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BMI-Pharmaceuticals-and-Healthcare-Report-2017-1-1.pdf
BMI Pharmaceuticals and Healthcare Report 2017 BLOMINVEST BANK
November 17
th , 2017
Contact Information
Research Analyst: Riwa Daou
Head of Research: Marwan Mikhael
Research Department
Tel: +961 1 991 784
According to the latest Business Monitor International (BMI) report on
Pharmaceuticals and Healthcare in Lebanon, the market will register modest
growth in the next few years. BMI believes that, among other elements, “the
public’s preference for branded medicines as well as an increasing chronic
disease burden will ensure the demand for patented medicine will continue”.
Market growth will however be restrained by Lebanon’s small population, strict
medicine pricing regulations and high political risks. The latter recently
materialized by the recent resignation of Prime Minister Saad Hariri which placed
the country in a familiar scenario of political paralysis.
Pharmaceutical Market
Lebanon’s pharmaceutical sales are worth just over $1.3 billion. According to
BMI’s estimates, pharmaceutical sales are forecast to rise by an annual 5.8%
from $1.73 billion in 2016 to $1.83 in 2017 and are expected to reach $2.21 billion
by 2021, which would yield a Compounded Annual Growth Rate (CAGR) of
5.29%.
Evolution of Lebanon’s Pharmaceutical Sales
Source: BMI
BMI provides supporting evidence for the “cultural prioritization” of health care in
Lebanon. BMI forecasts that Lebanon will keep dedicating a large share of GDP
on pharmaceutical spending, a share that will reach 3.5% by 2021 and that is also
the highest in the Gulf Levant and the seventh highest globally. Per capita
spending on medicine stood at $287.3 in 2016, is forecast to rise to $300.00 in
2017 and would eventually reach $371.2 by 2021, according to BMI forecasts.
For the time being, the Lebanese pharmaceutical market is still heavily reliant on
imports. According to BMI, Lebanon houses some 50+ importers but having
drugs manufacturing in Lebanon involves high costs and therefore remains weak.
BMI believes that even imports will be slowed down in the medium term due to
Lebanon’s proximity to war-ridden Syria and the ensuing disruption of trade
routes.
According to BMI, “Foreign drug companies dominate the market in value terms,
although none operate local manufacturing facilities”. BMI explains that foreign
firms simply import medicines via regional or local distribution offices. The
leaders on the market according to BMI are European and North American
companies, with no one company grasping the lion’s share. According to BMI,
the prevalence of foreign firms on the Lebanese market is a benefit to local
producers as it gives them “easy access to technology through cooperation
agreements”.
BMI, however notes that aside from European and North American companies, a
few regional drug companies are active on the Lebanese market. BMII lists the
following players: “Gulf Pharmaceutical Industries (Julphar, UAE), Eipico (Egypt),
Dar Al Dawa, Hikma Pharmaceuticals (both Jordan) and Spimaco (Saudi Arabia).”
Lebanon is attempting to remedy the issue of counterfeited drugs, cited as a
major weakness in the sector by BMI. According to BMI, foreign direct
investment in the sector of pharmaceuticals will continue to be hindered unless
Lebanon makes some serious progress on the enforcement of legislation and the
protection of intellectual property rights. In July 2017, the Ministry of Public
Health discussed the implementation of a two-dimensional bar code project on
imported and locally manufactured pharmaceuticals. According to the Ministry,
the integration of this bar code not only helps in the detection of counterfeit
drugs but also allows for fast product recalls once needed.
1.464 1.529
1.635 1.726
1.825 1.916
2.002 2.103
2.211
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
0.000
0.500
1.000
1.500
2.000
2.500
2013 2014 2015 2016 2017f 2018f 2019f 2020f 2021f
Pharmaceutical sales, $B Pharmaceutical sales,yoy % growth
Efficient measures to crackdown on counterfeiting drugs can inspire confidence
for new investors. In fact, in July 2017, the Lebanese Minister of Health and his
Egyptian counterpart signed a cooperation agreement which will allow for the
creation of medicine factories financed by both Lebanese and Egyptian investors,
for a wider entry of pharmaceutical products into Lebanon and for an easier
registration of medicine in both countries.
The influx of Syrian refugees is weakening healthcare service in Lebanon which
already suffers from structural flaws. In that regard, in June 2017, the World Bank
injected $120 million in the Lebanese healthcare system. The injection, along
with a $30 million earmarked by the Islamic Development Bank, is designed to
give up to 340,000 poor people access to healthcare services. In July 2017,
Lebanon also benefited from a $1.2 million donation from Saudi Arabia destined
to develop the Division of Intensive Care at the Al Makassed Hospital which will
include 20 emergency rooms.
Healthcare market
BMI forecasts suggest that healthcare spending in Lebanon accounts for around
7% of GDP. Healthcare spending which was valued at $3.5 billion in 2016, is
expected to grow by 4.9% to reach $3.67 billion in 2017. By 2021, BMI expects
healthcare spending to reach a value of $4.33 billion which implies a
compounded annual growth rate of 4.3%. Per capita healthcare expenditure is
also expected to climb from $583 in 2016, to $604 in 2017, to $726 in 2021 and
to $979 by 2026. The government’s healthcare expenditure accounted for a share
of 47.6% of the total or $1.66 billion whereas the private sector contributed to
the remaining 52.4% or $1.84 billion.
According to BMI, the market for medications takes up 49% of total health
care expenditure. This is problematic since the national health insurance scheme
has been suffering from a chronic deficit and since the population is ageing. The
latter would imply lower contributions and higher expenditures. According to
BMI, government expenditure on healthcare is set to increase from $1.66 billion
in 2016 to $2.04 billion by 2021, which would then represent 47.2% of total
health expenditure. The strain that healthcare expenditures put on the national
health insurance scheme leads BMI to believe that the government will venture
into cost-containment measures over the long term.
Promoting the use of generic drugs can be an effective tool to alleviate the public
health bill. The Lebanese population still perceives generic drugs as “inferior” to
the patented version according to BMI. BMI also highlights the fact that
Lebanese patients tend to seek medical advice straight from specialized doctors
instead of visiting family doctors first; BMI’s report elaborates on this issue by
mentioning that “Specialists, as opposed to primary-care providers, offer the
drawback (in expenditure terms) of prescribing more advanced and expensive
treatments, which might not be the most affordable or appropriate option”.
Lebanon has taken a few steps towards bettering the pharmaceutical and
healthcare sectors but additional efforts are still needed. BMI notes that Lebanon
had one of the “strongest pharmaceutical industries in the region” prior to the
civil war but was later outpaced by neighboring markets which built up their
facilities. Interestingly, BMI notes that the closure of the central laboratory for
drug testing in 2007 negatively impacted the quality of drugs on sale in Lebanon
since the testing of these drugs cannot be done locally but is rather requested
from developed markets (US and Western European states).
For your Queries:
BLOMINVEST BANK s.a.l.
Research Department
Bab Idriss, Downtown Beirut
Riwa Daou, Research Analyst
+961 1 991 784
Marwan Mikhael, Head of Research
+961 1 991 782
Disclaimer
This report is published for information purposes only. The information herein has been compiled from, or based upon
sources we believe to be reliable, but we do not guarantee or accept responsibility for its completeness or accuracy. This
document should not be construed as a solicitation to take part in any investment, or as constituting any representation or
warranty on our part. The consequences of any action taken on the basis of information contained herein are solely the
responsibility of the recipient.
