UAE drugs industry seeks shot in the arm

The UAE pharmaceuticals sector, a growing force with about 30 per cent of the local market share, could do with a booster dose of investment and government support, industry players told Emirates Business. The relatively new industry – the first plant in the UAE was set up in 1985 – exports some 700 formulae or generic drugs, to more than 60 countries.

Despite its achievements, the volume of investment in the UAE drugs industry is still very small – at the best of times, it is no more than one per cent of big player Pfizer's investment of some $300 billion (Dh1.1 trillion). Pfizer has several plants in the Middle East, each involving some $4bn in investment.

Industry executives wonder why investors and local governments have not paid attention to the UAE pharmaceuticals industry, which is more profitable, safe and stable in comparison with other sectors that have been badly hit by the fallout of the financial crisis.

Pharma company executives interviewed by this newspaper stressed that the downturn has had very little effect on their business. This is because the number of people needing affordable medication is forever on the rise. Besides, most countries in the region have started to enforce the health insurance system, which has brought more people under the umbrella of medical treatment and, thus, led to the growth of the drugs market.

There are eight big pharmaceutical companies in the UAE, with investments exceeding $2.64bn. They produce some 700 formulae as well as scores of solutions and needles. The largest four – Julphar, Global Pharma, Neopharma and Medpharma – produce 466 formulae and have a total annual production capacity of some five billion tablets and two billion syrup bottles.

Not ready yet for original drugs

Gulf Pharmaceutical Industries (Julphar) is the largest and the oldest of the companies. Its plants and offices are based in Ras Al Khaimah and it makes 186 formulae. Julphar distributes 10 per cent of its production in the UAE and 90 per cent in 40 world markets.

Global Pharma comes next with 60 formulae. The company distributes some 30 per cent of its production within the UAE and 70 per cent beyond. The company is the first affiliate of Dubai Investments Industries, an arm of Dubai Investments. Its plants are located at Dubai Investment Park.

The third is Neopharma in Al Musaffah industrial area of Abu Dhabi. It has 100 pharmaceutical formulae and distributes 50 per cent of its production in the UAE and the rest outside it. The fourth, Medpharma, makes 120 formulae. The smaller companies include Pharmacare and Gulf Inject.

According to Dr Mohammed Abuelkhair, Section Head, Drugs and Medical Products Regulation, Abu Dhabi Health Authority, the UAE pharmaceutical companies make generic rather than original drugs since the research, formulation and marketing cost of a new drug can run into hundreds of millions of dollars. Original drugs need huge plants, big pharmaceutical expertise and vast investments, which are not available at the moment, since most UAE companies are relatively new and their pharmaceutical expertise is limited, he said.

Abuelkhair said the world's generic drugs market is increasingly growing, accounting for $500bn out of the total world drugs market of $800bn. Even global pharmaceutical companies that make original drugs have begun to set up companies to produce generic drugs, because the latter cost much less than original drugs, he said.

The generic drugs market in the Middle East is worth some $7.5bn, or 50 per cent of the total $15bn. Egypt produces half of the Middle East's generic drugs, and it is also the largest market for such type of drugs.

The past few years have seen the emergence of Saudi Arabian, Jordanian, Syrian companies too, in the production of generic drugs. As competition increases, the UAE pharmaceuticals industry badly needs support, said Abuelkhair. Talking about the quality of generic drugs produced by the UAE companies, he pointed out that the Ministry of Health as well as the Abu Dhabi and Dubai health authorities continuously sign contracts for the purchase of UAE products, and no faults have been detected. As of now, the UAE health authorities buy more medicines from foreign companies than from local ones. Medicine company representatives said this should be reversed – the local industry should get more government patronage.

Need for state-backed research centre

To further develop the industry, it is important that the companies are supplied with the best pharmaceutical expertise, said Abuelkhair. "There should be co-ordination among the companies so that they may benefit from each other's expertise, and their research facilities need support for a more solid base," he said, suggesting that the state could set up a large research centre to complement smaller ones owned by the companies.

Talking about the contribution that the UAE drugs industry makes to the economy, the Managing Director and CEO of Neopharma, Dr BR Shetty, said the UAE pharmaceutical companies have made a strong position for themselves in a market monopolised for long by international drugs companies, mainly the US and European ones. "These companies," he said, "produce drugs that meet a big chunk of the market demand."

Neopharma, which was set up three years ago with an investment of Dh200 million, has applied to the Ministry of Health for registration of 10 new formulae. The company, said Shetty, does not concentrate only on 'copying' drugs whose copyrights have expired. Neopharma is an agent of several Pfizer drugs and it aspires to have joint ventures with the bigger company, he said.

"We are currently in talks to make drugs with big international companies that have branches in Asia, especially India," said Shetty, adding that Neopharma is working on doubling its investments.Shetty refuted the idea that national plants focus on making only cough medicines and paracetamol tablets. Such rumours about the UAE drugs are meant to downplay the size of their market share, he said. Big UAE plants, he pointed out, also make antibiotics and drugs for chronic diseases such as diabetes and hypertension. There are now more than 700 formulae with different concentrations, and the number is rising considerably, as doctors and patients vouch for these drugs.

