Saudi Arabia’s pharmaceutical market, the largest in the Gulf Cooperation Council (GCC), is forecast to grow 5.9% both this year and in 2012, but the current strong market domination by patented drugs is set to decline, say new forecasts.
The vast majority of the market is now covered by imports of patented and over-the-counter (OTC) drugs, but the currently low share of sales held by generic products is set to increase significantly this year and next, as a result of the imposition of mandatory price cuts and pro-generics policies, plus delays in the registration of innovative new products, according to a new analysis by the Jeddah-based National Commercial Bank (NCB).
Saudi Arabia accounts for roughly 65% of all drug sales in the GCC region, which also includes Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates (UAE). During 2009-12, the Saudi market is set to experience steady growth at a compound annual growth rate of 5.92%, driven mainly by population growth, ageing and affluence, with Gross Domestic Product (GDP) per capita forecast to reach 75,034 riyals ($20,008) by 2012, says the NCB report.
Aided by the expansion and modernisation of health care provision, plus the establishment of more private health facilities, the Saudi market is set to grow from a value of 11.81 billion riyals in 2009 to around 14.04 billion riyals ($3.74 billion) in 2012, with annual pharmaceutical demand per capita increasing from 465 riyals in 2009 to 515 riyals in 2012, it adds.
Imports account for approximately 84% of the market, with patented drugs having remained the favoured treatment option because of the Kingdom’s considerable wealth, says the NCB, which notes that medicine imports totalled 9.65 billion riyals in 2008 and are expected to grow at a CAGR of 4.64% during 2009-2012 to reach 11.57 billion riyals by 2012. European manufacturers supply the majority of imports, followed by the US, the Middle East and North Africa, while among the nations of the GCC – which operates a unified pharmaceutical procurement system covering all six of the Council’s member states – the UAE has been the dominating exporter to Saudi Arabia, accounting for sales of medicines worth 348 million worth riyals a year.
Under the agreements undertaken by the Kingdom with the World Trade Organization (WTO), the commercial presence of foreign hospitals and pharmaceutical companies is permitted via joint ventures (JVs) with Saudi firms. Furthermore, the Kingdom has revised its legislation, particularly in the areas of intellectual property (IP) protection, import licensing, customs tariffs and fees.
Pharma multinationals also tend to enter the Saudi market through JVs with Saudi firms, and there are currently there are nine such ventures in the Kingdom, with a total foreign investment of 195 million riyals. The single largest investor is Al-Hayat Factory for Medical Products, a Jordanian company with an investment of around 60 million riyals.
The largest UK investor in the market is GlaxoSmithKline (GSK), which established production operations in the Kingdom in 1992 and is currently the leading pharmaceutical company there with a market share of 10.8%. The company has a joint venture, Glaxo Saudi Arabia, with local company Banaja Saudi Import; the latter firm holds a 51% stake in the subsidiary, the NCB report notes.
