Industry Trend Analysis - A Recap On The Pharmaceuticals & Healthcare Outlook For 2017: Middle East & North Africa - SEPT 2017

BMI View : The MENA region's pharmaceutical and healthcare markets will be shaped by a range of opportunities and challenges in 2017. Ongoing trends , such as the rollout of compulsory health insurance schemes, generic substitution and medical tourism are expected to continue shaping the pharmaceutical market. Challenges will intensify, however, and while discrepancies exist at the country level, growth is expected to be muted in 2017 as the impact of a slow recovery within the oil sector will continue to impact pharmaceutical spending.

The pharmaceutical and healthcare sectors in the Middle East and North Africa (MENA) region will be shaped by numerous factors in 2017, including a slowdown in public sector growth as a result of low oil prices, regional challenges on the back of heightened pressure on drug prices and economic instability. We also highlight two additional themes that will define the pharmaceutical and healthcare markets of MENA in 2017.

Healthcare To Feel The Pinch

BMI View : As the recent era of lower oil prices continues to weigh on government revenues in the MENA region, the resilience of their respective pharmaceutical and healthcare sectors will come to the fore in 2017. As such, stricter healthcare budgets and slower public consumption will weigh on pharmaceutical market growth and create a more challenging business environment for drugmakers.

  • In April 2017, UAE-based pharmaceutical company Julphar (Gulf Pharmaceutical Industries) reported that company revenues had declined 1.0% year-on-year (y-o-y) to AED1.45bn (USD396mn) in FY16. 'Overall, growth in the MENA markets has been quite slow for the period, which impacted the company's sales', noted Dr Ayman Sahli, CEO of Julphar. He went on to say that 'due to political and commercial circumstances in some of our important markets - the year ahead will be a challenging one for Julphar.'

  • In April 2017, Hikma Pharmaceuticals confirmed its FY16 financial results; sales in the MENA region reached USD641mn - down by 2.3% from the USD656mn reported a year earlier. Growth in Saudi Arabia and Algeria, Hikma's second and third largest markets respectively, experienced a relative underperformance, partly attributed to the lasting effects of weak economic growth. During the company's latest earnings call, CFO Khalid Nabilsi commented that 'lower revenues from the Gulf Cooperation Council (GCC) were primarily due to economic uncertainty in the region which has slowed pharmaceutical market growth.'

  • In January 2017, Saudi Arabia announced its state budget for 2017, which included a stagnant y-o-y healthcare budget allocation of SAR890bn (USD237bn) - equating to about 13.5% of the overall spending allocation.

  • In the UAE's 2017 federal budget, a total of AED48.7bn (USD13.3bn) was approved for public spending - up less than 1% from the AED48.5bn (USD13.2bn) in the 2016 budget. While this does not constitute total government expenditure in the UAE, which derives from overall spending at the level of the respective Emirates, it is nonetheless a solid indicator of the UAE's fiscal stance. As such, the federal government has made fiscal consolidation a priority over the past two years, efforts which have somewhat cushioned the impact of much lower oil prices.

  • In January 2017, the UAE's leading private healthcare provider, Mediclinic International (previously known as Al Noor Hospitals Group, prior to combination), reported a near 3% y-o-y fall in sales revenue for the interim 2016/17 financial year - totalling just AED1, 547mn, (USD421.2mn) compared to AED1, 588mn (USD432.3mn) a year previously.

Regional Challenges To Dictate Company Strategies

BMI View : In 2017, the tough economic and political outlook for the MENA region will add to the industry challenges facing pharmaceutical companies with exposure to the region . Medicine pricing pressures will remain an inherent threat and all MENA countries will look to advance cost-containment measures within the pharmaceutical sector. This will demand a more strategic alignment for drugmakers to effectively capture future revenue-earning opportunities in the MENA region.

  • In June 2017, Oman's Director General of Pharmaceutical Affairs and Drug Control issued a circular to all private pharmacies and drug stores to implement the latest round of drug price revisions. According to the Omani Ministry of Health (MoH), the third phase will reduce the price of around 4,300 prescription drugs within both the patented and generic medicine sub-sectors.

  • In February 2017, Julphar's CFO Jerome Carle commented on the company strategy for the year ahead: 'Our ongoing approach is to continue to work with local authorities; with the investment in new hospitals from local governments and in the industry in general, we firmly believe 2017 will offer significant growth potential.'

  • Also in February, Hikma pharmaceuticals announced that its company direction for 2017 will be driven by the prioritisation of strategic products, stronger distribution capabilities and the broadening of the company's customer base.

  • It was announced in January 2017 that as part of the UAE's strategy to decrease medicines costs and limit the country's escalating healthcare costs, the Emirates' Ministry of Health (MoH) plans to increase the number of generic drug manufacturing facilities in the UAE to 30 by 2020.