The leading Saudi pharmaceutical companies are Saudi Pharmaceutical Industries and Medical Appliances Corporation (SPIMACO), Tabuk Pharmaceuticals Company and Jamjoom Pharmacy with market shares of 7.2 percent, 3.9 percent and 3.2 percent, respectively in 2009. Multinationals tend to enter the market through joint ventures with Saudi firms. Currently there are 9 joint ventures in the Kingdom, and GlaxoSmithKline's (GSK) strong product portfolio allows it to dominate the market with a share of 10.3 percent in 2009.
Market determinants
The most significant factor driving pharmaceutical demand is the rapidly growing population. Total population has grown at a CAGR of 2.4 percent over the 2000-2008 period and is expected to continue accelerating at this rate, reaching 28.5 million by 2012.
The rising wealth and private consumption of the population account for a great deal of pharmaceutical market expansion. Despite dipping slightly in 2008 in light of the global economic crisis, GDP (gross domestic product) per capita has been steadily rising for the past decade at a CAGR of 6.27 percent and is estimated at SR60,669 for 2010. Although there is a major unemployment problem within the Kingdom, government benefits, subsidies and high levels of personal wealth will keep the consumer market active, the NCB said in its report.
Business environment
The primary objective of the Saudi social development strategy is to provide a high standard of health facilities to the general public. For 2010, the government has allocated SR61.2 billion toward health and social affairs, a 17 percent increase on the previous year's budget. Saudi nationals and residents currently have access to over 400 hospitals, 2,075 healthcare centers and 850 private clinics. The continued government appropriations to the healthcare sector over the years have undoubtedly stimulated the pharmaceutical business environment.
The main regulatory authority in the country is the Ministry of Health (MOH), which requires all pharmaceutical companies to be registered. The Saudi Food and Drug Authority (SFDA), established in 2003, is responsible for developing and enforcing a transparent regulatory system for the pharmaceutical sector. To create a single interface between private suppliers and the public sector, the government has set up a National Company for Unified Purchase of Medicines & Medical Appliances with a capital of SR2 billion in 2007. The SFDA is also currently in negotiations with a number of international pharmaceutical companies to create a new draft regulatory system for drug approvals.
WTO accession
Under the Saudi WTO (World Trade Organization) agreements, the commercial presence of foreign hospitals and pharmaceutical companies is permitted via joint ventures with Saudi firms. Furthermore, the Kingdom revised its legislation, particularly in the areas of Intellectual Property (IP) protection, import licensing, customs tariffs and fees.
GCC drug policy
The GCC pharmaceutical procurement system is based on a unified drug policy to procure pharmaceuticals being consumed in the six member countries. The common drug policy ensures joint purchases of pharmaceuticals through Gulf tenders floated by the Secretariat General of Health, Riyadh, and other respective health ministries.
Market size
In 2008, the Saudi pharmaceutical market accounted for roughly 65 percent of all drug sales in the GCC region. Aggregate demand for pharmaceuticals in the Kingdom is estimated to have grown by 21 percent to SR11.17 billion in 2008. Furthermore, per capita market demand of pharmaceuticals in Saudi Arabia reached an all-time high of SR450 in 2008, well above the GCC average of SR263, the NCB report said.
Over the forecast period 2009-2012, the Saudi pharmaceutical market is set to experience steady growth at a CAGR of 5.92 percent. Population growth, ageing and affluence will be the main drivers of this expansion, with GDP per capita forecast to reach SR75,034 by 2012. Furthermore, healthcare provision, modernization and expansion, as well as the establishment of more private facilities are also aiding the sector's growth. Market value is forecast to rise from SR11.81 billion in 2009 to roughly SR14.04 billion in 2012. Meanwhile, pharmaceutical demand per capita will increase from SR465 in 2009 to SR515 in 2012.
Foreign trade
The Saudi pharmaceutical sector is heavily reliant on imports, accounting for approximately 84 percent of the market share in 2008. This is because the Kingdom's considerable wealth means that patented drugs remain the favored treatment option. Imports of pharmaceuticals stood at SR9.65 billion in 2008 and are estimated to grow at a CAGR of 4.64 percent over 2009-2012 to reach SR11.57 billion by 2012. European manufacturers supply the majority of imports, followed by the US, the Middle East and North Africa. In the GCC, the UAE has been the dominating exporter to Saudi Arabia, accounting for SR348 million worth of pharmaceuticals sales, the NCB report said.
Leading manufacturers
The three leading domestic players in the pharmaceutical industry are SPIMACO, Tabuk Pharmaceuticals Company, and Jamjoom Pharmacy. SPIMACO is the Saudi Arabia's major pharmaceutical manufacturer and the second-ranked drug company in the Kingdom, following GlaxoSmithKline (GSK). Its main facility is located in Qassim Industrial City, where it produces over 150 products, including brand-name drugs for multinational companies as well as its own generic forms of prescription and OTC medication. The company has its own distribution network, run by its subsidiary ARAC Healthcare Company.
Tabuk Pharmaceutical is the second largest domestic manufacturer with a 6.4 percent market share in 2009. The company formulates, registers, produces and markets generic, prescription and, recently, OTC drugs. Tabuk Pharmaceutical offers 86 branded generic drugs to 16 countries in the Middle East, North Africa, US and Europe, and its products were the first to be authorized for sale in European countries such as France and Denmark. It also produces eight innovative products under licensing for the Saudi market, in agreements with Japanese, Korean and European drug makers.
Jamjoom Pharmacy is the third largest local manufacturer of pharmaceuticals and accounts for roughly 3.2 percent of market share. The company produces and distributes 70 pharmaceutical products. The company also exports products to fifteen other countries in the Middle East and Africa region.
There are currently nine joint ventures in the market with a cumulative foreign investment of SR195 million. The single largest investor is Al-Hayat Factory for Medical Products, a Jordanian company with roughly SR60 million invested.
The largest UK investor in the market is GSK, which established production operation in 1992 and is currently the leading pharmaceutical company with 10.8 percent of market share. The company has a joint venture with local company Banaja Saudi Import, known as Glaxo Saudi Arabia, which has a 51 percent stake in the subsidiary, the NCB report said.
