Saudi Arabia Pharmaceuticals and Healthcare Report Q4 2009

In the updated Business Environment Rankings (BER), Saudi Arabia is ranked second, out of the 17 Middle East and African (MEA) markets surveyed. The country’s score is propped up by its sizeable and wealthy population as well as a steady forecast annual growth of its drug expenditure. Over the forecast period, the Saudi pharmaceutical market is expected to post a compound annual growth rate (CAGR) of 5.66% in both US dollar and local currency terms.

At consumer prices, we expect spending in this sector to increase from SAR9.94bn (US$2.65bn) in 2008 to SAR13.09bn (US$3.49bn) by 2013. However, strict price controls, alongside biased regulatory and intellectual property (IP) regimes designed to protect the local industry will have a negative impact on the market development, as will the need to contain costs in healthcare .

Nevertheless, the fact that the Saudi drug market accounts for around 65% of pharmaceutical sales in the wider Gulf Co-operation Council (GCC) region will continue to draw foreign companies. Additionally, despite the government’s commitment to reducing its healthcare financial burden – through measures including price cuts and the shifting of financial responsibilities to the private sector – pharmaceutical sector growth has been consistent and moderate over the past years. The growing burden of civilisation diseases has been one of the factors that have cushioned medicine expenditure from fluctuating oil prices .

Although the local industry has limited research and development (R&D) capabilities, in August 2009, the Saudi Gazette newspaper reported that the first locally-made swine flu treatment had reached the market. At a factory price of some SAR91 (US$24.3), the phosphate-based product, Osilta, is up to 30% cheaper than other swine flu drugs. However, the unnamed company that has launched the product explained that the drug cannot be used for prevention, instead only being effective to kill the A (H1N1) virus once it has entered the organism. The manufacturer has reportedly contacted state hospitals both in Saudi Arabia and the GCC bloc for supply negotiations. Around the same time, Saudi Arabia’s swine flu death toll climbed to four, with the World Health Organization (WHO) warning of a six-fold increase to the number of infections in Middle East region – which had already topped 1,100 – indicating strong commercial potential for Osilta .

In terms of the Kingdom’s economic performance, we still see 2009 and 2010 being fairly subdued growth years, although the long-term outlook for Saudi Arabia is more positive than it is for some of its neighbours, thanks to its strong domestic demand dynamics. However, as consumer confidence falls and jobs are lost in the course of the year, their impact on the over-the-counter (OTC) drug market is likely to be significant. Their consequences will be further compounded by the government’s commitment on educating the population in the prevention of overuse and wastage of medicines, as well as a wider drive to shift the burden of healthcare financing onto the private sector.

This report is excert of the Saudi Arabia Pharmaceuticals & Healthcare Report from