Industry Trend Analysis - Drug Pricing Revisions Will Challenge International Drugmaker Revenues - MAR 2018

BMI View: The UAE ' s pharmaceutical market presents significant growth opportunities for multinational drugmakers, yet the impact of lower medicine prices will create challenges for innovative companies operating in the Emirates. Despite this, the UAE is becoming more accepting of new and innovative medicines, with proposed reforms to the country's drug regulatory system likely to gain traction over the coming years, thereby upholding its appeal for innovative drug launches.

The impact of lower medicine prices in the UAE will be largely negative for innovative drugmakers operating in the UAE, particularly given the uncertainty surrounding the degree of such drug price reductions. In January 2018, the UAE's Ministry of Health (MoH) announced the latest round of annual price revisions to 762 innovative and generic drugs in the country. While this will create challenges for innovative firms in the UAE, the country remains one of the more attractive destinations for multinational drugmakers in the region.

The table below highlights the UAE's annual drug price revisions since 2011, of which 8,732 medicine prices have been re-adjusted, with the majority being for the treatment of chronic diseases. The latest round was officially implemented in September 2017 following negotiations between the MoH, local pharmaceutical companies and multinational firm Sanofi. Indeed, pharmaceutical pricing in the UAE will continue to place pressures on innovative drugmakers in particular, emphasising the importance of cooperation between stakeholders to implement an agreeable price. According to MoH officials, 'the collaborative efforts with Sanofi and local agents will help forge new ties based on trust, communication, transparency, and community support', as commented by Dr Amin Hussein Al Amiri, the UAE's assistant undersecretary for public health policy and the vice-chairman of the higher committee for drug pricing and registration. We note that these changes will create greater clarity over some regulatory processes; however, it will continue to be viewed adversely by innovative drugmakers in an already-challenging pricing environment.

UAE Annual Drug Price Revisions
Timeline For Implementation Detail Of Price Revision
Source: UAE Ministry of Health, BMI
July 2011 565 innovative and generic medicines
January 2012 115 generic medicines
June 2013 6,791 innovative and generic medicines
January 2014 207 innovative medicines
February 2015 280 innovative medicines
January 2016 142 innovative and generic medicines
September 2017 762 innovative and generic medicines

A Balancing Act: Government Initiatives To Maintain Multinational Interest

While the UAE renders a tough stance on medicine pricing in the Middle East, it is unlikely to introduce similarly aggressive pricing regimes as seen in some developed markets globally, including Germany, Japan and Turkey (to name a few). This restraint on the issue of pricing aims to achieve the UAE's desire to attract greater foreign investment as part of its drive for innovation and technology which international drugmakers may bring. Highlighting this, Dr Amiri also noted that 'our commitment to encouraging international pharmaceutical companies to locally manufacture will not only give patients an access to affordable but innovative medicines, but also benefit local factories through technology transfer'.

Reflecting the MoH's efforts to maintain an attractive market for innovative drugmakers, reforms to the UAE's drug regulatory system have gained traction over 2017, perpetuating the existing challenges facing international drugmakers seeking to launch innovative medicines in the Emirates. This includes the MoH signing a Memorandum of Understanding (MoU) with the Jafza/Jebel Ali Free Zone for the development of the pharmaceutical and healthcare sector, with a particular focus on reducing regulatory barriers. As part of the agreement, the UAE is aiming to attract 75 innovative drugmakers to the economic trading zone by 2021, with the number of companies producing patented drugs locally expected to double. Also in October 2017, the UAE signed 12 MoU's across 11 industry sectors, including with multinational drugmakers Pfizer, for the creation of a 'UAE Centennial 2071 Area' in Dubai. In accordance with the MoU with Pfizer, a number of key challenges in the UAE have been set to improve the population's access to high-quality medicines and local pharmaceutical production. More recently, Shire declared Dubai as its new regional hub for its Eurasia, Middle East and Africa (EAMEA) operations in November 2017, tasked with overseeing a network of ten regional offices and activity across thirty markets. These recent developments highlight the UAE government's push to strengthen partnerships with various research-based foreign drugmakers in order to establish Dubai as its hub for pharmaceutical investment. We do caution that reducing regulatory barriers for drugmakers in the UAE is a gradual process and uncertainties about the timeline ensure the risks remain for now.

It is worth highlighting opportunities for generic drugmakers too in the UAE, in a related development, the 'Dubai Industrial Strategy', of which pharmaceuticals is one of the key six initiatives, is pursuing a number of short-and-medium term targets for expanding the Emirati's drugmaker manufacturing facilities. According to the UAE Executive Council in October 2017, there will be a greater focus on the production of generic drugs and biologics for various chronic diseases, most notably oncology treatments. Indeed, the taskforce overseeing Dubai's pharmaceutical sector is simultaneously working on improving the regulatory environment for biologics, as to fast-track the future production and supply into the domestic and regional markets.