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UAE Freezones Biz News Updates
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Freezones: The UAE Wants Bigger Pharma
Late next year the UAE-based pharmaceutical distributor Al Ittihad Drug
Store (IDS) will leap up the value chain when it opens Pharmax, a $20
million facility to manufacture generic pharmaceuticals in DuBiotech (a
TECOM Business Park). By targeting the chronic illness sector with medicines
to treat ailments including hypertension, diabetes and depression, the firm
hopes to win over customers and then keep them for life, says its group CEO,
Ahmad Tabari.
Generics have only about a 5-6 per cent market share in the GCC, with
patented drugs dominating the landscape, according to a report from Alpen
Capital published in 2013. That means that firms have to work hard to
convert patients from branded drugs over to a generic. Tabari says that
whether the medicine will be used for a short period, like an antibiotic, or
to treat a long-term illness, the effort is roughly the same. “The bang for
your buck is much better in the chronic medication sector. That’s our view.”
The use of generics in the region is also set to grow as the UAE and wider
GCC moves towards an insurance-based system, which creates more demand for
lower cost medicine, says Marwan Abdulaziz, executive director of DuBiotech.
For IDS, moving up the value chain will allow the business to reap bigger
margins, with prices in the distribution business set by the Ministry of
Health. “You’re lucky if you make 3-4 [per cent] net profit at the end of
the year,” says Tabari. While there’s the hefty $20 million price tag for
the new plant, which will employ around 25 highly skilled staff, Tabari—who
received a law degree from Harvard and has worked as an investment
banker—says the capital outlay isn't so significant in the context of their
current running costs. “People underestimate the amount of capital you
actually have often tied up in the distribution business,” he says, with
conversion cycles in the UAE extending to 270 or even 360 days. “Governments
who buy medicine sometimes don’t pay for a year or a year and a half.”
The risks in manufacturing are mainly around building brand awareness, where
it already has a track record as a distributor. “We don’t see it as much of
a risk as somebody else might, because we’ve had the experience in marketing
and developing the brand and getting the product accepted by the consumer,”
says Tabari.
Eventually the company plans to export its product, across the GCC and to
the wider region, with East Africa, Iran, Iraq and Libya all flagged as
potential markets. “Setting up a factory for the UAE alone doesn’t make a
lot of sense,” he says.
Pharmax will be the first company to set up pharmaceutical manufacturing in
DuBiotech, says Abdulaziz. Alpen Capital says there are already eight
manufacturers in the country, including Abu Dhabi-based Neopharma, which has
tie-ups with Pfizer and Merck Serono, major international players that have
offices in DuBiotech. Local players in the generic market include Julphur—the
largest pharma manufacturer in the UAE—and Global Pharma, which began
production of local generics last October, following Sanofi’s purchase of a
66 per cent stake in the firm from Dubai Investments.
Moves to encourage manufacturing are part of a strategy to reduce costs and
improve supply. “The healthcare landscape in the UAE is fast evolving and we
are working closely with pharmaceutical companies to make the UAE the
regional hub, which will positively impact the supply, distribution and
pricing of drugs,” says Amin Hussain Al Amiri, the assistant undersecretary
for Public Health Policy & Licensing Sector at MoH, speaking at the launch
of Global Pharma’s generic production last October.
Local production is being encouraged by the MoH through a basket of
incentives around the fast-tracking of new drugs, and even preferential
treatment in federal tenders. DuBiotech has also smoothed the path for its
companies: TECOM signed a memorandum of understanding with the MoH in 2012,
says Abdulaziz. “We have a concrete agreement with them, that they
facilitate the approval for the companies in our freezone.”
Locally produced drugs will receive a fast-track approval by the ministry,
within 6-12 months according to Tabari; overseas medicines, especially
generics, normally take much longer—as much as 2-3 years. Within the federal
tendering system there’s also a preference for local medicines. “If there
are two products, one locally manufactured and the other imported, the
preference is given to the locally-manufactured one, even if the price is
slightly higher,” says Abdulaziz.
With the UAE currently importing around 85-90 per cent of its drugs,
Abdulaziz sees scope for the manufacturing sector to grow, partly driven by
the insurance sector’s demands for cheaper drugs. Generics are likely to be
the target; there are at least 15 products coming off-patent by 2020, says
Abdulaziz, and a company that is first to produce a new generic gains a
market advantage.
But beyond manufacturing there’s plenty of interest in further developing
research activities, in line with the country's national innovation
strategy. With the development of a new drug taking on average 15 years and
close to $2 billion of investment from discovery to market, the day when a
UAE company develops a new drug is still some time away. International
companies are already segmenting out portions of research activities as part
of the larger process. Also, clinical research organisations (CROs) are
based in Dubai, working with hospitals in Abu Dhabi, Saudi Arabia and Egypt,
says Abdulaziz.
And Dubai is playing to its strengths as a hub. Countries with large
populations, such as China and India, have a natural advantage in attracting
companies that want to conduct large-scale clinical trials. Instead, Dubai
is focusing on the research phases—such as on the bench or in animals—that
take place before a drug is tested in humans. Coordinating with countries in
the region with large population bases like Egypt and Iran also holds
promise.
The emphasis on developing the industry is being enhanced by new additions,
both in clinics and the education sector, such as the upcoming Mohammed Bin
Rashid University of Medicine and Health Sciences. Patient visits are also
growing at Dubai Healthcare City (DHCC). In 2014, it recorded 1.2 million
visits by patients, up from a million visits in 2013.
Medical tourists are also an important growth area, comprising 15 per cent
of DHCC patients in 2014. A recent survey by DHCC of medical tourists found
that 48 per cent come primarily from the GCC, while 32 per cent come from
the wider Arab World. The remainder is made up of patients from Europe and
Asia. The three most popular procedures were infertility treatments,
followed by cosmetic treatments and dental in third. “The survey results
indicate our strengths, positioning us as leaders in the healthcare sector
among regional and international investors, physicians and patients,” says
Dr. Fatma Al Sharaf, the senior manager for strategy and partner development
at DHCC.
The freezone authority is currently making a push to attract more medical
tourists: Phase 2 of DHCC is currently under construction, and will target
this segment by introducing wellness concepts and pushing investment into
attracting visitors. “Wellness tourism is a growing branch of medical
tourism as people increasingly combine holidays with a holistic approach,”
says Dr. Al Sharaf.
Abdulaziz says there’s a feeling that the industry as a whole is growing in
the right direction. “We attract the industry because of the facilities we
have, the regulations and the activities. But it’s important that we make
sure that those players are engaged locally with the right stakeholders.”
Sep 10, 15 |
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Courtesy UMS International Fz LLC
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