Pharma export growth outpaces imports

Pharmaceutical exports outpaced imports over the last 7 years, according to a study by Dubai Chamber of Commerce and Industry.

Since 2003, imports of pharmaceutical products have risen by 275 per cent from Dh800 million to Dh3 billion in 2010 while exports too have risen by 300 per cent from Dh100 million to Dh400 million over the same period.

It said the UAE pharmaceutical market is one of the most developed markets in the Middle East, with a strong healthcare infrastructure and the highest per-capita medicine expenditure in the Middle East. The market continues to lure manufacturers and traders to the region.

The study goes on to highlight several attractive features that lure multinationals to focus their investment activities on the UAE pharmaceutical sector which include a relatively strong patented drug market, the country's traditional wealth and its preference for latest medicines as well as the rise of the local manufacturing industry over the past few years with its strong emphasis on regional and global exports.

Industry experts say that there is potential for further growth in the pharmaceutical products sector in the light of the changing lifestyle dynamics in the region which is based on an increasingly Westernised disease profile with non-communicable diseases such as obesity.

The results of a recent Dubai Household Health Survey (DHHS) that covered 5,000 households jointly conducted by the Dubai Health Authority (DHA) and the Dubai Statistics Centre (DSC) showed that approximately 80 per cent of Dubai residents do not participate in enough exercise to be considered as healthy.  According to the experts, the areas of growth for manufacturers include targeting the overweight and obese residents of the UAE.

The study further states that an array of solutions has emerged in recent years aimed solely at this segment. Other diseases associated with a relatively sedentary lifestyle such as increased heart disease and diabetes will likely remain the mainstay of growth for patented drug manufacturers. New areas for pharmaceutical product growth could also include tapping the rising demand for medical tourism connected to these changes in lifestyle.

Also, increasing incomes and awareness lead to an increase in personal care. The rise in medical device sales that monitor health (such as blood sugar and heart rate monitors) in connection to pharmaceutical products is also another area of potential growth.  This, combined with the opening of pharmacies in grocery retail outlets, will stimulate the over-the-counter (OTC) market which may help manufacturers realise this opportunity quickly.

It is also hoped that the further deepening of GCC market integration and the introduction of integrated healthcare insurance systems will boost pharmaceutical trade in the long-run.  A lot remains to be harmonised between GCC member states before the benefits avail themselves to consumers. Substantial investment in the healthcare sector such as the Dubai Healthcare City and DuBiotech projects will also encourage foreign direct investment in healthcare in the long-run.

Drivers of growth

The pharmaceutical industry, broadly understood as generic drugs, over the counter (OTC) medicine and patented drugs, is proving attractive for manufacturers for several reasons.  Perhaps the most important factor is that the health industry typically bucks the trend of the economic cycle.  Healthcare and therefore pharmaceutical products are often considered a daily necessity and therefore exhibit stable sales in relation to the economy.

In the UAE, and the wider GCC, growth prospects for the sector are amplified partly because of the population dynamic of an emerging yet sizeable growing middle income class.  According to Economist Intelligence Unit forecasts, the GCC population will reach 53 million by 2020.  As incomes rise, spending on healthcare typically rises as consumers tend to become more health-focused.

Other regional drivers for growth are access-related.  The UAE is proving to be an efficient re-export regional hub and several regional markets are proving to be lucrative for companies that are establishing operations in Dubai.  This is compounded by the fact that profitability for pharmaceutical products also remains high because they are, in comparison to other sectors, relatively light-weight in distribution and highly profitable at retail despite their regulated prices.

Challenges

The UAE pharmaceutical sector confronts several challenges as the local manufacturing sector is relatively small and focuses on basic medicines. The market relies on imports for hi-tech prescriptions. For example, in 2010 nearly 64 per cent of pharmaceutical imports came from Europe, around eight per cent from North America and another eight per cent from the Mena region. India is the biggest supplier from Asia and accounts for five per cent of total imports.

Local producers, however, have started to respond to local needs – one particular example is the planned production of insulin by a local manufacturer this December. Imports of hi-tech medicine are compounded by the fact that the pace of regional innovation is slower when compared with other rival hubs such as Singapore, and the fact that although improving, domestic patent law is still migrating towards international standards. These challenges are likely to be addressed by both the disparate regulations between the emirates and the national institutions over the medium to long-term, thereby encouraging more foreign direct investment.

There are also some valid concerns about the prevalence of counterfeit drugs which enter and exit the country.  Almost one in seven counterfeit items - including 73% of fake medicines - seized at European borders last year was routed through the UAE, according to a European Commission report last year. The UAE officials have reigned in with tighter measures to curb counterfeit trade by increasing the number of inspections, frequency and thoroughness of inspections. Dubai-wide, counterfeits can also be curbed through dealing with established retail and distribution channels with reputable retail partners.

Still, the study points towards a positive trend stating that despite prevailing challenges, the market for pharmaceutical products is likely to remain strong in the wake of lifestyle changes region-wide. The prospects for the sector are likely to improve over time as local and national legislation continues to be in closer agreement with international standards. Growing population and incomes underpin the growth-dynamic for the foreseeable future.

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