INOICMEMBERCOUNTRIES PRODUCTION,CONSUMPTIONANDTRADE

PHARMACEUTICALINDUSTRY

ORGANISATIONOFISLAMICCOOPERATION STATISTICALECONOMICANDSOCIALRESEARCHAND TRAININGCENTREFORISLAMICCOUNTRIES(SESRIC)

PharmaceuticalIndustryinOICMemberCountries: Production,ConsumptionandTrade Introduction

Today pharmaceuticals have become an indispensable part of health care system around the globe. Historically pharmaceuticalshaveplayedavitalroleinthe humandevelopmentbyimprovingthequality of life and reducing the time spent in the hospitals. Thanks to innovative pharmaceutical industry that almost all epidemics and chronic diseases are curable today. Due to its direct link with the welfare and wellbeing of human beings pharmaceutical industry is of strategic importance for the development of a healthyandproductivenation.Today,pharmaceuticalindustryisconsideredtobe one of the largest and rapidly growing global industries. It is a major source of employmentgenerationandforeignexchangeearningsformanycountriesaround theglobe. However, despite all these extraordinary achievements its a harsh reality that every year millions of people die across the world, mostly in low income developing countries, due to unavailability and inaccessibility of necessary medicines.AccordingtotheWorldHealthOrganization(WHO),onaverage,30% of the world population lacks access to lifesaving medicines; whereas, in some countriesinAsiaandAfrica,thenumbermaybeashighas50%(RogerBate,2008). Many developing countries, including some OIC member countries, has insufficient or no manufacturing capacities in the pharmaceutical industry. Local industry coversa tiny fraction of domestic pharmaceutical demandand they rely heavilyonimportsandmedicinalaid.Inaddition,theshareofmedicinesinOut ofpockethealthpayments(i.e.paidbythepatient)israngingbetween40to60% inthesecountries.Consequently,medicinesareneitheravailablenoraccessibletoa large fraction of population and hundreds and thousands of people die of preventable and treatable diseases. This short report is a humble attempt to


investigate the availability of medicines in OIC member countries by focusing on the production, consumption and trade patterns of pharmaceuticals in these countriesduringtheperiod20052010.

PharmaceuticalProductionandConsumption: WorldwideTrends
The global pharmaceutical industry has shown rapid growth over the years and emerged as one of the fastest growing industries in the world. However, world pharmaceutical production and consumption is still unevenly dispersed around theworldwiththedevelopedcountriesastheleadingproducersandconsumersof pharmaceuticals. AccordingtoIMSHealth(aninternationalconsultinganddataservicescompany), in2010,worldpharmaceuticalmarketwasvaluedatUS$875billionwithagrowth rate of 4.1% over the previous year at the constant exchange rate. The volume of pharmaceuticalindustryhassurgedfromUS$647billionin2005toUS$875billion in2010,correspondingtoanincreaseof35.2%.Duringthisperiod,theindustrys growthratehaswitnessedadecliningtrendfrom7.2%in2005to4.1%in2010.This declineismainlyassociatedwiththeslowdownineconomicactivity,especiallyin the developed countries which consume a large chunk of global pharmaceutical products.In2008,economicslowdownindevelopedcountriesculminatedintoone of the worst global financial and economic crisis since the Great Depression. The negativeeffectsofthismeltdownofhistoricmagnitudewerefeltacrosstheglobe

Figure1:GlobalPharmaceuticalMarket,20052010
BillionUS$ 1000 800 600 400 200 0 2005 2006 2007 2008 2009 2010 TotalWorldMarket Source:IMSHealthMarketPrognosis,March2011. GrowthOverpreviousYear Percent 10 8 6 4 2 0


and all sectors were hard hit. The pharmaceutical industry was not an exception andithaswitnessedoneofthelowestyearonyeargrowthratesof6.1%in2008.In 2009,however,thenegativeeffectsofthecrisissubsidedandglobaleconomyhas startedtorecover.Thesepositivedevelopmentshelpedtheglobalpharmaceutical industry to rebound to its precrisis level and its growth rate climbed to 7.1% in 2009(Figure1). Global pharmaceutical market, both in terms of production and consumption, is highly concentrated in the developed regions. In 2010, North America (38%), Europe(29%)andJapan(12%)accountedfornearly79%ofglobalmarket.Onthe other hand, developing regions with a share of nearly 85% of world population, accountedforonly21%ofglobalpharmaceuticalconsumptionin2010(Figure2).A breakdown of pharmaceutical market in developing world reveals that Asia, AustraliaandAfricarepresentnearly15%whereasLatinAmericaaccountsfor6% oftheglobalpharmaceuticalmarket.

