Building on this momentum, pharmaceutical manufacturing in GCC countries has emerged as a promising frontier. It has taken on a crucial role in boosting the region’s self-reliance in healthcare and opened new avenues for economic diversification, aligning with the broader objectives of GCC countries to reduce dependency on oil revenues. Various strategic initiatives primarily drive the surge in the region’s pharmaceutical manufacturing capabilities. Governments across the GCC have been investing heavily in infrastructure, research and development, and talent training in the pharmaceutical sector. Regulatory reforms to foster a favorable environment for the local manufacturing of pharmaceuticals have been instrumental in attracting significant foreign direct investments.
Furthermore, joint ventures between multinational pharmaceutical companies and local manufacturers have accelerated this sector’s technology and knowledge transfer. This has fostered an increase in the production of high-quality, cost-effective medications in the GCC, bringing enhanced healthcare accessibility within reach of its population. Moreover, in response to the global Covid-19 pandemic, pharmaceutical manufacturing in GCC countries underwent rapid advancement. The pandemic emphasized the significance of a robust, locally-sourced pharmaceutical supply chain to ensure the uninterrupted availability of medications. It catalyzed expanding production facilities and the introduction of innovative drug manufacturing technologies. The pharmaceutical manufacturing industry in GCC countries is poised for substantial growth. As this sector evolves, it will play an even larger role in the region’s healthcare transformation and contribute significantly to its socio-economic stability.
Challenges to the pharmaceutical industry in the Gulf
Manufacturing pharmaceuticals in the GCC poses many challenges. Putting together a pharmaceutical manufacturing plant is highly capital-intensive, with a long payback period typically involved. There has also been a need for more focus on developing a manufacturing sector in the GCC until recently, a small domestic market, difficulty raising funds, and a lack of skilled workforce in the pharmaceutical manufacturing industry. In a market where branded drugs are in high demand; local drug makers are restricted primarily to manufacturing generics. The small market size and price controls also kept multinational branded drug companies from setting up production facilities. The region prefers to import drugs from neighboring pharmaceutical export hubs instead. Here are some challenges we will discuss:
High Drug Prices and Regional Disparities
Due to the preference for imported branded drugs, drug prices in the GCC are significantly higher than world averages. Other factors contributing to the region’s high medicines prices include the small size of the end market, the low bargaining power, and the high per capita income.
Substantial Reliance on Imported Products
Most pharmaceuticals utilized across the Gulf region are sourced from abroad. Domestic drug manufacturers, in their operations rely heavily on equipment and pharmaceutical ingredients of foreign origin. This dependency on external resources has consequently constrained the growth and autonomy of the domestic pharmaceutical industry. Moreover, it has engendered a vulnerability to disruptions in the international supply chain, potentially leading to shortages of essential medications. Equally significant is the economic risk of heavy reliance on imported pharmaceuticals. The pricing of these drugs and related equipment is often subject to fluctuations in foreign exchange rates. These variations can not only affect the overall cost of healthcare in the region but also impact the stability of the pharmaceutical supply chain, creating inconsistencies in pricing and availability for end users. These issues underscore the urgent need for GCC countries to bolster their domestic pharmaceutical manufacturing capacity. By reducing their dependency on imports and establishing a self-sustaining pharmaceutical industry, these nations can achieve greater control over their healthcare landscape and insulate themselves from the vagaries of international markets and supply chain vulnerabilities. Investing in pharmaceutical manufacturing can contribute to more stable and predictable pricing, benefiting the entire healthcare ecosystem from manufacturers to end users.
Outbound Medical Tourism
Medical tourism is gaining traction worldwide due to rising costs and long waiting times. Many patients from these regions prefer eastern countries such as Thailand, Singapore, and India since they offer high-quality medical treatments at relatively low prices. GCC residents also prefer to get serious illnesses treated overseas. There are several reasons for this outbound medical travel, including non-availability or poor quality of specialized treatments required, high costs compared to Asian hubs for medical tourism, and ex-pats choosing to travel back home for their medical treatment.
Shortage of Skilled Manpower
There is a severe shortage of skilled and knowledgeable local personnel in the Gulf. Due to this, the region has needed more to conduct drug research and development and manufacture drugs. Additionally, the pharmacy sector needs more indigenous pharmacists due to inadequate educational facilities and a lack of local interest in service-oriented and customer-facing positions. The result is that drug manufacturers and pharmacies have to hire many expatriates, leading to higher costs. As a result, industry players also need help maintaining a stable employee base due to the high attrition rates among these employees. Governments across the region recognize this challenge and are promoting the involvement of the local population in the pharmaceutical industry. Due to the gap between the number of indigenous residents and the total population in the GCC (especially in the UAE, Kuwait, and Qatar), the industry will continue to depend on foreign workers to meet market demands.
Future trends in the GCC pharmaceutical industry
Pharmaceutics in the Gulf is still in the early stages of development compared to international standards. Despite this, it is undergoing reform and simplification of government regulations, increasing its efficiency and enhancing its infrastructure. In the next few years, many changes will be coming to the pharmaceutical industry in the Gulf Cooperation Council, which will provide great investment opportunities for investors. Foreign investment is expected to boost local production. Population growth is a key growth driver for the Gulf Cooperation Council pharmaceutical sector. A strong ex-pat presence and high levels of urbanization also support pharmaceutical sales growth in the region. There will be 17.8 million people over 60 in 2050; older people will consume a big chunk of pharmaceutical spending in the GCC and drive growth. Growing Use of Generic Drugs; Increasing Privatization; Greater Drug Price Unification; Higher Imports from Europe; GCC Countries Wooing Indian Pharmaceutical Companies; and Biotechnology Parks Emerging as Centers for Innovation are among the trends, we expect to see in the pharmaceutical industry shortly.
