business in the UAE, as medical premiums have risen on an average 25-30 percent in 2001 owing to rising expensive medical claims. Also, it may be worthy to note that over 80 per cent of the UAE population is expatriate.
Moreover, a recently published survey estimated that the Saudi Arabia's private health market, presently valued at US$1.06 billion per annum, is expected to grow to US$3.46 billion in the next two to three years. This expansion is inclined to occur following the imposing of the cooperative health insurance system on expatriates. Official sources have reported that 80 private hospitals are presently operating in Saudi Arabia. The total investments in these hospitals are valued at US$1.6 billion.
As far as pharmacies are concerned, Oman has a total of 300 pharmacies, Bahrain has 65, Qatar has 95, Kuwait has 170, and UAE has a total of 600. There are more than 3,000 pharmacies in Saudi Arabia, which on an average sell US$266 million worth of pharmaceutical products annually. And in Oman, pharmacies sell around US$17 million worth of pharmaceutical products, with the largest network being that of Muscat Pharmacy.
Generally, pharmacies in most of the Gulf countries do participate in government tenders besides running their private sales outlets.
The cash-rich Middle East, for long had been the target of the European and American multinationals. But things started changing in the local market at the advent of patent and WTO's intellectual property regulations. Even today, almost all the Arab world countries prefer to register non-patented drugs from an MNC instead of patented ones, simply because of the royalty factors.
Recently, Oman followed its Gulf neighbours and formulated consumer-friendly drug policy that aims to reduce the prices of medical products, and at the same time establish a price control regime.
Presently, the annual pharmaceutical import in the Sultanate is estimated at RO26 million, with the government providing free healthcare to Omani citizens, procurement of medicines is done through joint tenders floated by the GCC states. For emergency requirements, local pharmaceutical distributors directly supply to government hospitals. The GCC states are pursuing a uniform strategy on drug price control in view of joint tenders issued for purchase of pharmaceutical products.
It might be worthwhile to note here that although the GCC countries are moving towards economic integration, and customs union is something that has been looked at immediately, not all of them have the same structure. For instance, Oman and Bahrain charge five per cent customs duty, while Qatar and Kuwait have a four per cent duty, and UAE zero per cent. Moreover, Oman provides a 10 per cent price preference to Omani nationals for local goods and services.
Of the GCC countries, Kuwait, Bahrain, Qatar, and UAE, are already members of the WTO. All four of these countries entered the General Agreement on Tariffs and Trade (GATT) and WTO under simplified procedures and with minimal negotiations. Saudi Arabia applied for WTO membership in 1993, and converted this application to WTO accession early in 1996. An observer to the WTO since April 1995, Oman has recently joined the organisation.
Coming to intellectual property protection, the GCC secretariat has declared the protection of intellectual property rights to be a priority and is working to facilitate this in the six member states, especially in the area of patent protection. Saudi Arabia enacted patent and copyright laws in 1989, the UAE enacted copyright, trademark, and patent laws in 1992, Bahrain enacted copyright law in 1993, and Oman has enacted a copyright law in 2000.
So, the fate of the pharmaceutical industry in the Arab world depends on the turn the government policies of the individual countries take.