Medicines in the UAE – Why the Huge Disparity?

Why is there such a discrepancy in the price of branded and non-branded drugs? A regional spokesperson provides an insight

The Price of Medicines… Why the Huge Disparity?

 

The forthcoming Pharmaceutical and Biotechnology Middle East Exhibition & Conference (PABME), which takes place from May 23-25, 2010, at the Dubai International Convention & Exhibition Centre, is a major event for the region’s pharmaceutical sector. The exhibition will attract thousands of manufacturing representatives, pharmacists, doctors and other professionals, all keen on conducting good business in the face of the recession.

What matters most to the consumer, however, is the price that they pay for their medicines in their street corner pharmacy. With such huge discrepancies between branded and generic (unbranded) forms of medicine, we ask Ruch de Silva, Consulting Analyst, Healthcare, Datamonitor MENA, to shine some light on why drug prices in the region are subject to such large variances:

Why is there such a disparity in the price of certain branded drugs and their generic counterparts? Is this just a simple case of patents expiring, or are there further issues in the equation?

“Firstly, the price of drugs, both prescription and over-the-counter (OTC) drugs, are controlled by the Drug Control Department of the Federal Ministry of Health (MoH) in the UAE. The price of a drug consists of three components; the ex-manufacturer price, which goes to the manufacturer, margins for the distributor and profits for the retailer.

The last drug price revision was made by the MoH in October 2008 for 1,129 medications imported from Europe, whose prices had been the same since 2005. This figure comprised 530 drugs used to treat chronic diseases and 599 used to treat acute conditions. The strengthening of the Euro against the dollar made the UAE an unattractive market for European pharmaceuticals and the prices of these European drugs were adjusted to compensate for this. The revisions involved increasing the prices of drugs for chronic conditions by 5.85 per cent, while those used to treat acute conditions rose by up to 21.4 per cent.

Generics, like their branded counterparts, are equally highly priced in the UAE. Datamonitor’s research among drugs used to treat three major chronic illnesses in the UAE; diabetes, hypercholesterolemia and hypertension, found that the range in price difference between the branded and generic versions to be merely 13-59 per cent. In comparison, in markets such as the UK and Germany, generic drugs are priced up to 80 per cent less than the branded versions. However, such discounting is only possible with unbranded generics. Drugs available in the UAE and the rest of the Middle East are usually branded generics which involve marketing costs and even carry the names of their respective companies. An example is the drug Julmentin (co-amoxiclav), which incorporates the name of its manufacturer, Julphar, with that of the generic drug originally developed by GSK, Augmentin. The costs associated with marketing drives the prices of such branded generics up over the volume-driven unbranded generics where all overheads, including profit margins are kept to a bare minimum.”

Last year, the Abu Dhabi Health Authority required doctors practising within the emirate to prescribe drugs by their molecular name. The move, it was said, was made to encourage the use of generic drugs. Do you think that this action will boost generic uptake, or will it simply see the decision to prescribe expensive branded drugs taken from doctors and given to pharmacists?

“In February 2009, the Health Authority of Abu Dhabi (HAAD) mandated the prescription of drugs by molecular names through the development of a prescription template. Despite seeming piecemeal and a reform that would merely shift the power of prescribing from a physician to a pharmacist; Datamonitor believes that this reform is part of a series of long-term reforms aimed to deliver cost-effective healthcare to all residents of Abu Dhabi.

Dr Mohammed Abuelkhair, an advisor to the Drugs and Medical Products of the Health Authority of Abu Dhabi (HAAD) revealed to Datamonitor that the shift to generic prescribing had already produced an increase in generic consumption and a drop in branded drug use since the ruling was passed. Dr Abuelkhair also highlighted that HAAD-sponsored patient-focused campaigns have been run in pharmacies to promote the use of generic drugs and that this had contributed to the higher uptake of generics among patients. In a presentation at the Pharmaceutical and Biotechnology Middle East (PABME) conference in April 2009, Dr Abuelkhair disclosed that certain branded drugs had seen a fall in consumption of between 36 per cent and 50 per cent (Abuelkhair, 2009) since the implementation of the reforms. Datamonitor believes that such reforms, together with strategies like the development of the positive formulary list for the basic health insurance policy (administered as the Abu Dhabi Plan for low wage expatriate workers by DAMAN) will boost the use of generics over brands.”

Pharmaceutical companies often experience a drastic decline in drug revenue upon patent expiry. However, their Gulf Cooperation Council counterparts have managed to grow the sales of products post-patent expiry. Why should this region be different?

“In the UK, branded drugs experience sales erosion of approximately 40 per cent after the first year and 75 per cent after two years of generic competition. The continuing implementation of cost-cutting measures, coupled with an already high use of generics, means that branded pharmaceuticals have to work even harder in the future to protect its market share.

Similarly, Germany’s pharmaceutical market, which is highly genericised, being the oldest and most profitable generic market in Europe, has begun to shift from a branded generic market, towards a commodity generics market. This has been driven by wide-ranging reforms which put negotiating power firmly in the hands of Germany’s sickness funds (krankenkassen) making sales and marketing forces obsolete, with competition simply based on price.

However, this is not the case in the Gulf Cooperation Council (GCC) countries where pharmaceuticals like GSK have managed to steadily grow the franchises of branded drugs such as Augmentin annually, despite the presence of generic competition for over half a decade.

The reason for this lies in consumer sentiment and the willingness of payers to reimburse the use of branded drugs, even where generic versions are available. Consumers in the GCC, being relatively affluent, are notoriously brand conscious. This mind-set even extends to their consumption of healthcare services and pharmaceutical items. Generic drugs have been always seen as suspicious, despite the large generic manufacturing base in the GCC and Middle East and North African (MENA) region. On top of that, payers, particularly the public sector, have allowed the consumption of branded drugs, which have been paid for by revenues generated from the export of hydrocarbons that the region has in abundance. The recent trend observed in privatising healthcare financing, through the introduction of private health insurance, will see the implementation of cost-cutting measures that will boost the uptake of generics. However, Datamonitor does not expect cost-cutting measures to be implemented immediately, but only as the market matures and competition for premiums and profit-making stiffens.”

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