Growing Use of Generic Drugs
Regarding overall sales volume, branded medicines still lead the GCC pharmaceutical market, but generics are gaining ground. The growing local manufacturing industry and government incentives fuel Generics’ sales. No doubt, branded pharmaceuticals will continue to dominate the market for the foreseeable future due to the high brand preference among consumers. Still, generic pharmaceuticals are expected to narrow the volume gap shortly. As well as the above factors, the expiration of several patented medicines used to treat chronic diseases will likely lead to the introduction of cheaper generic alternatives. Because of the ingrained perception that generic drugs are inferior, GCC consumers will likely hesitate to buy them. However, government measures favoring generics should eventually lead to higher sales. As a result of this expected trend, the average pharmaceutical price levels in the Gulf market are expected to decrease.
Many companies in the GCC work on specialized and targeted pharmaceutical technologies to cut costs, improve knowledge, and use local forces in their work process and benefit the entire region. The company OBP, for instance, develops monoclonal antibodies (mAbs), targeted drug therapies.
The GCC pharmaceutical sector is expected to privatize more rapidly as government measures boost local drug production and health insurance penetration. Across the region, governments are offering incentives to domestic and international players to set up new production plants to increase private investment. Since expatriates in many Gulf countries must buy medication from private pharmacies, the pharmaceutical retail segment has also seen higher participation from private pharmacy operators. Moreover, with mandatory medical insurance programs already enacted in some constituent countries and likely to be implemented in the remaining countries, the burden of medical care will gradually shift from the government to employers and insurance companies.
Greater Drug Price Unification
The governments within the Greater Gulf Cooperation Council (GCC) have been exerting considerable effort for some time now to unify pharmaceutical prices across the member nations. This ongoing strategy aims at fostering a more uniform, accessible, and fair pharmaceutical landscape for all. These efforts have recently gained significant momentum, largely driven by the glaring price discrepancies among the constituent countries. These price differences can create considerable challenges, as they affect the affordability of medications and potentially breed cross-border irregularities in the pharmaceutical trade. Such inconsistencies may inadvertently stimulate a gray market for drugs, undermining the region’s efforts to regulate and control the quality of pharmaceutical products. In response to these issues, the heightened efforts towards price unification signify a determined push towards fostering a more equitable healthcare environment. The objective is not just about equalizing costs. Still, it is also about ensuring transparency, promoting competition, and making essential medications accessible to every citizen, irrespective of their geographical location within the GCC. The implications of such a strategy are vast. It could lead to an improved public health scenario, lessen financial burdens on patients, and ultimately contribute to the greater health security of the region. In effect, it forms a key part of a larger commitment to improve the quality of life for all residents within the GCC.
Higher Imports from Europe
Increasing purchasing power and a growing population have made the GCC an attractive market for European pharmaceutical companies. As a result of the global financial crisis and the resulting regional debt problems, European drug manufacturers encountered challenging economic conditions and market dynamics in their home countries in the immediate aftermath of the crisis. To compensate for this weakness, they increased their focus on the relatively new Gulf pharmaceutical market to offset it. A free trade agreement between the GCC and the EU has been negotiated for years. When the agreement is finally enacted in the coming months, pharmaceutical imports from the EU will likely increase further in the medium term.
GCC Countries Wooing Indian Pharmaceutical Companies
The GCC governments are adopting a liberal approach to encourage local and foreign players to set up regional bases to create a conducive environment for the private sector to participate in the domestic pharmaceutical sector. Due to their strong trade relations and large expatriate population of Indian origin, Gulf countries attract Indian companies to take advantage of their broad experience. By eliminating trade barriers and encouraging foreign direct investment, the impending GCC-India free trade agreement will further open up the Gulf pharmaceutical market for Indian companies. Due to this, Indian pharmaceutical companies are expected to capture a larger share of the GCC generic drugs market, largely at the expense of Middle Eastern manufacturers.
Biotechnology Parks Emerging as Centers for Innovation
Governments across the GCC region aim to diversify their economies beyond the traditional hydrocarbon sector. It is also important to note that the government’s strategic vision prioritizes the development of the retail and tourism industries and places a great deal of focus on advancing healthcare. The sector plans to provide better and more cost-efficient medical care to residents, attract medical tourists, and develop new biotechnological products. DuBiotech in the UAE and Jeddah BioCity Science Park in Saudi Arabia has been established to foster these goals. To develop local capabilities for manufacturing patented pharmaceutical products, technology parks play a major role in bringing foreign investments and technology.
Every country needs the pharmaceutical industry. More than 30 years since the GCC countries started this valuable industry. However, after these years, they still import 90% of their needs from overseas manufacturers. It is still the early days for the pharmaceutical sector in the Gulf, and the drug manufacturing industry is at a relatively nascent stage because of several obstacles that need to be overcome. GCC pharmaceutical markets can be expected to continue to show sustained growth. It is difficult for Gulf manufacturers to compete with foreign companies because they produce available medication. Despite the limited production of GCC pharmaceutical drugs and its inability to meet the standard, private investors are attracted to the region. There’s been much investment in the GCC’s economy, science, regulatory, and healthcare infrastructure. If supported by health plans, regulatory simplifications, and trade incentives, opportunities within and outside GCC pharmaceutical should be identified and evaluated. Considering the new regulations and the Vision that the GCC countries have set, we can expect a brighter future for the pharmaceutical industry in the GCC.