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Sat 18 Jul 2009 04:00 AM

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Pharmyard rivalry

The UAE's high drug costs are proving to be a bitter pill for patients. We reveal why copycat drugs may overhaul the healthcare market.

Pharmyard rivalry
Pharmyard rivalry
Selection of data taken from Datamonitor report UAE Pharmaceuticals Review 2009.

The UAE's high drug costs are proving to be a bitter pill for patients. Arabian Business reports on the side effects of top-price prescribing, and reveals why copycat drugs may overhaul the healthcare market.It analyst amit mehta lives in the UAE but fills his prescriptions in India. The drug he relies on to keep his cholesterol in check, simvastatin, costs $27 for 30 tablets in the UAE. In India, he claims, it is less than a third of the price.

"I stock up when I go home, or my family brings my prescription when they visit," he says, adding that he doesn't have health insurance. "I can't afford the medication costs here."

He's not alone. A recent report from the World Health Organisation (WHO) revealed that patients in the UAE pay some of the highest prescription drug prices in the Middle East, second only to those in Kuwait. According to the World Health Statistics 2009 survey, generic drugs sold in UAE pharmacies cost more than thirteen times the international reference price, the median procurement price for generics - or unbranded drugs - sold by suppliers to developing countries.

Patients also pay top dollar for brand name drugs. In the 23 pharmacies surveyed, branded drugs cost on average 23.5 times the reference price.

Regionally, only Kuwait ranked higher. Generic drugs sold in the Gulf state cost on average 15.7 times the reference price. By comparison, generics in Yemen are marked at 3.5 times the reference cost. In Iran, the mark-up is just 1.3.

"There is no question costs here are high in comparison to other Gulf countries, particularly Saudi Arabia," admits George Varghese, pharmacy manager at The City Hospital, Dubai.

The high prices, he says, are reflective of the UAE's small population and piecemeal ordering system. As a minor player in the global drug industry, the Gulf state doesn't have the scale to wrestle down prices.

"The consumption here, when compared to a country like Saudi Arabia, is very low," he notes. "The batch size is small so the drug price is high, then the margin of the wholesaler is high and the end user pays the price. It's the size of the population."

More than 90 percent of the UAE's estimated $0.8bn pharmaceutical market is imported through agents.

For the same reason, drug shortages are a common occurrence among hospitals and pharmacies. Agents will wait to accumulate a minimum number of orders before shipping more stock in, and give preference to countries with bigger orders.

Varghese claims he has to wait up to six weeks for fresh shipments of adrenaline, an essential drug used in emergency situations such as during cardiac arrest.

"There are always shortages, and that's not just one or two [drugs], it's many," he reveals. "These firms supply the largest markets first, as the margins are better. We're a lower potential market."

According to the WHO survey, which polled the price and availability of 25 essential drugs in 30 developing countries, government pharmacies in the UAE stocked just 16.7 percent of branded drugs, alongside 61.1 percent of generics. Private pharmacies had 73.9 percent of generics available, and all branded drugs.

In the US and Europe, price competition between drugmakers is brutal. Medication costs in the US have halved in the last decade, despite the country's aging population and surging chronic disease rates, largely because the rise of copycat drugs, costing up to 80 percent less than their branded rival, has pinched prices. What is shoring up prices in the UAE, argues Dubai-based analyst Imran Ahmed, is the lack of low-cost alternatives to top-dollar branded drugs."The critical story in the UAE isn't necessarily the absolute prices of drugs, but the very small differential between generic and branded drugs and their lack of availability," says Ahmed, who is Datamonitor's head of strategy and consulting for the region.

"There are none of the classic generic players in this market and that means we haven't been able to drive down costs."

According to the firm's UAE Pharmaceuticals Review 2009, generics in the UAE are on average 37 percent cheaper than their brand equivalent. In developed markets, the gap is typically more than 50 percent and can be up to 80 percent.

In the case of the diabetes medication pioglitazone, the generic version of the drug, marketed under the name Actos, is less than 20 percent cheaper than its branded rival in UAE pharmacies. This is despite the UAE having one of the highest incidence of diabetes in the world.

"There isn't as strong a disparity as we would expect, and that is the fundamental problem in the UAE and what is keeping drug prices, on average, elevated," says Ahmed. "In other countries, when the patent on drugs has expired, other [generic firms] are allowed to compete and then the customers win.

"Here, it's like the customer never gets to win and we always lose."

For some patients, however, the situation is reaching crisis point. A recent survey by Datamonitor, which polled 6,000 residents in 19 countries, including Saudi Arabia and the UAE, revealed an alarming number of expats are scrimping on prescriptions and bypassing doctor appointments in a bid to cut their healthcare spending. More than nine percent of recession-hit expats in Saudi admitted skipping drug doses or splitting pills in half in an attempt to spin out their prescriptions.

More than 13 percent of Saudi expats, and nearly 18 percent of UAE respondents, admitted to skipping their own drugs in order to buy medication for their children.

"Some of these drugs are obscenely expensive," Ahmed notes. "There is, for the majority of people, no support from the insurance companies and they have to buy these out of their own pocket. That is why they have to resort to splitting pills."

But some predict the UAE's days as a brand-drug stronghold are numbered. The rise of mandatory health insurance schemes, already in place in Abu Dhabi and set to be introduced in Dubai next year, is likely to erode branded drug use as insurers favour cheaper, copycat versions. And unlike single hospitals, insurers have the scale to force price changes.

Earlier this year, Health Authority Abu Dhabi ruled that doctors must write the generic name of drugs on prescriptions, rather than the brand name. According to Dr Jad Aoun, chief medical officer of Daman, the emirate's largest insurer, pharmacists are expected to dispense generic drugs wherever possible.

"In our view, mandatory insurance will be game-changing," predicts Ahmed. "Right now, about 40 percent of GCC insurers' costs are drugs, compared to around 25 percent for insurers in other parts of the world.

"Insurers, who ultimately are profit-making entities, will find the mechanisms to force pharmacists to dispense generics," he predicts. "It will change the structure of healthcare eventually."

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