Value pricing essential for Mideast pharma industry


07/02/2014 09:10 AST

Pharmaceutical manufacturers and distributors in the UAE do not follow value-based pricing, which makes drugs a little expensive, states Gihan Hamdy Elsis, author of Pharmaceutical Industry in the Mena Region: Challenges and Recommendations, a white paper that was unveiled in Dubai on Thursday.

“The report recommends value-based pricing for better pricing agreements between companies and governments, so we can have drugs that are priced according to its value,” Gihan Hamdy Elsisi, Head of Pharmaceutical Unit, Ministry of Health, Egypt, told Khaleej Times on the sidelines of the launch of the report.

Commissioned by Boehringer Ingelheim, the paper gives a comprehensive overview of the pharmaceutical industry of the Middle East and country-specific recommendations and suggestions.

As per its findings, the industry in the UAE depends on imported drugs, long gestation period for registration and approval of drugs by the government, and lack of partnerships between the government and private sector.

“In the UAE, the main challenge is related to the time taken to allow the companies to bring in new molecules to the market. We need greater flexibility and swifter approvals. While the UAE is quite advanced compared with other countries, it still takes about eight to 14 months to get approvals,” said Karim El Alaoui, managing director and Head of Prescription Medicine, Middle East, Turkey and Africa, Boehringer Ingelheim.

Even though the UAE’s $1.6-billion pharmaceutical industry is among the most developed ones in the Middle East, its average sales as a percentage of the country’s GDP stand at just 0.4 per cent.

The numbers stack considerably low compared with countries like Saudi Arabia that boasts of sales at 0.8 per cent to its GDP, Bahrain at 1 per cent, Oman at 0.6 per cent, and Lebanon at 3.3 per cent.

Statistically, the UAE is highly dependant on imported drugs with domestic production representing approximately 15 per cent of the total drugs sold locally. Imports of pharmaceutical products have expanded at a compounded annual growth rate of over 16 per cent between 2009 and 2011.

One of the key reasons for high imports is the lack of manufacturing base and R&D units. Weak implementation of patent legislations deters foreign companies to make investments here, and therefore, there is a serious deficit of research and development activities and low budget allocations.

The report has also highlighted the need for uniform record-keeping and coding of disease. At present, Dubai hospitals use ICD9 disease codes while Abu Dhabi has already implemented ICD10 codes.

One of the risks pointed out in the paper is the price reduction by the government with fixed profit margins for the local agents, and increased profit margins for the pharmacies. These price reductions are challenged by continuous increase in production costs.

The UAE is part of the $8.5 billion pharmaceutical market of the GCC. As per the report, local production of more than 220 manufacturing units covers only 45 per cent of the regional consumption.

Khaleej Times
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