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Saudi Arabia Pharmaceuticals and Healthcare Report Q4 2011
Business Monitor International, Sep 2011, Pages: 102
Saudi Arabia Pharmaceuticals and Healthcare Report provides industry professionals and strategists, corporate analysts, pharmaceutical associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Saudi Arabia's pharmaceuticals and healthcare industry.
Saudi Arabia is the largest regional market. While its potential is substantial – given its large population and the high prevalence of ‘civilization’ diseases – factors such as strict price controls and a deficient intellectual property (IP) regime will continue to deter foreign investors. In the meantime, massive investment into the expansion of healthcare infrastructure should stimulate sales of both pharmaceuticals and medical devices. The Kingdom will also continue to seek to increase local production capacity for the manufacturing of medicines, although the bulk of high-tech medicines will continue to be supplied through imports.
Headline Expenditure Projections
- Pharmaceuticals: SAR12.66bn (US$3.38bn) in 2010 to SAR13.69bn (US$3.66bn) in 2011; +7.9% in both local currency and US dollar terms. Forecast unchanged from Q311.
- Healthcare: SAR69.17bn (US$18.47bn) in 2010 to SAR77.71bn (US$20.75bn) in 2011; +12.4% in both local currency and US dollar terms. Forecast unchanged from Q311, although historical data increased slightly.
- Medical devices: SAR5.68bn (US$1.52bn) in 2010 to SAR6.42bn (US$1.72bn) in 2011; +13.1% in both local currency and US dollar terms. Forecast down slightly from Q311 due to macroeconomic factors.
Business Environment Rating: Saudi Arabia's score remained the same in relation to the previous quarter. However, the score – 55.7 of out of the maximum 100 – has now placed Saudi Arabia seventh within the regional matrix, which assesses 19 regional markets, down from fifth previously, as the relative attractiveness of other countries improved.
Key Trends & Developments
- The formation of The Gulf Federation of Manufacturers of Pharmaceuticals and Medical Supplies (GFMPMS) in Doha in June 2011 is, potentially, a very significant move towards the regulatory consolidation of the industry in the Gulf Cooperation Council (GCC) and Yemen. There has already been some progress in unifying patent regulations, pricing and drug registrations in recent years, although it seems doubtful that the Arab Union of Pharmaceutical Manufacturers and Medical Appliance Manufacturers (AUPAM) made much of an impact in this regard. It is hoped that this new GCC-specific industrial union will have more success.
- Further improvements in the public healthcare sector can be expected in the short-to-medium term, as the executive council of the Saudi Arabian ministry of health recently gave the green light to the ministry's strategic primary healthcare plan, The Saudi Gazette reported in June 2011. The healthcare plan covers the introduction of international preventive, therapeutic and rehabilitative services, which will improve quality of life for all patients in the region, according to the ministry's spokesperson, Khalid Al-Marghalani.
- In July 2011, Mohsen Al-Hazmi, deputy chairman of the Health Committee of Saudi Arabia's Shoura Council, said that 60% of healthcare projects in the country were faltering. This is in spite of the government allocating an additional SAR16bn (US$4.3bn) in financial aid to healthcare to assuage concerns about political unrest. Although the reason for the problems in enacting the country's healthcare plans is neither stated nor explored, BMI believes the problem does not lie with the funding, but in a lack of local expertise and lack of transparency in the construction industry.
Economic View: Outlook for Saudi Arabia's fiscal budget is relatively bright in the near term, but we expect the country to see a string of fiscal deficits beyond 2011. Elevated oil prices and export volumes will be able to support Riyadh's massive fiscal stimulus programme in the near term, but outlook for depressed prices and volumes from 2012 and beyond indicate that the fiscal surplus will turn into deficit, which may require some repositioning of finances for healthcare and other social programmes. We have pencilled in a fiscal surplus of 2.2% of GDP in 2011 and a deficit of 0.3% of GDP in 2012.
Political View: The Saudi royal family depends on steady oil revenues and Western support to maintain its tight grip on the population. The loss of either one of these could lead to substantial unrest and, potentially, regime change over the long term. We, therefore, expect the government to continue investing in a variety of stimulus measures, with this view supported by recent announcements regarding healthcare infrastructure expansion. We, however, caution that some of those programmes may have a destabilising effect in the longer term, as they further decrease incentives for the local population to work in the private sector.
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