BMI View: Chronic 'lifestyle' diseases in the UAE will drive healthcare and pharmaceutical spending. BMI maintains a slightlyconservative forecast on growth of drug sales in value terms in light of price control measures and the increasing use of rational prescription. However, we are more bullish on growth in healthcare spending and believe private clinics will outperform public healthcare provision. Following a report by the Health Authority of Abu Dhabi (HAAD) it has been possible to forecast the market share of major therapeutic areas in the UAE. Using a combination of BMI's own forecasts and HAAD data we have forecast drug expenditure by therapeutic area to 2015 and examined growth in demand, population demographics and risk factors in the emirate. BMIhas also extrapolated the data from the HAAD report, which covers over 40% of the UAE's population, to the rest of the emirates, to estimate the value of all the therapeutic areas across the country and forecast drug expenditure growth rates in each medical field.
An Overview Of Abu Dhabi
Abu Dhabi is the UAE's capital and second largest city, with a population of 1.3mn. The surrounding regions of Al Ain and the Western Emirate contribute an additional 0.6mn people to the region. Of this total, only 0.4mn are Emirati nationals and the remaining 79% is made up of immigrants, predominantly young men from Asia who have travelled to the country to take advantage of the economic boom. The population is expected to grow rapidly in the near future and the HAAD report forecasts a rate of increase of 24.4%-45.2% from 2009-19, depending on whether a conservative or optimistic view is taken on the number of expatriates migrating into the UAE.
In the region monitored by HAAD, the majority of patients' encounters with clinicians took place outside of the hospitals, with 94% of patients classified as outpatients, 4% of encounters taking place in A&E and the remaining 2% occurring in hospitals. However, in value terms this small number of inpatient interactions accounted for 22.3% of the total cost to the healthcare system, as they require more costly and intensive treatments.
The population is predominantly young, which has a negative effect on growth in pharmaceutical expenditure. The unusual distribution of the population, due to the high numbers of young male expatriates, lowers levels of spending on chronic diseases associated with age. However, the high concentration of people in the construction industry means that when combined, respiratory diseases and infections account for more expenditure on pharmaceuticals than cardiac diseases.
However, unhealthy lifestyle choices across the populace have made the incidence of chronic diseases very high considering how the low average age. Demand for treatment for circulatory disease, diabetes mellitus, oral conditions and cancer could all grow at a compound annual growth rate (CAGR) of over 9% year-on-year. This is a huge opportunity for drugmakers, not only in the more obvious clinical areas that make the most headlines, but across the spectrum of chronic diseases.
Although diabetes and cardiovascular disease have grabbed most headlines in the region, respiratory infections and disease, metabolic disorders, musculoskeletal diseases, digestive and endocrine disorders all make up a considerable amount of the total market value. By multiplying a therapeutic area's percentage of healthcare spending with BMI's total healthcare expenditure figures for 2009 (AED29.9bn (US$8.15bn)), a forecast by therapeutic area can be calculated. This can then be combined with demand forecasts to create a predicted expenditure for each therapeutic area by 2015.
This method does not take into account drug or healthcare price inflation and therefore purely represents demand. By addingBMI's macroeconomic inflation forecasts to demand for 2010 to 2015, we can generate the upper and lower limits of expected market growth by therapeutic area.
The HAAD report estimates that pharmaceutical expenditure is worth 19.8% of all spending on healthcare, close to BMI's value of 17.4%, but this could be partly explained by the higher costs of healthcare in Dubai, as the data is extrapolated only from Abu Dhabi. Furthermore, forecasts of demand growth for healthcare in the Emirate correspond closely with BMI's long-term growth forecasts. HAAD's maximum demand growth forecasts meet BMI's expectations for the healthcare industry growth when combined with expected inflation figures. However, given that drug prices in the near term are expected to fall due to state-imposed price cuts and increased genericisation, we are happy to stand by our slightly more conservative forecasts for growth in pharmaceutical spending and slightly more bullish forecasts for healthcare expenditure.
The prescriptions of choice by value indicate a strong preference for high value pharmaceuticals and a lack of choice within the market. Although Lipitor appears within the top five best selling drugs in 13 of the 20 therapeutic areas, BMI believes this is because patients being treated for a large number of these disorders are likely to have a blood test. High cholesterol is common in this region regardless of disease and many of these prescriptions will not relate directly to the therapeutic area they are listed under, which BMI recognises as a weakness of the study.
Cardiovascular And Diabetes Are The Obvious Outperformers For Demand Growth And Market Size
The scientific and anecdotal evidence appears to indicate that the UAE and Abu Dhabi is about to experience an explosion in demand for treatment of diseases related to hypertension, obesity and diabetes. Since the UAE introduced mandatory blood tests and healthcare checks for all residents to renew membership to the health insurance schemes, data has been compiled on these risk factors that makes for fairly shocking reading, with almost 36% of the Emirati's classified obese despite having a median age of just 19. The expatriates fare slightly better, especially as their median age is 30, but in general men had higher incidences of hypertension and women had higher rates of obesity.