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Navigating Through Government Policies – A Guide for Pharma Companies

17th May, 2016


Category: Regulatory Compliance

The series on factors that hold pharma companies back in the Middle East continues with government policies. Over the years, we have seen a range of government initiatives that have driven the growth of the pharmaceutical market.

However, the pharma sector is also highly regulated in nature and therefore comes with limitations with regards to registration, entry into new markets and pricing. Long registration periods (particularly for imported drugs) has been covered in the previous article so here, we look at other regulations such as pricing and domestic manufacturing policies.

Pricing

As mentioned in the first article, pricing negotiations in the Middle East are tricky to understand due to the inconsistent nature of the overall process. Added to that, since 2013 the GCC has adopted a price unification approach in a bid to reduce the excessive drug prices in the region.

So how does it work? The new price for a drug will be based on the lowestprice of a particular drug in the region. This usually will be Saudi Arabia due to its market size and its international pricing legislation, which takes the lowest price of 30 countries worldwide. The prices in the other countries within the GCC will have to drop significantly to match it.

Further complexities arise with launch timelines within the region, countries will systematically have to update their approved drug prices once the same drug becomes available in other neighboring markets.

For pharma companies, further drops in drug prices will result in lower profit margins. However, arguments suggest an increase in demand as health insurance is introduced, medicines become more affordable for the population and medical tourism continues to flourish.

Policies protecting domestic drug production

Governments in the Middle East have introduced various policies to bolster domestic manufacturing of medicines and reduce the dependence on imported drugs. These include policies limiting advertising of drugs and a protracted registration process for foreign companies. In Saudi Arabia, the Saudi Food and Drug Authority (SDFA) are encouraging foreign companies to carry out clinical trials locally as part of drug approval process, with local clinical trial data potentially expediting the market authorization process.

As incentives for local manufacturing are fairly commonplace throughout the region, pharma companies have learnt to accept this and work with strategies that do work. For example, the preference for imported drugs by patients as well as physicians has ensured that foreign pharma companies’ products are still very much in demand. With 80% of drugs being imported, there is definitely a place for pharma companies to not only thrive but also gain significantly from being in the Middle East.

As we have seen here, government regulations on pharma companies act as a double-edged sword that both promote and delay the progress of companies in the region. While these regulations do present challenges, learning to navigate through them will be worth the benefits that lie ahead.

Are there any challenges that you have faced within market entry because of pricing or local manufacturing policies? Do let us know your thoughts and views in the comments.

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