Figure2:RegionalDistributionofGlobalPharmaceuticalMarket

Japan 12%

Asia/Australia/ LatinAmerica Africa 6% 15%

Europe 29%

NorthAmerica 38%

Source: IMS Health Market Prognosis, March 2011.

OICMEMBERCOUNTRIES
Like many other developing countries, the OIC members are facing many socio economicchallengesincludingtheestablishmentofanefficientandeffectivehealth care system. In these economies, health sector is suffering from many problems ranging from poor health infrastructure to insufficient number of medical staff.


Howevertheshortageofandinaccessibilitytonecessarymedicinesareamongthe mostchallengingproblems.Duetotheunavailabilityoftherelevantdataformost of the OIC member countries, comprehensive analysis on production capacity of pharmaceuticalindustryattheOIClevelisnotpossible.However,anoverviewof pharmaceutical industry in the OIC member countries, for which data are available,intermsoftheirgeographicalregionsisgiveninthefollowingsection.

MIDDLEEASTANDNORTHAFRICA(MENA)
PharmaceuticalmarketintheMENAregionaccountedforabout1.8percentofthe world market, or around US$12 billion in 2006 [Pharmaceutical & Biotechnology MiddleEast(PABME)].MostofthecountriesinMENAregionarecharacterizedby low domestic pharmaceutical base. According to the Arab Organization for Industry and Mining, local production accounts for 45 % of consumption, with morethan220manufacturingunits.InMENAregionGCCcountrieshavehighest percapitamedicinesconsumptionestimatedatUS$52whileinothercountries,the figureisestimatedataboutUS$20in2004. Among the GCC countries Saudi Arabia has the largest number of local pharmaceutical manufacturing plants totaling 27 with an investment of US$ 619 million. As shown in Figure 3, Saudi Arabian pharmaceutical industry produced medicines worth of US$ 320 million in 2006 compare to US$ 187 million in 2000. However,localproductionsatisfiesonly15%ofthedemandandimportsaccount for85%ofthedomesticmarket. Egyptian pharmaceutical market, which is estimated at around US$ 1.7billionin2007,isone of the major flourishing markets in the MENA region. According to some reports, Egyptian pharmaceutical industry comprised of about 30 companies and local productionsatisfiesmore than 90% of domestic

Figure3:PharmaceuticalProductioninSaudiArabia
MillionUSD 600 500 400 300 200 100 0 2000 2001 2002 2003 2004 2005 2006

Source:NationalCommercialBankofSaudiArabia.


demand .On the other hand, Egypt is contributing 30% of supply in the MENA pharmaceuticalmarket. Jordan is another major market in the MENA region. Jordanian pharmaceutical industry consists of 17 factories and accounts for 3.5% of the total workforce employed in the countrys industrial sector and is second largest export earning industryaftergarmentmanufacturing.In2005,Jordanianpharmaceuticalindustry producedUS$350millionworthofmedicinescomparetoUS$185millionin2003. Localproductionsatisfiesabout50%ofdomesticmarket. In the MENA region, UAE is one of the most expensive pharmaceutical markets with per capita medicine expenditure estimated at about US$ 80. There are eight pharmaceuticalmanufacturingunitsinUAEwhichpresentlysatisfyaround10% of local demand (Dubai International Pharmaceuticals and Technologies ConferenceandExhibition,DUPHATDecember2008).

