Saudi Arabia. Pharmaceutical market to reach US$4.7 billion by 2016 - Deloitte

In an effort to deliver better patient outcomes the global healthcare industry has adopted a new business model that shifts its focus from developing blockbuster drugs and building pipelines, to business portfolio evolution, the regulatory landscape and emerging markets, according to a new report by Deloitte. These strides have also been taken to counter the slow market growth and declining profitability of the global healthcare industry.

The Deloitte report entitled 2013 global life sciences outlook: Optimism tempered by reality in a “new normal”, concludes that the primary drivers behind this shift are numerous. They include: expiring patents and generic competition, pricing pressures, heightened regulatory scrutiny, expansion into emerging markets, increasing alliances and acquisitions, and a persistent economic slowdown.

Among specific market segments, pharmaceuticals accounted for US$798 billion in market revenue in 2011; and biotechnology accounted for US$289 billion. Saudi Arabia for example, one of the largest pharmaceutical markets in the Middle East region, is forecast to expand by 4.7 percent a year to reach US$4.7 billion by 2016.

The Deloitte report also closely examines the current state of the global life sciences industry and the top issues facing stakeholders, with focus on the GCC. It indicates that the GCC States, which include Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates, comprise a dynamic life sciences and health care market, due to their growing and ageing population and increasing total health care expenditures per capita.

“To grow in this challenging climate, the life sciences industry is transitioning away from a primary-care, small-molecule-driven sales model, towards targeting specialist secondary care indications. Two practices we are witnessing are the use of high-value biologic therapies in the developed markets, as well as marketing branded and off-patent medicines in the fast-growing emerging markets, including the Middle East countries,” said Herve Ballantyne, healthcare industry leader, Deloitte Middle East. “Cost savings facilitated by mergers and acquisitions are also set to bolster profits.”

The GCC population is expected to continue growing at five percent Year on Year, driven mainly by the influx of expatriates to the region, according to the report. While the dominant age group is estimated to be the 30-44 year old group, the 45-65 and 65+ age groups are expected to grow cumulatively by an average of six percent between 2011 and 2020. This ageing population will further increase the burden on health care systems and costs.

“There are many prevalent trends across the GCC, that are likely to impact life sciences and healthcare companies operating in the region,” said Ballantyne. “These trends include governments’ increasing investment in health awareness and lifestyle changes programs and technological advancements; the growth of smaller clinics and ambulatory centres  increased interest in medical tourism; and new health care regulations,” he added.

The 2013 global life sciences outlook identifies several worldwide trends have fuelled the pharmaceutical industry’s growth and remain favourable in the long term. They include:

1. Aging population, especially in large markets. The growth rate for the world’s 65+ year-old population is projected to outpace that of the 0-4 year-old segment by 2020, thus increasing demand for life sciences industry products and services.
2. Rising incident of chronic diseases. As a result of changes in lifestyle and eating habits, people are becoming more prone to chronic diseases such as diabetes and hypertension which, in turn, are high risk factors for heart attack and stroke. The demand for and use of preventive drugs and medical devices and other assisted technologies like e-health and mobile health are increasing, as a result.
3. Opportunities in emerging markets. Companies increasingly are targeting growth in emerging markets as a way to offset sluggishness in developed regions.
4. Technological advancements and product innovation. The areas of biotechnology and biosimilars, combination devices, and “big data” analytics are particularly active.
5. Health care reform provisions, including increases in government funding and broader insurance coverage.

Many challenges facing the GCC healthcare market are also shared in the report. They include heavy reliance on government financing as well as increasing health care costs. The report further outlines challenges such as limited medical education options, capital-intensive health care for the private sector, a shortage of medical personnel, and a health care infrastructure that lags behind developed nations – all of which are hampering the industry’s development.

Navigating the GCC regulatory landscape is another challenge facing life sciences companies As the report shares. Each GCC country has a government agency responsible for regulating the health care and life sciences industry. In addition, the Health Ministers’ Council for GCC States promotes coordination among the member states to advance achievement in preventive, curative, and rehabilitative care.

Also, the Health Ministries Council has set a regulatory drug pricing mechanism for member states. This policy has important financial ramifications for life sciences companies engaged in the drug registration and pricing process: Patented products account for 90 percent of total prescription drug sales in the GCC. In recent years, price controls have been imposed on patented products as a way to reduce the cost burden on GCC governments and the local population.

Source: Deloitte