UAE spend on medicines rises

Per capita spending on pharmaceuticals in the UAE reached approximately Dh690 per annum last year and the residents have to shell out more this year despite the Ministry of Health’s recent initiative to slash prices of hundreds of drugs.

Business Monitor International has projected that the UAE residents will be expending Dh715 – Dh25 or 3.5 per cent more – this year on medicines. However spending is expected to rise modestly next year to Dh724.

The UAE’s Ministry of Health last month signed a deal with drug distributors to reduce prices of 565 drugs, mostly for chronic and lifestyle diseases like diabetes, obesity and hypertension, between five to 60 per cent following intense negotiations with international drug manufacturers.

“BMI expects that most of the value development will be realised in the prescription sector, boosted by rising population numbers and a changing diseases profile. In particular, the country is tackling an obesity and diabetes epidemic, which will also require long-term treatment of related conditions, such as increased blood pressure. The recently-established single market of the six GCC states will also facilitate the placement of foreign products in the region,” said Daniel Rosen, head of pharmaceutical and healthcare research for the Middle East and Africa region.

“We forecast a 5-6 per cent fall in average drug prices in 2011, as the majority of price cuts take effect in the latter half of the year, while demand plus inflation should be between 7.7 per cent and 10.5 per cent. In 2012, BMI forecasts an 8-9 per cent decrease in average drug prices across the year, while demand multiplied by inflation is expected to be between 8.8 per cent and 11.6 per cent,” Rosen told Emirates 24l7.

Rosen said the agreement between health ministry and drug distributors is bad news for the overall market size of the UAE and for the distributers who rely on fixed percentage mark ups for their profit margins.

However, prices were high before the changes and the reductions are unlikely to make the supply of these medicines unprofitable.

The retail pharmaceutical market continues to be vulnerable to fluctuations in the dollar-euro rate and these cuts will not alter that. However, overall BMI does still like the UAE's growth story because of its stable business environment and the population demographics, which are likely to see an explosion in the demand for care as the population ages and incidence rates of chronic disease rise.

BMI revealed that the costs of 177 medicines in the UAE are currently much higher than in other countries in the region. In the UAE, a large section of the population suffers from chronic ailments such as Type 2 diabetes and cardiovascular diseases.

According to the BMI report, 8.26 million residents bought medicines worth Dh5.71 billion, in total, last year and are expected to spend Dh5.91 billion this year – an increase of 3.5 per cent. This will then grow only one per cent to Dh5.98bn next year.

To generate these numbers, BMI said it had used Haad’s forecast demand growth for treatment, added to macroeconomic inflation forecast, minus the expected effects of the price cuts.

Around Dh32.93 billion were spent on healthcare last year which will increase 10 per cent to Dh36.16bn.
Medical devices spending totalled Dh2.93 billion in 2010 to Dh3.25 billion in 2011.