The pharmaceutical industry in Saudi Arabia is set to expand significantly amid government efforts to roll out broad-based reforms to the health care system.
The Kingdom’s pharmaceutical market will grow at a compound annual growth rate (CAGR) of 5.5% until 2023 to reach $10.7bn, according to a new report from US health consultancy IQVIA. This is a somewhat more conservative estimate than the CAGR of 9% between 2016 and 2026 forecast by consultancy Future Market Insights earlier this year.
The report comes at a time when reforms to health care services are shaking up legislation and service provision. Health care sector reform is at the heart of the country’s long-term national development plan, Vision 2030, and the National Transformation Programme (NTP) 2020.
Earlier this year the Saudi authorities increased the allocation of public spending on health services by 17%, as part of government efforts to help tackle non-communicable diseases (NCDs) and other health issues.
See also: The Report – Saudi Arabia 2019
Saudi Arabia is already the largest pharmaceutical market in the MENA region, worth around $8.2bn in 2018.
The rise in the incidence of NCDs – which include cardiovascular disease, cancer, respiratory disease, diabetes and obesity – is driving additional demand for pharmaceuticals.
According to data from the World Health Organisation, 20% of Saudis over the age of 20 have Type 2 diabetes and over 6.5% of adults have high blood pressure. In 2015 the prevalence of obesity stood at one in three adults and one in four children, or some 5m people. This figure is expected to rise to 8m people by 2030.
Population growth, higher living standards, the development of medical infrastructure and increased medical insurance coverage are other important contributors.
Health care reforms dovetail with broader efforts to slow the rate of import expansion by boosting the domestic production of medical equipment and supplies.
Saudi Arabia is a significant importer of medical equipment: around 98% of all medical devices are imported, which costs an estimated $1.8bn per annum.
Among other health care segments, pharmaceuticals has been identified by the NTP 2020 as an area in which import dependence could be reduced, mainly by ramping up domestic manufacturing to a target of 40% local production by 2020.
To help achieve this, the government has provided incentives for local manufacturers, including import tariff exemptions, interest-free credit and subsidised utilities.
“Opportunities for increasing the local manufacture of pharmaceutical products can be supported by offtake agreements between the public and private sector,” Fahad Al Shebel, CEO of the National Unified Procurement Company, told OBG.
Government efforts to reduce pharma imports, in addition to rising health insurance penetration, are putting greater focus on generic and over-the-counter medicines, which are predominately manufactured locally.
The value of generic drugs in the Kingdom has been rising in recent years, though they still account for less than half of all pharma sales.
Further growth of the domestic industry has been hampered by limited research and development capabilities, and uncertainty over future prices has held back investment.
Partly as a result of this – as well as the government’s decision to allow 100% foreign direct investment in the sector – a number of local companies have licensing agreements with international companies, and global firms such as Pfizer, GlaxoSmithKline and Novartis are now active in the local market.
In light of the predicted expansion of the pharmaceutical segment, interest from both local and international firms can be expected to grow significantly.
Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.
Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.
Register Here×Following delays, the long-awaited GCC Railway looks likely to be revitalised, a move that could transform trade and connectivity across the Gulf.
After a surge in uptake during the Covid-19 pandemic, the telehealth industry is courting new investment to further innovation and increase access to care in emerging markets.
The Turkish Prime Minister Bulent Ecevit has spent the last week in the US hoping to garner support for economic reforms at home and trade concessions for Turkish exports to the US.
