Enthused with business-friendly government policies and various positive catalysts, UAE’s pharmaceutical industry is enjoying one of the best phases at the moment.
Increasing health awareness, popularity of generics and biotech medicines, mandatory increase cover, mindfulness of overall well-being among residents and exodus of people from other countries for various beauty treatments… All these dynamics have collectively contributed to the growth official estimates, over the past 10 years, the UAE pharmaceuticals industry has approximately doubled, reaching a whopping AED7.4 billion in 2014, with a growth of 12 percent over 2013.
Al Ittihad Drug Store (IDS), one of the oldest and most trusted names in the UAE pharma sector, is spearheading the consumer healthcare product distribution sector in the region. Established in 1968, IDS’ distribution side of the business sizeably took off when Beecham Laboratories (now GSK) became an IDS partner in 1979. It was followed by the selection of IDS as their partner in the UAE (in 1980’s) by Hoechst AG (now Sanofi of France) and Bayer AG.
Under the mentorship of its group CEO Ahmad Tabari, IDS is now looking forward to add manufacturing into its portfolio. It is all set to establish Pharmax that is expected to be operational by 2016. Pharmax has been established to develop, manufacture and market branded generic pharmaceutical products in the Middle East and North African (MENA) region.
Tabari, who was probably the first UAE high school graduate to attend Massachusetts Institute of Technology in Cambridge, has gained experience in US’ top law firms and in various sectors including technology, banking and petroleum. However, he returned to his roots in the UAE in early 2000’s and joined IDS and played a pivotal role in its makeover into a forward looking regional organisation.
Emirates Business talks to Tabari to take stock of the momentous pharmaceutical industry and prevailing trends in this region.
EXCERPTS FROM THE INTERVIEW
Please shed some light on your upcoming project Pharmax and is this an indication that IDS is gradually aiming to switch from distribution to manufacturing?
Pharmax has been established to develop, manufacture and market branded generic pharmaceutical products in the Middle East and North African region, and it will be located in DuBiotech (Dubai Biotechnology and research Park).
Besides our core business of distribution, we will also be manufacturing.
However, IDS has no intention of switching operations. We are just adding a manufacturing unit to our portfolio with an investment of US$25 million. Indeed, our experience in distribution will help ensure the success in Pharmax.
By when are you expecting to get Pharmax operational?
Work is on at a good pace and we are expecting Pharmax to be fully operational by the third quarter of 2016.
In the last few years, UAE has seen a surge in the opening of new hospitals and pharmacies, thereby escalating the business in the UAE pharmaceutical industry. According to you, how well is the pharmaceutical industry placed in the UAE?
Over the past 10 years, the UAE pharmaceutical industry has approximately doubled, reaching AED7.4 billion in 2014, with a growth of 12 percent over 2013. There are several reasons behind this zoom, such as, population growth, introduction of compulsory health insurance, growth of regional medical tourism and other factors. So I would say the industry is doing extremely well. Still there is immense potential and certainty we can expect good days, business-wise, in the forthcoming years.
In addition to the above, from 2011 to 2013, the ministry has managed to achieve a considerable price cut for 7504 innovative and such similar drugs across four-phased initiatives. Price reductions ranged from 1 percent to 60 percent, thereby benefiting patients suffering from chronic, viral, neurological, cardiovascular disease and cancer.
In the wake of current trends in the pharmaceutical industry, what is better – manufacturing of distribution?
I believe they are both growing trends with an equal amount of potential, which is why IDS is now also moving into manufacturing.
While spearheading a leading drug distribution company in the UAE, have you observed any particular inclination of drug consumption (increase or decrease) in this region? If yes, what reasons could be attributed to it?
Yes, I have observed an increase in the drug consumption in this region. A few notable reasons are:
- High population growth rate –
With an estimated population of 9.2 million residents, the UAE healthcare sector caters to a rapidly growing population and the concurrent increasing demand on the healthcare sector.
