Wave Of Drug Price Reductions To Be Enacted

BMI View: State intervention in drug pricing is set to become more heavy-handed and frequent as the GCC region attempts to establish unified drug pricing over the next five years. Despite these measures, the region's burden of disease, relative wealth and healthcare infrastructure will make it an attractive region for pharmaceutical companies.

In recent months, the UAE Health Ministry has launched a number of initiatives in conjunction with pharmaceutical companies to institute price reductions after discovering that prices in the UAE are considerably higher than in neighbours Jordan, Oman and Saudi Arabia.

  • In January 2014, the Ministry of Health ordered the reduction in price of 14 drugs used in diabetes care, which was part of a wave of price cuts on almost 205 medicines. Diabetes medicines saw their prices slashed by almost 83%. The Ministry of Health first announced a reduction in the cost of drugs in June 2011 when it slashed the prices of 565 medicines by 55%.

  • Growth Set To Moderate Over Long Term
    Pharmaceutical Sales, 2013-2023

BMI View: State intervention in drug pricing is set to become more heavy-handed and frequent as the GCC region attempts to establish unified drug pricing over the next five years. Despite these measures, the region's burden of disease, relative wealth and healthcare infrastructure will make it an attractive region for pharmaceutical companies.

In recent months, the UAE Health Ministry has launched a number of initiatives in conjunction with pharmaceutical companies to institute price reductions after discovering that prices in the UAE are considerably higher than in neighbours Jordan, Oman and Saudi Arabia.

  • In January 2014, the Ministry of Health ordered the reduction in price of 14 drugs used in diabetes care, which was part of a wave of price cuts on almost 205 medicines. Diabetes medicines saw their prices slashed by almost 83%. The Ministry of Health first announced a reduction in the cost of drugs in June 2011 when it slashed the prices of 565 medicines by 55%.

  • Further reductions were announced in November 2011 when the prices of 115 generic medicines were cut by 35%.

  • The UAE's biggest reduction in drug prices took place in June 2013 when health authorities cut prices of 6,632 medicines, including drugs used for the treatment of hypertension and heart failure, anti-depressants, asthma and anti-virals for HIV, by 40%.

  • In May 2014,the UAE Minister Of Health Abdul Rahman bin Mohammed Al Owais issued two ministerial decisions that curtail drug prices of 11 varieties of medicines. The medicines affected are for the treatment of blood, hormonal and immunological diseases, as well as allergies. The price reductions range from 1% to 56% of the previously registered price.

We believe that heavy intervention on drug pricing is set to become a recurring feature of GCC markets, and that pharmaceutical manufacturers will need to adopt a more flexible strategy when targeting these markets.

Gulf Cooperative Council Drug Prices Set To Come Down Over Long Term

GCC member countries are set to endorse a pricing mechanism in November 2014 ahead of a formal endorsement of a price list by the various ministries of health. The scheme is set upon reducing and maintaining prices of medicines and limiting profit margins of pharmacies and wholesalers. The actual process for coming to uniform pricing across the GCC may take up to 4 years, according to Dr. Fahad Al-Dosari, head of medicinal pricing at the Council of Ministers of Health of the GCC. In a concession to drugmakers, the Gulf Supreme Council agreed that unified prices would be set in US dollars, although we note that currently, almost all GCC countries peg their currency to the US dollar.

Growth Outlook To Moderate Over Ten Year Period

We believe growth in pharmaceutical sales in the UAE will pick up slightly in 2014 to 5.6%, with pharmaceutical expenditure increasing from AED7.02bn (US$1.91bn) in 2013 to AED7.41bn (US$2.02bn) in 2014. Over the medium term, we expect the market to experience a CAGR of 5.6% to reach a value of AED8.75bn (US$2.38bn) by 2017. At this point, we expect annual pharmaceutical spending per capita to be valued at US$240. Over the long term we project growth will remain fairly stable at approximately 5.4%, yielding a market size of AED11.28bn (US$3.07bn) by 2022, and annual pharmaceutical spending per capita at US$280. Pharmaceutical spending will remain a relatively small proportion of the country's overall wealth over the next decade, at approximately 0.45% of GDP.

Growth Set To Moderate Over Long Term
Pharmaceutical Sales, 2013-2023

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Related sectors of this article: Pharmaceuticals & Healthcare
Geography: United Arab Emirates
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