Forecasting the Middle Eastern market
Radi Haloub of the University of Huddersfield on Jordan as an entry point for the Middle Eastern pharma market.
By on Jun 8, 2010Radi Haloub of the University of Huddersfield on Jordan as an entry point for the Middle Eastern pharma market.
When considering an emerging market, decisions are not exclusively driven by market attractiveness, according to Radi Haloub of the University of Huddersfield.
Although now an academic, Haloub's early career was in pharmaceutical sales and marketing, and he highlights several key questions.
For example, we might be concerned at how well we are surviving in our existing markets as well as basic financial statistics for the emerging market, such as health care spending, pricing, cost of sales, etc.
What about prescription habits? he asks, because prescribing practices vary among countries.
Jordan, for example, needs to be seen within the context of the Arab world, which comprises 22 countries that share a language and religion.
Sixteen countries are generally considered to make up the Middle East, of which 12 are within the Arab world.
The population of the Middle East is 350 million, and is expected to grow by 40% over the next 20 years.
Its pharmaceutical market is estimated at $12 billion, with generics growing fast because of patent expiries.
Opportunity for growth
Within the Middle East, the market is divided between private and government systems, explains Haloub.
The government sector is heavily driven by pricing, hence the emphasis on generics; it is only worth trying to penetrate it with innovative products with little or no competition.
Yet Haloub sees a major opportunity for growth in the region, perhaps even more than China and India, where pricing can be a major barrier.
Indeed, Middle Eastern governments are seeking to attract foreign investment through liberalization of trading practices and stronger intellectual property laws.
The top therapeutic categories vary from country to country.
In Jordan and Saudi Arabia, anti-infectives are the top category, while lifestyle-related diseases are becoming much more prevalent in all these countries, in common with the Western world.
Expanding the market
But there are aspects in which the region is completely different.
Haloub points out that local pharmaceutical companies invest only 0.2% of revenue in R&D, and even this is targeted towards new formulations of off-patent products.
This compares with multinational companies that spend 12% of revenue on R&D within the region.
Alongside these statistics, consider the efforts by governments to improve living standards by means of health promotion, with employers now required to provide health insurance.
This should help expand the pharmaceutical market.
It is also worth noting that, in some countries, the number of new registrations for generics is limited, while the health authorities usually control pricing.
Market size varies widely within the region, with Egypt, Turkey, and Iran representing 60% of the population.
Market structure also varies; Egyptian local manufacturers supply 93% of the domestic market, yet in Saudi Arabia over 80% of drugs are imported.
Haloub warns, however, that market data may be confounded by illegal imports.
In Yemen, some 45% of drugs enter the country by this route.
The gate to the Middle East
He has tried to make sense of the regional market by relating three factors: population, market growth, and private health care spending per capita.
With these metrics, Turkey and Saudi Arabia show up as particularly attractive because of especially high spending and high market growth.
Turkey also does well because of its large population.
In contrast, Egypt, Jordan, and Iran are less attractive, with low spending.
Egypt, in particular, has low spending and low growth, despite its large population.
However, as Haloub points out, Jordan may be worth examining because of higher growth.
It is the most politically stable country in the region, although he concedes that the market is not enormous, at $192 million.
The domestic pharmaceutical industry is successful, making important contributions to exports and contributing 40% of local medicine production.
Although its own market is not very large, many other factors are important, according to Haloub.
Jordan is the gate to the Middle East, he says.
With a stable economy, high homeland security, a highly educated medical profession (mostly trained abroad), and high acceptance of pharmaceutical company messages, he sees it as an ideal springboard for expanding sales within the whole Middle Eastern region.
This article is based on a talk given at the Pharma Forecasting Excellence USA 2009 conference.
For more on the Middle East, see The Middle East: A pharma market in the making.
For more on Russia, see Reassessing Russia's pharma market.
For more on Brazil, see Breaking into the Brazilian pharma market.
For more on China, see Cracking the Chinese pharma market.
For more on the pharmerging markets as a whole, see How to get ahead in 'pharmerging' markets.