News & insights

Arab World: Opportunities and Risks for Pharma

June 9, 2014

The three primary criteria for a pharmaceutical company to investigate when building a marketing strategy are market size and growth, protection of intellectual property rights and enforcement of said rights. This report provides an insight into these criteria as they relate to the MENA market.

Pharmaceuticals market in MENA

At close to USD20 billion, the pharmaceuticals market in the Middle East and North Africa (MENA) is an attractive one to pharmaceutical companies in general . Patented drugs make up anywhere from 60 to 80 % of the pharmaceuticals market in total sales . The general trend is that the richer the country is, the higher the patented drug market share is. Furthermore, it is projected that the total market size will grow to just over USD30 billion by 2016, which represents a five-year compound annual growth rate (CAGR) between 2011 and 2016 of over 9% . The projected CAGR for developed countries is much lower and declining. CAGR (2012-2016) in North America ranges between 1-4% while in Europe, it ranges between 0-3% .

Based on these numbers, MENA is indeed a very attractive market for innovator companies to consider when looking at expanding presence internationally. With patented drug sales of approximately USD2 billion and USD4 billion, Egypt and Saudi Arabia, respectively, are the two largest markets. On the other end, the two smallest markets, Bahrain and Oman, have patented drug sales of approximately USD0.2 billion and USD0.3 billion, respectively. These numbers are to be expected since Egypt has the highest population in the region at about 83 million and Saudi Arabia’s at over 25 million . Similarly, both Bahrain and Oman have two of the smallest populations in the region with approximately 1.2 and 3 million, respectively.

In the case of Saudi Arabia, patented drugs account for over 80% of pharmaceutical sales whereas generic drugs account for less than 8%. Another example with high patented drug sales is Bahrain, where the numbers in this case are approximately 80% for patented drugs and less than 6% for generic drugs.

Jordan, on the other hand, is the only country in the region where total sales of generic drugs are higher than for patented drugs. In Jordan, generic drugs account for nearly 50% of total sales, whereas patented drugs account for about 33%. This is a result of a strong and well organized local pharmaceutical industry and a relatively low healthcare purchasing power. While Jordan’s current patent law provides a 20 year patent-term and a market exclusivity period, one key aspect of the law that alleviates pressure on the local industry is the Bolar exception. This latter allows firms to develop and test a generic drug during the period of market exclusivity, and thus ensure timely delivery of a generic upon patent expiry. This provision, combined with the highly educated Jordanian pharmaceutical workforce, has also led to an increase in foreign investment in this sector. The Jordanian Patent Law is currently undergoing certain amendments which would create, for both patent owners and generic pharmaceuticals, more visibility on the patent landscape in the country.

Patenting in MENA

Over the past several years, almost every country in the MENA region has updated, revamped or introduced new patent laws. As a result, many of these laws adopted internationally accepted practices. While in the past only pharmaceutical processes were patentable, it is now possible to patent pharmaceutical products or substances. In most cases, only new chemical entities are patentable, while in others, second medical use  or Swiss-type claims  are allowed. In some countries, patent term extension (PTE) is possible if certain conditions are met. Morocco is one such country where a supplementary protection certificate (SPC) is issued for a period covering the number of days of delay in the event of unjustified delays by the authorities in awarding the authorization for marketing approval.

The number of MENA countries with PCT membership is increasing. So are trade agreements between those countries and the US or Europe. These open-up several opportunities for businesses looking to penetrate new markets with growth opportunities.

The procedures at the different patent offices vary substantially. In many countries, substantive examination as to novelty, inventiveness and applicability is performed locally. In some countries, the same is outsourced to foreign patent offices. What is allowed under each local patent law also varies. In Egypt for instance, it is not allowed to claim method of treating or use of a product, be it to diagnose, treat or prevent. The Egyptian Patent Office does not even allow Swiss-type claims. Such is not the case in Saudi Arabia where medical use and Swiss-type claims are allowed, while methods of treatment are not. See Table 2 below for some examples.

The third criterion whose value varies between countries and is of high importance has to do with the legal environment. This criterion includes dealing with counterfeiting and with imitators such as generic brands. Counterfeiting is a global problem and porous borders as well as inadequate border controls lead to substantial losses in sales and profits. Similarly, patent owners may be resistant to registering and penetrating a market where legal recourse against imitators is ineffective or unavailable. If we were to extrapolate on the evolution of the legal enforcement as it applies to trademarks, it is to be expected that the legal environment surrounding patents will follow suit in providing the adequate protection.

For trademarks, customs in various MENA countries have become very active. In Saudi Arabia for example, it has become increasingly difficult for an infringer to import counterfeit goods. Customs go as far as checking the Trademark Office records in cases where they suspect counterfeit consignments and ascertaining the validity of the name, brand, trademark and owner of the goods. Concerted efforts and joint planning by the Commercial Anti-Fraud Department and the Customs Authorities have led to a successful year in 2012 in fighting piracy and suspending a considerable amount of counterfeit imported into the country, including pharmaceutical products.

Other countries have updated their laws in an effort to better protect the consumer as well as enable rights holders to take actionable measures. This is the case in Egypt where IP Law no. 82 for the year 2002 introduced new provisions on enforcement against counterfeiting. In these provisions, the judges have the competence to issue provisional measures such as seizure of goods to determine infringement and preserve evidence. With regards to sanctions, this IP law increased the amount of fines and imposed new remedies. Some of these remedies include confiscation and destruction of infringing goods and the tools or equipments used in the infringement. Enforcement in Egypt was taken further by providing an IP unit in the police force as well as teams of civil inspectors who are authorized to seize infringing goods from the market.

Navigating the MENA Market

Governments have to find a balance between foreign investments and protecting their existing industry. In oil-rich countries such as Saudi Arabia, non-oil industries may be marginal, yet a rapidly growing market exists for the pharmaceutical sector. For oil-poor countries such as Jordan, the local pharmaceutical industry contributes considerably to the national GDP and plays a pivotal role in keeping healthcare cost low in such an economy. Understanding these dynamics is crucial when building a market strategy especially in identifying needs for intellectual property protection.

Needless to say, language barrier, doing business in MENA countries and sporadic instability may make new players reluctant to penetrate this market. Working with a local partner with both local and regional expertise and know-how can alleviate many of these concerns. Furthermore, as more MENA countries enter into bilateral free trade-type agreements with developed countries, they find themselves obligated to amend and adopt new laws.

Whether the goal is to exclude rival innovator companies, or to prevent imitators (generics) from entering the market and driving prices down, patent laws and regulations in the MENA region increasingly offer better protection. Through patenting or data exclusivity, innovator pharmaceutical companies today have the option of safely and securely penetrating the rapidly growing market of the MENA region. The necessary laws have been drafted and are being enforced gradually. Amendments to drive foreign investments as well as enhance enforcement are being made as needed. Lastly, the legal environment, while still untested, is maturing in the right direction.