The UAE is Emerging as the Gulf’s Pharmaceutical Hub
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The UAE is Emerging as the Gulf’s Pharmaceutical Hub
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By Naam Chakravorty, Gulf Region Analyst at Botho Emerging Markets Group
April 4, 2021
Available for download as a PDF
Why would a pharmaceutical manufacturer set up shop in the UAE when its neighbour, Saudi Arabia, has more demand and, in turn, higher sales volumes? A colleague was quick to raise this point during a debate on pharmaceutical development in the Gulf. For context, overall healthcare expenditure increased to USD 76 billion in 2019 from USD 60 billion in 2013, showcasing unprecedented growth owing to expanding and ageing population. And even though the Gulf’s pharmaceutical industry has existed for two decades, local production can only meet less than 20 percent of today’s local demand. As a result, GCC countries have been pursuing international pharmaceutical companies to invest in the region. Saudi Arabia has the largest pharmaceutical sales volume in the GCC due to its large population base, further enhanced by mandatory health insurance and a vibrant private healthcare system. However, the UAE has been ahead in the race: even though the country is less than one-third of Saudi Arabia’s population size, its pharmaceutical market is currently growing at 8.5 percent annually compared to Saudi Arabia at 5 percent.
The UAE is quickly emerging as the Gulf’s pharmaceutical leader by successfully attracting international companies and erecting dozens of world-class medical facilities. Pharmaceutical multinationals are drawn towards the UAE for its ease of doing business, ranking above other Gulf countries and at 16th globally. Due to its strategic location and logistics infrastructure, the country is among the top five logistics hubs globally, offering huge growth potential for pharmaceutical multinationals. The UAE has remained the preferred location in the GCC for pharmaceutical multinationals, with no fewer than 24 of the largest 30 pharmaceutical companies in the GCC currently headquartered in the country with the objective to increase reach and market access. For example, Ipsen, a French pharmaceutical leader, established their MENA headquarters in UAE after undertaking a rigorous assessment of the region’s opportunities.
While the country’s market potential is small by global standards, a study by the WHO and the UAE Ministry of Health and Prevention concluded that the UAE invests the most in health per capita of all Arab countries. Growing demand, coupled with innovation-friendly policies, continues to attract more pharmaceutical investments compared to other GCC countries. The UAE government's focus on prioritising the sector makes it easier for pharmaceutical manufacturers to set up shop efficiently and avoid major regulatory hurdles. Healthcare and pharmaceuticals are one of the crown jewels in the UAE’s strategy to diversify away from oil under the Dubai Industrial Strategy 2030 and the Abu Dhabi Vision 2030. The plans aim to increase the total output and value-addition of the manufacturing sector, enhance innovation, and make the UAE a preferred manufacturing base for global businesses.
Access to global talent also gives the UAE’s pharmaceutical market a competitive advantage compared to its neighbours. The UAE is home to the largest number of expatriate workers in the Gulf region due to its low-tax regime and relatively liberal lifestyle. However, the high turnover rate among expat workers is a threat to this edge—a challenge that is further exacerbated by limited Emirati professionals in the industry. The UAE Vision 2021 aims to mitigate these threats to the stability of the local pharmaceutical industry by fostering more skilled workers that can help bridge the local talent gap.
International R&D collaborations remain one of the biggest challenges faced by emerging markets such as the UAE for achieving pharmaceutical innovation. However, the country’s recent investments in bilateral knowledge could potentially increase home-grown pharmaceutical innovations. At the height of the COVID-19 pandemic, for example, the UAE engaged global pharmaceutical counterparts to strengthen their sectoral knowledge. In 2020, the UAE government provided financial incentives to Indian healthcare manufacturers with strong R&D acumen to promote stronger partnerships in healthcare, pharmaceuticals, medical devices and alternative medicines. Shortly thereafter, the UAE and Indonesia discussed cooperation between drug regulatory authorities in both countries for potential partnerships between manufacturers of drugs and vaccines, coupled with mutual investment in the health and pharmaceutical sectors. Recently, the UK and the UAE have started talks around the launch of a ~£200m biotech and life science fund to further the British Life Sciences Industry. The country’s openness to cross-pollinate resources and exchange learnings from other markets will undoubtedly lead to homegrown pharmaceutical innovation.
Emerging markets, such as India, Brazil, and China will drive the future of pharmaceutical innovation due to their large domestic markets and biomedicine research and manufacturing. The UAE is no exception. With its location, renewed focus on international R&D collaboration, and investor-friendly policy frameworks, the UAE can serve the GCC region along with underserved markets, such as those in Africa, which can struggle to access quality, competitively-priced pharmaceuticals. The country is poised to leverage its reputation of a stable business environment and increased focus on R&D to attract global pharmaceutical companies and build a solid foundation to fuel its aspirations of diversification.