Bahrain's pharmaceuticals industry takes new strides

Along with finance, tourism and telecoms, the pharmaceuticals industry is one sector that the Bahraini government is keen to develop as part of a broader shift towards an economy less centred on oil. Perhaps the most visible symbol of this is the ongoing $1.6bn Dilmunia Health Island, which, when completed, is meant to turn Bahrain into one of the premier medical tourism destinations in the GCC and wider Middle East.

For the industrial sector, such developments are driving new investments in pharmaceuticals production. “Bahrain has a fledgling pharmaceuticals sector which it is eager to develop,” Vivian Jamal, executive director of business development at Bahrain’s Economic Development Board (EDB), a semi-private autonomous agency, told OBG. “Japan’s SBI Pharmaceuticals, for instance, signed a memorandum of understanding with Mumtalakat Holding Company in 2013. Innovest has also announced plans to build a $93m insulin production plant. These are some of the opportunities we are looking to create more of in the kingdom.”

Industry Snapshot

Bahrain’s health care sector is currently driven by government, which accounted for 70% of the country’s health care spending in 2013, according to Business Monitor International (BMI), a market research firm. Medical care is provided free to Bahraini nationals and subsidised for expatriate workers, who starting in 2014 must have health insurance (see Health chapter). The state, however, does not issue specific regulations on purchases of drugs.

As the people of Bahrain live longer, diseases such as cancer, diabetes and cardiovascular ailments have become more prevalent, opening up new opportunities for pharmaceutical sales. Although Bahrain’s population of 1.5m makes it the smallest market in the GCC, its pharmaceuticals sector contributes roughly 0.6% of GDP, a higher portion than any other GCC country. In 2012, promisingly, Bahrain ranked second in the GCC by per capita spending on pharmaceuticals, at $226. The total value of the sector rose from $240m in 2011 to $260m in 2012 – a figure BMI projects will rise by a compound annual growth rate of 10.1% to 2017, when it will reach BD160m ($423m).

A New Regulator

In 2010, the primary responsibility for regulating the health sector was transferred from the Ministry of Health to the National Health Regulatory Authority (NHRA), and in December 2012 the NHRA’s Pharmaceutical Products Regulation Department was established. One asset, control of which was given to the NHRA as part of this shift, is a government laboratory set up in 1996, at which all employees have doctoral or other advanced degrees.

The regulation department oversees all pharmaceutical transactions in the country and even has the authority to halt government outlays if they do not meet regulatory requirements – for example, products containing more than five herbal substances or preparations are banned. The department is also responsible for inspecting pharmaceutical factories, examining inventories and overseeing human resource qualifications. It is part of the Gulf Central Pharmaceutical Registration Committee, which, on occasion, sends three-person delegations to ensure that all member states are complying with GCC mandates. Bahrain’s NHRA also ensures that the final pricing of such products sold in the country are in line with those standards.

In the medium term, the newly established department hopes to work on quantitative assessment procedures and to triple the department’s staff. Unlike other markets in the region, Bahrain allows a pharmaceutical company to register as a business even before its products have received regulatory approval – though it may not begin selling its products until then. The EDB, which is responsible for attracting investment into the country, is often willing to assist companies working their way through the NHRA approval system.

Production

Pharmaceutical production in Bahrain is still a nascent industry – there were no drug manufacturers operating in the country as recently as 2010. That has begun to change. In late 2011, Bahrain Pharma, formerly known as Bahrain International Medicine Manufacturing Company, launched the nation’s first laboratory-based pharmaceutical factory at the Bahrain International Investment Park in the Al Hidd Industrial Area. By early 2015, the company plans to begin mass production at the facility, which can produce 9bn vegetarian softcaps and 20m bottles of syrups a year, with a product line ranging from antihistamines to chewable multivitamins. The facility was built using technologies developed by US firm Vanguard, and this has allowed it to produce vitamin supplements according to the guidelines of the US Food and Drug Administration (FDA), and to specialise in products certified as meeting good manufacturing practices in the US. Its high-tech machines avoid the normal drying period for softgels, which can last up to five days – a big increase in production speed for a contract manufacturer.

