The right dose: Demand for pharmaceuticals is set to rise as the population ages

Kuwait is set to witness significant demographic changes over the coming decades, with far-reaching consequences for the local pharmaceuticals industry. High birth rates and continued immigration mean that the population is increasing in absolute terms and is set to reach 4m by 2020 and 6.3m by 2050, according to estimates by the UN’s Economic and Social Commission for West Asia.

The population is slowly ageing: birth rates have fallen steadily, from 5.1 children born per woman in 1982 to 2.6 in 2012, according to World Bank indicators. At the same time, life expectancy continues to rise. Although figures from Kuwait alone are not available, the latest report from Alpen Capital shows that in the GCC as a whole, the number of people over 65 years of age is set to increase from 1.2m to 14.2m, or from 2% of the population to 20%, by 2050.

PUBLIC HEALTH: Many communicable diseases – such as cholera, typhoid and tuberculosis – have become a thing of the past since independence. However, the incidence of non-communicable diseases (NCDs) – including diabetes, cancer and heart disease – has risen markedly in recent years, and can largely be attributed to poor diets and sedentary lifestyles. Tackling NCDs will therefore be a longterm challenge for public health authorities. As a result, demand for medicines in Kuwait is set to rise substantially, prompting greater interest from both the government and the private sector.

According to BMI Research, Kuwait’s pharmaceuticals market was projected to expand from an estimated KD290m ($999m) in 2013 to KD306m ($1.05bn) in 2014, a 6% rise. Overall health care expenditure was predicted to grow from KD1.43bn ($4.93bn) in 2013 to KD1.56bn ($5.37bn) in 2014, a rise of 9%. This trend is set to continue as population growth and demographic changes persist.

FORMING PARTNERSHIPS: International pharmaceutical groups are required to form partnerships with Kuwaiti distributors, while the government can control the prices of certain drugs. Among the larger such companies in Kuwait are Al Mojil Drug Company, Ali Abudlwahab al Mutawa Company (AAW) and Bader Sultan. Al Mojil started as a pharmacy chain before branching out into the distribution of drugs, and currently holds the local licences for global pharma giants such as Novartis, Pfizer and Johnson & Johnson. AAW holds licences with groups such as Roche and Nestlé Health, while Bader Sultan distributes products from Switzerland’s Grünenthal, the US’s BioMarin and the UK’s GE Healthcare. (Valium)

As for local manufacturing, Kuwait Saudi Pharmaceutical Industries Company was founded as a partnership with Sweden’s Astra Pharmaceuticals (now part of AstraZeneca), but took on a Saudi partner in 1994, assuming its current corporate form. It makes over 120 products geared towards the local market and exports to the GCC, other Middle East states and Africa. The product range spans cardiovascular drugs to antibiotics, painkillers and suppositories.

According to Alpen, spending on pharmaceuticals in Kuwait as a percentage of GDP was lower than the world average of 0.6% in 2012, with the country spending 0.4% of GDP. This reflects the demographic profile, with 25% of all Kuwaitis under the age of 15, according to the World Bank, given that older people tend to be the biggest consumers of health care services and medicines. Indeed, given the ageing population, spending on pharmaceuticals could start to rise rapidly in the coming decades.

PATENTED DRUGS: Kuwaiti consumers continue to exhibit a preference for patented drugs over generic ones, as is the case in the GCC generally, where according to Alpen, generics made up just 5-6% of the total market in 2013. However, Gulf governments meet 70-75% of the costs of health care according to the WHO, a figure that rises to 82% in Kuwait, and leading to efforts to introduce greater cost control into the health care system.

The bulk of efforts to reduce extraneous expenditure has so far focused on reducing the amount of government spending on the health care of expatriate workers. However, increasing local production of medicines has become more attractive both from the perspective of securing best value, and in terms of the security of supply. For example, a WHO study from 2012 found that the price of drugs in the GCC was up to 13 times higher than the world average.

According to BMI Research, the value of the Kuwaiti pharmaceuticals market in 2014 stood at KD312m ($1.07bn). In the GCC as a whole, around 80% of medicines are imported, according to Alpen. The bulk of domestic production consists of generic medicines, geared towards common and minor medical complaints. Medicines for more complex illnesses continue to be imported – chiefly from the EU, the US and to a lesser extent Japan – with little to no local production. For instance, despite the high rate of diabetes, Kuwait produces no insulin.

DOMESTIC PRODUCTION: A series of obstacles has historically prevented greater domestic production. For example, Kuwait’s small population of 3m has meant that local research and development remains in its early stages. Without a local drug industry in place, the public health system relied heavily on imports, contributing to the widespread perception among consumers that imported branded medicines are always superior to cheaper, generic alternatives.

However, this is beginning to change, as countries across the region – aware of their increasing requirements for medicines over the coming decades – put incentives in place to ensure greater and cheaper production. Most notably, the GCC is gradually implementing a system of common registration and licensing for pharmaceuticals, as well as moving towards an agreement for the bulk purchase of drugs by regional public health authorities. This has allowed for greater economies of scale, and for smaller Gulf states to take advantage of the greater clout on the market that combined purchasing can bring.

The creation of a common pharmaceuticals market for the Gulf stands to benefit countries such as Kuwait in particular, which have hitherto been limited by the small size of their markets. According to IMF projections, the GCC will have a population of 50m by 2020, and given the similar demographic profiles across the region, Kuwaiti producers stand to benefit from a unified market.

In addition, the ongoing conflicts in Syria and Iraq have limited the capacities of the pharmaceuticals industry in those countries to meet demand. This has placed Kuwait in a position to supply those markets, which have a combined population of 50m.

The domestic generics market also looks set to expand, with the country’s public hospitals increasingly looking to use generic products, given their clear cost advantage in many cases. Furthermore, patents on products with global sales totalling $223bn in 2013 are due to expire by 2020, and this will create opportunities for the increased manufacture of generic drugs for the domestic market.