- Introduction of compulsory health insurance –
The introduction of mandatory health insurance in Abu Dhabi resulted in an immediate increase in demand for the healthcare services by over 40 percent.
- Continued growth of regional medical tourism –
Most governments in the region are encouraging medical tourism, resulting in Jordan, Lebanon and Dubai leading the way.
- Medicinal healing of lifestyle diseases are rapidly growing –
Such as anti-diabetic, cardiovascular, anti-hypertensive, gastro-intestinal and the Central Nervous System.
In the UAE, which specific health sectors are doing exceptionally well?
For the pharmaceutical industry in the UAE, the main growth areas are generics and biotech medicines. However, in terms of consumption, digestive and metabolic, asthmatic and nervous system diseases’ medications take a lead.
You come with a sound knowledge in diverse fields like law, finance and technology. How did this rich experience help you in IDS?
Having gained exposure to law, finance and technology, I applied my experience to IDS by modernising our IT infrastructure, reorganising our corporate structure on a surer footing, and dramatically improving our financial position by launching new divisions and services at regular periods. Now, IDS has grown from a turnover of AED35 million in 2003 to over AED300 million.
What about your customised ethical product portfolio, as well as about consumer product portfolio? In what aspects or service wise are they different from each other?
The difference is that ethical products are predominantly prescription-based, whereas consumer products are over the counter (OTC) products and be purchased without prescriptions. They can be classified as below:
- Muscle relaxants
- Oncology and Hematology
- Skin care and hair care
- Food supplements, vitamins and nutrients
- Home healthcare i,e. blood pressure monitors, thermometers and nebulisers
- Bandages and strip plasters
How fast is IDS expanding its client-base, if we compare your current standings vis-a-vis last few years?
Currently, IDS covers all pharmacies and hospitals, supermarkets, convenient stores and non-conventional stores across the UAE.
We are also evaluating the possibility of establishing a new distribution channel that caters to salons and beauty centres. Our expansion is in line with the growth of pharmacies and hospitals within the region.
In addition, during the last ten years, DIS has shown a pronounced growth in every category, including growing yearly revenues, market shares, number of prescriptions, product portfolios and in representing international partners.
In 2011, IDS covered 1,546 pharmacies and hospitals across the UAE. And now we cover 2,317, which is a growth of almost 50 percent in the last 4 years.
Many new divisions and services have been launched in IDS under your mentorship. Which one is closest to your heart and why?
My latest venture to establish Pharmax is the closest to my heart, as it will represent a milestone for IDS. This manufacturing unit will vertically integrate upwards into manufacturing generic drugs.
If we talk about IDS’ growth rate, at what pace has this company grown in the last one decade? Also, how was 2014 for IDS and which factors have contributed to growth?
In the fiscal year of 2014, IDS has recorded a growth rate of 14 percent in the total sales turnover, as compared to the figures recorded for the year of 2013. This tremendous growth is higher than the recorded total market growth of 11 percent. In addition to the above accomplishment, the consumer division of IDS, in pharmacies and supermarkets, grew by 60 percent from AED20 million to AED32 million.
This significant positive change is the result of organic growth from the existing portfolios and the launch of new products like Duodart, Levitta ODT and Profertil.
Not only this, the company also broke another of its set record wherein more than 5 million units were packed, shipped and delivered into the market during the year 2014. Presently we are doing extremely well. We are expecting a growth of 15 percent by the end of this year.
What is the USP of IDS? What extra edge are you offering to your clients in comparison to your competitors?
IDS is the clear choice for all pharmaceutical companies, because IDS provides a full spectrum of integrated services: regulatory affairs, marketing, distribution and manufacturing.
Not only that, we are financially very strong – our turnover exceeded AED 270 million in 2014. The distribution side of the business is going from strength to strength, with a minimum annual growth of 15 percent. We act quickly and turn around proposals to any project quicker than our competitors.
However, we are not stopping here and constantly working on improving our services that will add more value to our partners. We are doing it through various mechanisms like always improving our IT infrastructure, implementing advanced CRM solutions reducing our delivery timings to our customers.