ECON- DISS 4

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PHARMACEUTICALS IN SAUDI ARABIA 14 Jul 2017

OVERVIEW

The Saudi Arabian pharmaceuticals market posted flat growth in 2016 to SAR24.7 billion. Despite deteriorating health indicators and the growing sophistication of the healthcare sector, market performance

was hampered by decreasing consumer spending due to the overall economic slowdown in the Kingdom,

brought about by falling oil prices and government austerity measures.

Market growth in value terms was negatively affected by declining pharmaceutical prices in 2016. Substantial price reductions were introduced during 2016, derived mostly from the pharmaceutical price

harmonisation process introduced by Gulf Cooperation Council (GCC) member countries (Bahrain, Kuwait,

Oman, Qatar, Saudi Arabia and the United Arab Emirates) and Yemen. According to the World Health

Organisation, prior to the harmonization efforts pharmaceuticals in the region were priced 13 times higher

than the international standard.

Household expenditure on pharmaceuticals decreased by 6.1% annually to reach SAR11.6 billion in 2016, due in part to plummeting global oil prices and the subsequent economic slowdown, and the introduction of

government austerity measures that hit household disposable incomes and consumer confidence across the

country. As a result, the consumer confidence index fell by 10% in 2016, negatively affecting all consumer

items, including pharmaceuticals. Also, aiming to make medicines more affordable, the Saudi Food and

Drug Administration (SFDA) introduced new pricing regulations which resulted in declining prices for

over-the-counter medicines, and thus negatively affected market growth in value terms.

Government spending on pharmaceuticals amounted to SAR1.8 billion in 2016, down by 8.6% over the previous year. Despite the government’s recent efforts to expand access to healthcare services for the

country’s population, and the launch of economic diversification plans, the Kingdom slashed healthcare

spending by 35% to SAR104 billion in 2016 from SAR160 billion a year earlier. Fiscal pressures due to the

plunge in oil prices led to a delay in government payments to pharmaceutical companies and distributors.

However, the situation eased relatively towards the end of 2016, and further improvements are expected

during 2017.

MARKET DEMAND

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PRODUCTION OUTPUT

PRODUCER SHARES

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PRODUCER PROFITABILITY

PRODUCTION FORECASTS

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DEFINITIONS

Pharmaceuticals Pharmaceuticals is an aggregation of Active substances and basic pharmaceutical products and

Medicaments, vaccines and other preparations.

Active Substances and Basic Pharmaceutical Products This category includes production of medicinally active substances to be used for their

pharmacological properties in the manufacture of medicaments, processing of blood, manufacture of

chemically pure sugars, processing of glands and manufacture of extracts of glands, etc.

Medicaments, Vaccines and Other Preparations This category includes manufacture of pharmaceutical preparations: antisera and other blood

fractions, vaccines, diverse medicaments, including homeopathic preparations, manufacture of

chemical contraceptive products for external use and hormonal contraceptive medicaments, dental

fillings and bone reconstruction cements, medical impregnated wadding, gauze, bandages, dressings,

surgical gut string, etc.

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