Saudi Arabia’s pharmaceutical market, the largest market in the GCC region, is expected to grow at 5.5% CAGR until 2023 to reach USD 10.74 billion. The expansion of this industry over recent years has been associated with Saudi Arabia’s growing population, increasing non-communicable diseases and strong state support for health services through government investment in new hospitals and clinics.
To address the spreading non-communicable diseases, such as cardiovascular diseases, cancer, diabetes and obesity, chronic respiratory diseases in 2019 alone, the Saudi government also announced a 17% increase (USD 45.86 billion) on health and social development’s spending.
The Plan for Localisation
Most Saudi-based pharmaceuticals companies started as importing agents as well as distributors for foreign-made products. Therefore, the majority of Saudi’s pharma-market is still dominated by pharmaceuticals manufactured overseas, with just around 20% of the drugs consumed in the country made locally. Around 70% of the imports originate in Europe, 13.1% from the United States, 12.3% from the GCC, and the rest from other regions.
Saudi Arabia is targeting to raise the proportion of local manufacturing to approximately 40% in the pharma-sector by the end of 2020. While the Ministry of Health has been entrusted with further localising the industry and is implementing several tools to attract further investments, including price protection strategy for locally-produced products.
As stated by Faisal Bindail, deputy general manager of AJA Pharma, Saudi Arabia has seen major international and regional companies begin locating their production in the Kingdom in recent years. For instance, Pfizer, American multinational pharmaceutical corporation headquartered in New York City, began its production with USD 57 million plant at King Abdullah Economic City in January 2017.
The plan for localisation is also expected to create a more substantive local research and development sector for Saudi Arabia’s pharmaceutical industry in the longer term. Currently, most manufacturers only have laboratories and small-scale facilities, while substantive works are undertaken by more than 20 colleges in the country.
However, while local and regional companies are gaining more market share in the industry, the plan is affecting the growth of many large multinational companies in Saudi Arabia, which has slowed down in recent years.
The plan is also linked to approximately USD 12.72 billion designated for spending on healthcare projects, directly linked to Saudi’s Vision 2030, as well as a long-term development strategies to promote local medicines.
Controlling Medicine Supply Chain
Issues such as counterfeit drugs, along with smuggling and the illegal sale of drugs are still happening in the pharma-sector in the GCC region, including Saudi Arabia. Saudi Food and Drug Authority (SFDA), one of the country’s agencies which have key performance indicators, have the central objective to secure complete control over the medicine supply chain in the Kingdom. The SFDA also aims to ensure the tighter regulation of sales, enabling accurate market analysis.
A comprehensive track-and trace system is the main way for SFDA to achieve its objectives on securing medicine supply chain in Saudi Arabia. The agency is currently working to upgrade e-infrastructure, hoping to make it easier for importers, manufacturers, as well as distributors to register and integrate closer with government departments.