The Ministry of Health and local health bodies strictly monitor the UAE drugs and are satisfied with their quality and efficacy, which is why they buy made-in-the-UAE drugs in bulk, said Shetty.

"After years of hard work by several UAE plants, locally-made medicines are a strong competitor to foreign drugs, original or generic," he said. To buttress this argument, Shetty said his company exports a large part of its production to Asian, Arab and European markets "and we manage to compete with big drug companies".

Currency fluctuations raise costs

The biggest problem facing the UAE pharmaceutical firms, said Shetty, is the fluctuation in foreign exchange rates, especially the euro, which has risen considerably over the past several months. This has led to a 10 to 15 per cent rise in the cost of UAE drug manufacturing, since most plants buy their raw materials from European countries, he added.

Along with a stronger euro, drug manufacturers have to deal with a price ceiling, too – the prices of medicines are fixed by the Ministry of Health and they are rarely changed, so the profit margin falls, Shetty said. The national plants, he said, earmark a large part of their budgets to promote their pharmaceutical products, since they are new products in the UAE market, a place where giant companies such as Pfizer, Novartis and Roche have existed for years, gaining the confidence of doctors and patients alike.

The reason the rise of the euro is hurting the industry so much is that the ministry makes it mandatory for companies to buy raw stock from certain countries, said Vice-Chairman and Managing Director of Medpharma, Yanoof Ali Salem Al Bidh. The ministry does this to enforce strict standards in the manufacturing process and it does not allow companies to buy the same or similar raw material from other countries at lower prices.

"We do not object to ministry resolutions and instructions, and we are sure the ministry wants the best for patients and companies, but strict import measures force us to incur extra costs," said Al Bidh. "The process of the registration of medical formulae at the Ministry of Health takes a lot of time, money and effort, as the ministry wants to make sure that the patent on the original formula has expired."

Despite the hurdles, Al Bidh said the UAE companies have highly developed their performance and products. The industry has grown by at least 15 per cent over the past three years, he added. Medpharma plans to double the number of formulae it produces over the next three years.

Whatever other constraints the industry has, a crisis of confidence is not one of them, said Al Bidh. Doctors recommend drugs made by the UAE companies as long as they are strongly effective, and their prices are at least 30 per cent lower than those of the original drug, so they have ready buyers.

The future of generic drugs is largely in the Middle East and the developing world, and the UAE companies have an opportunity to double their production and market share here, he said. "What is important is to boost investment – lack of it is a big problem for UAE companies, though profitability of the industry is far higher than that of real estate or other sectors," said Al Bidh.

Investment needed in UAE companies

More investment would certainly be a shot in the arm for the industry, said Managing Director of Julphar, Dr Ayman Sahli. "The eminent position of the pharmaceuticals industry all over the world can basically be attributed to the vast investments made in it – whether in the establishment and supply of plants, the selection of active raw materials or qualified staff, good marketing or research to discover new drugs. All these require huge funds, but the returns are also very high," he said.

International drugs makers that have controlled the Middle East market for years have made astronomical profits, he pointed out. But in the Gulf, they set up production lines only for medicines for common diseases, he said. Julphar is pumping some Dh500m to set up the first insulin plant in the region. The feasibility study has confirmed that the plant will be highly profitable. "UAE businessmen should keep the pharmaceutical industry in mind because it is very profitable," said Sahli. He also said UAE drug makers should look beyond the local market. Julphar, for instance, exports most of its drugs.

Other markets badly need generic drugs too, especially those in the developing world, where the patients number in billions. Undoubtedly, the developing world's markets offer a golden opportunity to UAE pharmaceutical companies, he felt. "Our experience has shown that UAE drugs have won confidence and attained big sales volumes in the Gulf, Southeast Asia and Latin America. Those markets still need more than double of what the UAE plants produce."

More investments in the UAE pharmaceuticals industry will help set up a solid scientific base that is still missing in this region, he said. If good salaries as well as material and moral incentives are made available, experienced pharma professionals here might invent new drugs, and if a UAE company manages to invent a new drug, it will make enormous profits over 20 years, the period set by international agreements for the inventing company to sell its drug at very high prices, as is the case with big international companies, said Sahli.

8,000 formulae

UAE companies make antibiotics, medicines for digestion and diabetes, drugs for the heart, vascular system and rheumatism, and painkillers, said Dr Mohammed Abuelkhair, Section Head, Drugs and Medical Products Regulation, Abu Dhabi Health Authority. The drugs are available at about 1,700 private and government pharmacies. These drugs control 30 per cent of the market, and the Ministry of Health has registered some 8,000 formulae. A quarter of these are alternative drugs made by the UAE companies.

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