Pharma sales in the six Gulf Cooperation Council (GCC) member states - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE) - are set to grow by an average of 7% a year to 2020, reaching a value of $10.8 billion from $5.6 billion in 2010, say new estimates.

The emerging GCC drug pharma market is undergoing a sea change, with governments implementing reforms, simplifying regulations and upgrading and expanding healthcare infrastructure to compete with the global pharmaceuticals market, says the research, from Frost & Sullivan.

Favourable regulatory policies have attracted foreign participants to the market, intensifying competition among top multinationals and a few local companies, it adds.

As imports account for 80% of the GCC pharma market, these government efforts are vital to enhance local production. Domestic producers focus mainly on the manufacture of generic drugs but, given these products’ high prices, end-users tend to lean towards branded drugs, the report notes, pointing out that the World Health Organisation (WHO) has estimated that drug products in the GCC are priced 13 times higher than the international standard. There is no standardisation in their prices, due to the small size of the market and increasing privatisation within the sector.

The private pharmaceuticals sector in the region favours branded pharmaceuticals, so patented drugs dominate the market, with around a 95% share. And while this bodes well for the multinationals, local firms will be hard-pressed to keep pace with the demand for brand drugs, says the study.

F&S' analysts believe the governments of GCC countries need to introduce measures to boost domestic manufacturing by engaging with pharma multinationals and other stakeholders. These strategies could include offering incentives to new local manufacturers to compete in the growing market, while existing participants could be encouraged to introduce improved technologies to survive in the multinational-dominated market, they suggest.

GCC governments are also trying to reduce their dependence on imports by entering into joint ventures and licensing deals with pharma multinationals. Such initiatives, coupled with the rising incidence of lifestyle diseases in the GCC, are expected to considerably improve the region's pharmaceutical market considerably, the report adds. 

- F&S is also forecasting that total healthcare expenditures in the GCC will show a compound annual growth rate (CAGR) of 10.3% during 2010-18, with spending rising to $133.19 billion in 2018 from an estimated $46.12 billion in 2011.

This fast growth will be due to a combination of factors such as an expanding population base, higher incidence of lifestyle diseases and deeper insurance penetration, it says.

The surge in medical tourism in the region, combined with the escalating disease burden, will create a need for 90,690 beds by 2018, but opening up healthcare facilities in GCC countries involves numerous complicated processes which deter possible foreign market entrants, the report observes.

The industry in the GCC is mostly regulated by the government, so the most pressing need is to open the market to private healthcare organisations by easing entry barriers and reducing the complexity of procedures, it adds.

Public-private partnerships (PPPs) in healthcare have already been proven to save as much as 25% of health care costs, and the two forerunners in such deals in the GCC are the UAE and Saudi Arabia, with most such deals in the region currently being based on the "build, operate and transfer" (BOT) system, says F&S. More PPP deals in the fields of medical, nursing and paramedical colleges can also reduce the GCC's dependence on expatriate doctors and nurses, and generate jobs for citizens, it suggests.