The UAE wants bigger Pharma | Bloomberg Business Week – Middle East
Lower cost drugs are in demand. Incentives for manufacturers, including fast track for approval, is helping supply.
Late next year the UAE-based pharmaceutical distributor Al Ittihad Drug Store (IDS) will leap up the value chain when it opens Pharmax, a $20 million facility to manufacturer generic pharmaceuticals in DuBiotech (a TECOM Business Park). By targeting the chronic illness sector with medicines to treat ailments including hypertension, diabetes and depression, the firm hopes to win over customers and then keep them for life, says its group CEO, Ahmad Tabari.
Generics have only about 5-6 percent market share in the GCC, with patented drugs dominating the landscape, according to a report from Alpen Capital published in 2013. That mean that firms have to work hard to convert patients from branded drugs over to a generic. Tabari says that whether the medicine will be used for a short period, like an antibiotic, or to treat a long-term illness, the effort is roughly the same. “The bang for your buck is much better in the chronic medication sector. That’s our view.” The use of generics in the region is also set to grow as the UAE and wider GCC moves towards an insurance-based system, which creates more demand for lower cost medicine, says Marwan Abdulaziz, executive director of DuBiotech.
For IDS, moving up the value chain will allow the business to reap bigger margins, with prices in the distribution business set by the Ministry of Health. “You’re lucky if you make 3-4 [percent] net profit at the end of the year,” says Tabari. While there’s the hefty $20 million price tag for the new plant, which will employ around 25 highly skilled staff, Tabari-who received a law degree from Harvard and has worked as an investment banker-says the capital outlay isn’t so significant in the context of their current running costs.
“People underestimate the amount of capital you actually have often tied up in the distribution business,” he says, with conversion cycles in the UAE extending to 270 or even 360 days. “Governments who buy medicine sometimes don’t pay for year or a year and a half.” The risks in manufacturing are mainly around building brand awareness, where it already has a track record as a distributor.” We don’t see it as much of a risk as somebody else might, because we’ve has the experience in marketing and developing the brand and getting the product accepted by the consumer,” says Tabari.
Eventually the company plans to export its product across the GCC and to the wider region, with East Africa, Iran, Iraq and Libya all flagged as potential markets. “Setting up a factory for the UAE alone doesn’t make a lot of sense,” he says.
Pharmax will be the first company to set up pharmaceutical manufacturing in DuBiotech, says Abdulaziz. Alpen Capital says there are already eight manufacturers in the country, including Abu Dhabi-based Neopharma, which has tie-ups with Pfizer and Merck Serono, major international players that have offices in DuBiotech. Local players in the generic market include Julphur-the largest pharma manufacturer in the UAE-and Global Pharma, which began production of local generics last October, following Sanofi’s purchase of a 66 percent stake in the firm from Dubai Investments. Moves to encourage manufacturing are part of a strategy to reduce costs and improve supply.
“The healthcare landscape in the UAE is fast evolving and we are working closely with pharmaceutical companies to make the UAE the regional hub, which will positively impact the supply, distribution and pricing of drugs,” says Amin Hussain Al Amiri, the assistant under secretary for Public Health Policy & Licensing Sector at MoH, speaking at the launch of Global Pharma’s generic production last October. Local production is being encourages by the MoH through a basket of incentives around the fast-tracking of new drugs, and even preferential treatment in federal tenders. DuBiotech has also smoothed the path for its companies: TECOM signed a memorandum of understanding with the MoH in 2012, says Abdulaziz.
“We have a concrete agreement with them, that they facilitate the approval for the companies in our freezone.” Locally produced drugs will receive a fast track approval by the ministry, within 6-12 month according to Tabari; overseas medicines, especially generics, normally take much longer-as much as 2-3 years. Within the federal tendering system theres also a preference for local medicines. “If there are two products, one locally manufactured and the other imported, the preference is given to the locally-manufactured one, even if the price is slightly higher,” says Abdulaziz.
With the UAE currently importing around 85-90 percent of its drugs, Abdulaziz sees scope for the manufacturing sector to grow, partly driven by the insurance sectors demands for cheaper drugs. Generics are likely to be the target; there are at least 15 products coming-off patent by 2020, says Abdulaziz, and a company that is first to produce a new generic gains a market advantage. But beyond manufacturing there’s plenty of interest in further developing research activities, in line with the country’s national innovation strategy.
With the development of a new drug taking on average 15 years and close to $2 billion of investment from discovery to market, the day when a UAE company develops a new drug is still some time away. International companies are already segmenting out portions of research activities as part of the larger process. Also, clinical research organizations (CRO’s) are based in Dubai, working with hospitals in Abu Dhabi,, Saudi Arabia and Egypt says Abdulaziz. And Dubai is playing to its strengths as a hub.
Countries with large populations, such as China and India, have a natural advantage in attracting companies that want to conduct large-scale clinical trials. Instead, Dubai is focusing on the research phases-such as on the bench or in animals-that take place before a drug is tested in humans. Coordinating with countries in the region with large population bases like Egypt and Iran also holds promise.
The emphasis on developing the industry is being enhanced by new additions, both in clinics and the education sector, such as the upcoming Mohammed Bin Rashid University of Medicine and Health Sciences. Patient visits are also growing at Dubai Healthcare City (DHCC). In 2014, it recorded 1.2 million visits by patients, up from a million visits in 2013.
Medical tourists are an important growth area, comprising 15 percent of DHCC patients in 2014. A recent survey by DHCC of medical tourists found that 48 percent come primarily from GCC, while 32 percent come from the wider Arab World. The remainder is made up of patients from Europe and Asia.
The three most popular procedures were infertility treatments, followed by cosmetic treatments and dental in third. “The survey results indicate our strengths, positioning us as leaders in the healthcare sector among regional and international investors, physicians and patients,” says Dr. Fatma Al Sharaf, the senior manager for strategy and partner development at DHCC.
The freezone authority is currently making a push to attract more medical tourists: Phase 2 of DHCC is currently under construction, and will target this segment by introducing wellness concepts and pushing investment into attracting visitors. “Wellness tourism is a growing branch of medical tourism as people increasingly combine holidays with a holistic approach,” says Dr. Al Sharaf.
Abdulaziz says there’s a feeling that the industry as a whole is growing in the right direction. “We attract the industry because of the facilities we have, the regulations and the activities. But its important that we make sure that those players are engaged locally with the right stakeholders.