In Our Q210 Business Environment Ratings, Saudi Arabia is ranked second of the 17 Middle East and African (MEA) markets. This is a rise from fifth place in Q110 and a return to the countrys previous second place in Q409. The slide in Q110 was due to a drop in Saudi Arabias score for limits of potential returns. Part of
the reason for the country’s reinstatement to second place is the drop in the scores of other countries in the region.
From 2009 to 2014, the pharmaceutical market is expected to post a compound annual growth rate (CAGR) of 6.32% in both US dollar and local currency terms. Saudi Arabia and the UAE are the biggest medical spenders in the Gulf Cooperation Council (GCC), the most influential pharmaceutical markets in the MENA region. Saudi Arabia would be more capable of higher medicine spending if more rational policies were put in place to encourage domestic drug manufacturing and reduce reliance on imports. For example, joint ventures and licensing deals with multinational pharmaceutical companies would help reduce prices and improve access to medicines.
In January 2010, the Saudi Arabian Deputy Minister of Health for Planning and Development asserted that the replacement and upgrading of public hospitals will be completed by January 2013, and further that the 2010 health budget has approved the establishment of eight hospitals and 19 healthcare centres.
Saudi Arabia is similar to its GCC neighbours in that there is a growing trend for lifestyle diseases such as diabetes and obesity-related problems. These will provide a long-term revenue stream for the prescription drug segment.
Strict controls imposed on over-the-counter (OTC) medicines in Saudi Arabia, limiting their advertisement and promotion, are likely to limit growth for this segment in the future there is no sign of this changing. These controls are similar to others in the region; however, the UAE are already showing signs of change.
EU countries and the US dominate the market and are major suppliers of pharmaceuticals to Saudi Arabia. However, other countries, including Japan and Ecuador, have started to gain market share by establishing joint ventures in pharmaceutical manufacturing with Saudi partners.
The largest producer of pharmaceuticals in Saudi Arabia is Glaxo Saudi Arabia (a subsidiary of UKbased drug major GlaxoSmithKline (GSK), with a 10.8% share. GSK also has a joint venture with local company Banaja Saudi Import through Glaxo Saudi Arabia, which holds a 51% stake in the venture. Local company SPIMACO is the second-largest producer of pharmaceuticals in Saudi Arabia, and holds a market share of 7.4% and currently meets 75% of Saudi Arabian private pharmaceutical demand.
In January 2010 the company announced that it plans to expand into Eastern Europe and Northern Africa. SPIMACO also plans to modernise its manufacturing plant in Saudi Arabia, financing this through the issue of 18mn ordinary shares to raise capital of US$209mn. While the companys decision to expand internationally is positive, there remains considerable domestic potential the OTC market is particularly underdeveloped, mainly as a result of over-regulation.
Several large Indian drugmakers are attempting to penetrate the Saudi drug market. Ranbaxy which already has marketing operations in the UAE, Bahrain and Oman is leading the way, and was the first Indian drugmaker registered in the country.