Prescription for Change

While entry into the World Trade Organization is generally perceived to be broadly positive for the Saudi economy, concerns have been expressed that the pharmaceutical sector is one of the few that will face a bleak future unless it adopts a new strategy.

The kingdom has a $1.2 billion market in medicines, more than 3,000 pharmacies and more than 4,600 registered drugs, both generic and patented. Saudi Arabia's citizens are the largest consumers of pharmaceutical products in the Gulf region, where consumption of medicines is estimated to be $52 per capita, compared to about $20 in the rest of the Arab world.

More than $620 million has been invested in 27 manufacturing plants which concentrate mainly on the production of generic medicinal drugs.

The largest player in the sector is the Saudi Pharmaceutical Industries & Medical Appliances Corporation (Spimaco), a company set up in 1986 as the flagship of a new local industry.

In recent years local production has increased to more than 13 percent of consumption, but more than $1 billion worth of pharmaceutical products are still imported every year, mostly from U.S. and European manufacturers.

A consequence of having to abide by WTO tariff regulations, according to an analysis published last year by the Gulf Organization for Industrial Consulting, will be that local pharmaceutical industries will not be able to compete economically with medicines from abroad.

But this assumption is strongly disputed by Ayman Tamer, president of the Tamer Group, a leading Jeddah-based manufacturer and distributor of pharmaceuticals and beauty products. “I don't see WTO accession as a threat to the health sector, but rather as an opportunity,” he says. “This has automatically opened the door for regulatory reform. Legislation will become clear and capital investment will become more secure for both Saudi and foreign companies.”

Tamer points out that expected entry to the WTO has already led to the creation of the Saudi Food and Drug Association (SFDA) and another new organization, the Health Development Council of the Mecca Region, which is a private-public partnership of various players in the healthcare industry.

“Perhaps some companies believe that their agency representation will be at risk, but if you have a good business relationship and add value to the business, then this relationship is not in jeopardy. Indeed it may evolve over time,” he says.

Tamer agrees that some companies that merely act as a sponsor and do not add much value to the product may find that their role will become redundant. “But for foreign companies to come and do what we can do in terms of wholesale distribution would require tremendous investment, which I don't see most pharmaceuticals undertaking,” he says.

“Their main concerns tend to be research, education and marketing. Distribution is not an area of major interest to them if there are players in the local market that can meet their needs.”

Tamer says that the environment in Saudi Arabia for getting drugs approved by the SFDA and then to the market is very fast. “If you have the paperwork in order, it really takes no time at all, much less than in most European countries and certainly much less than getting FDA approval in the U.S.”

He adds, however: “In Saudi Arabia, in order to ensure safety and quality, the authorities are cautious about the registration and pricing of certain products. There is no free and direct promotion here as there is in the U.S.”

The Tamer Group is a local healthcare and beauty care company with an international dimension. Its focus is on personal care, fragrances and prestige products, as well as pharmaceutical and medical goods, and it is continuing to increase its presence in the beauty care market.

In order to meet the demands of the Saudi and regional markets, it maintains strategic relationships with the leading international companies in the pharmaceutical, medical and consumer goods sectors.

Its manufacturing arm, the Saudi Japanese Pharmaceutical Company (SAJA), a joint-venture with a Japanese consortium, produces the latest researched products as well as generics for the Saudi and Middle East markets. It has introduced a confectionery supplies unit and is looking to diversify into this area by investing in a confectionery production facility.

Tamer says that the healthcare industry is short of technically qualified staff, especially medical doctors and pharmacists. This is exacerbated by the pressure from the Ministry of Labor for a greater Saudization of the labor force.

At present, 45 percent of the group's personnel are Saudi if pharmacists are excluded. If they are included, the figure is 25 percent which, says Tamer, is good compared to other companies.

The group's growth plan is that 300 of the projected 500 new hirings should be Saudi citizens. The trouble is that although a lot of effort is being put into developing the group's human resources, most graduates are not inclined to pursue business careers, he says.

To win recruits to the industry, the Tamer Group is creating partnerships with universities locally and regionally. “A lot of training programs are operated through the Chamber of Commerce and other organizations to make the link and improve the recruitment of aspiring professionals,” says Tamer. “More effort is needed, but we are heading in the right direction.”