Foreign Partnerships

In early 2013, a visit from a Bahraini business delegation to Japan had important ramifications for the pharmaceuticals sector, resulting in the signing of a memorandum of understanding between Mumtalakat, a state investment arm, and Japan’s SBI Pharmaceuticals. Under the terms of the deal, SBI is to develop a new factory in Bahrain that will export to the GCC. The facility will develop a new form of 5-ALA, an over-the-counter dietary supplement for diabetics. SBI Pharmaceuticals is itself a joint venture between SBI Group and Cosmo Oil, a Japanese company. Through partnerships with Arabian Gulf University, King Hamad University and the Bahrain Defence Force Hospital University, it also aims to launch clinical trials of its products. The company has already set up an office in Bahrain to oversee construction of the new factory and to conduct research.

In February 2014, Deeko Group Bahrain and Delhi-based Mankind Pharma, one of India’s top 10 pharmaceutical firms, signed a deal that should pave the way for future opportunities through a $30m investment by the Kerala Institute of Medical Sciences to expand its presence in Bahrain. Itself an emerging centre for pharmaceuticals, India is also the GCC’s largest trading partner, with bilateral trade topping $175bn in 2013.

Trade Agreements

Among Bahrain’s competitive advantages in pharmaceuticals are its various free trade agreements (FTAs), some of them with key drug-producing states. At the GCC level, FTAs came into effect with the US in 2006, and with Singapore in late 2013, while others are under way with South Asia’s two largest economies, India and Pakistan, and with the EU. This bodes well for future growth: the FTA with the US resulted in a near doubling of trade between the two countries in six years, from $1.1bn in 2006 to $2bn in 2012, and under its terms Bahrain has adopted rigorous patent protection standards – another benefit to potential drugmakers. Compared to neighbouring countries with FTAs with the US such as Oman or Jordan, Bahrain also offers competitive logistics thanks to its modernised Khalifa Bin Salman Port, direct causeway to Saudi Arabia and ongoing airport expansion.

Diabetes

One opportunity that is opening for foreign investors within the Bahrain market is the development of pharmaceuticals related to diabetes. According to the International Diabetes Federation, Bahrain has the 12th highest prevalence of the disease in the world. Rates are also high throughout the region: Kuwait, Saudi Arabia and Qatar are all within the top 10.

Local investment in pharmaceuticals is also developing. Gulf Biotech Company, funded by Innovest, a sharia-compliant investment firm in Bahrain, is building a $93m facility in the Salman Industrial City; other investors include Merck and Helm. The 16,000-sq-metre facility will begin operations in early 2016 with a capacity of 42m units a year, targeting the export market through pre-sales agreements with European and American drug firms. One project under way by Innovest is to make insulin inhalants that meet the standards not only of Bahrain and the Executive Council for GCC Health Ministers but also those of the FDA and the European Medicines Agency.

Future Growth

While at present nearly all of Bahrain’s pharmaceutical needs are met by imports, new facilities being developed in the kingdom will both serve international markets and reduce medical costs within the kingdom. Foreign direct investment will boost domestic production. In the typical growth cycle of a pharmaceutical company, a firm first develops dietary supplements; next, it produces generic versions of preexisting drugs; and, in a final stage, creates new products. Given the health demographics of the kingdom and the number of packaging firms already operating in Bahrain, conditions are favourable for the further entry of pharmaceutical manufacturers.

There are two ways the government might ease the process along. As in Qatar, the Ministry of Health could decree that generic drugs must be prescribed by doctors, which could boost the local pharmaceuticals industry, though as of mid-2014 the NHRA had indicated no plans to do so. A second option is for the government to create a state-owned company to make pharmaceuticals. At present, at least, with no major policy issues at hand, the NHRA and the government seem content to let the sector develop through market-driven forces.