Health care poised for domestic growth
Following on from my previous articles on the subject, another segment in healthcare where there are immense opportunities is in drug manufacturing. There are approximately 200 pharmaceutical companies (mainly retailers) that are registered with the Ministry of Health. European suppliers largely dominate the market.
With Saudi Arabia’s population now climbing above the 30 million mark and growing, and with an increasing number of high-end private and public hospitals in the Kingdom, there are strong opportunities in the field of pharmaceuticals. These are not only for companies looking to import drugs, but also for the local production of pharmaceuticals and medical devices — an area the government is eager to develop and support.
Due to low domestic pharmaceutical production in Saudi Arabia, with only 27 manufacturers, approximately 85 percent of the drugs sold here are imported.
This opens the gates for generic drug manufacturers in the country, especially when you consider the cost aspect. At present, more than 70 percent of all prescription drugs sold in Saudi Arabia are patented, which are usually more expensive than generics owing to the research and development and compliance costs involved.
Fostering a strong and localized drug manufacturing sector is increasingly being identified as an area of strategic importance, and the new National Transformation Program aims to see an increase in the role of local pharmaceutical manufacturing in the domestic market, up from 18 percent to 40 percent. As part of cost-saving measures in the face of lower oil revenues, healthcare institutions are also being encouraged to review their pharmaceutical purchases to try to find cheaper alternatives, offering opportunities for local manufacturing.
In the past, international companies favored engaging with Saudi Arabia through trade or licensing-out agreements due to tight regulatory issues, but international pharmaceutical companies are now being incentivized to open local manufacturing facilities, with interest-free loans of up to 75 percent of capital costs available through the Saudi Industrial Development Fund. Companies are also able to establish 100 percent foreign-owned operations. Moreover, the National Industrial Clusters Development Program is working with the MOH and other relevant regulatory bodies and has already attracted leading global players such as GlaxoSmithKline, Sanofi, Pfizer and others.
With the pharmaceutical industry being a key part of the Kingdom’s Vision 2030 goals, especially with the high population growth, coupled with the government’s initiatives to provide the best healthcare infrastructure to its people, I strongly believe the pharmaceutical manufacturing sector in Saudi Arabia is poised for tremendous growth.
Basil M.K. Al-Ghalayini is the Chairman and CEO of BMG Financial Group.