ASIA
In the Central Asian region, Turkey emerged as a promising pharmaceutical market. Today, Turkey is the largest pharmaceuticals producer in the OIC and is ranked16thamongtheworlds35leadingproducers.Thereare134pharmaceutical companiesoperatinginTurkeyanddomesticindustrymeets90%oflocaldemand. In2006,TurkeyproducedUS$3947millionworthofmedicinescomparedtoUS$ 1932millionin2000(ExportPromotionCentreofTurkey).Turkishpharmaceutical industry and market has great growth potential and is placed in a group of countries Pharmerging Markets represents growing pharmaceutical marketsintheworld. In the Asia Pacific, Malaysiaisoneofthe fastest market around US$ growing valued 1027 pharmaceutical which fastest called

Figure4:PharmaceuticalProductioninTurkey
MillionUSD 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 2001

2002

2003

2004

2005

2006

Source:ExportPromotionCentreofTurkey.


million in 2007 [Frost & Sullivan estimates 2008]. According to Malaysian Drug ControlAuthority,in2006,therewere246registeredpharmaceuticalcompaniesin thecountryandlocalmanufacturerproducedabout2530%ofdomesticdemand. Providedtherichnaturalresources(floraandfauna),Malaysiaisenvisagedasan importantbiogeneric(herbalmedicinesandvitamins)marketintheregion. Indonesia is another growing pharmaceutical market in the region estimated at US$ 1.29 billion in 2006. According to Drug and Food Control Agency (BPOM), Indonesia has a strong pharmaceutical manufacturing industry based on 108 companies.In2005,localcompaniesaccountedfor90%ofsalesofmedicinesinthe country.

SUBSAHARANAFRICA(SSA)
TheregionofSSAaccountsfor24%ofglobalburden of disease and represents less than 1% of global healthexpenditures.Nearly50%ofSSAstotalhealth expenditures are being financed by the patients. AccordingtoWorldHealthSurvey2003,theaverage share of medicines in outofpocket health payments in SSA (14 countries) is 37%, while at country level, this share varies from 11% in Chad to 62.2 % in BurkinaFaso.In2006,pharmaceuticalmarketinSSA wasvaluedatUS$3.8billion,correspondingto0.6%ofglobalmarket.InSSA,37 outof44countrieshavesomepharmaceuticalproductionandlocalmanufacturer account for 2530% of local demand. However, pharmaceutical production is highly concentrated among a few countries. In 2006, SSA produced US $ 1.07 billionworthofpharmaceuticalsoutofwhichmorethan70%(i.e.US$735million) was contributed by South Africa alone. Nigeria was the second leading producer with a share of 10% (i.e. US$ 107 million). Among other OIC member countries, Senegal produced US$ 22 million, Cte dIvoire produced US$ 14 million and UgandaproducedUS$9millionworthofmedicinesin2006.

PHARMACEUTICALTRADE
Globalpharmaceuticaltradehasshownanupwardtrendduringtheperiod2005 2010.Accordingtotheavailabledata,worldtradevolumehasincreasedfromUS$ 556 billion in 2005 to US$ 824 billion in 2010. This corresponds to an increase of


over 48%. In 2010, Global pharmaceutical exports were valued at US$ 417 billion while pharmaceutical imports were valued at US$ 407 billion. However, like the production,pharmaceuticaltradealsoremainedhighlyconcentratedindeveloped worldwhichaccountedforabout93%ofworldexportsandabsorbednearly82% of pharmaceutical imports in 2010. As a group, developed countries are net exportersofpharmaceuticalproducts.Ontheotherhand,theshareofdeveloping countriesinglobalpharmaceuticaltraderemainedverylowandtheyaccountedfor only 7% of exports and 18 % of pharmaceutical imports in 2010. As a group, developingcountriesarenetimportersofpharmaceuticalproducts.

Figure5:OICPharmaceuticalExports20052010
TotalExports 3.0 2.5 BillionUS$ 2.0 1.5 1.0 0.5 0.0 2005 2006 2007 2008 2009 2010 Source:UNComtradeonlinedatabase. ShareinDCsTotal ShareinWorldTotal 10 9 8 7 6 5 4 3 2 1 0

Percent

Beingasubstantialpartofthedevelopingcountries,majorityoftheOICmember countries is net importer of pharmaceuticals and their share in global pharmaceutical trade remained very low. As shown in Figure 5, OIC pharmaceuticalexportswitnessedanincreasingtrendduringtheperiod20052010. In2010,OICpharmaceuticalexportsvaluedatUS$2.6billioncomparedtoUS$1.4 billion in 2005, corresponding to an increase of 85%. During the period under consideration,onaverage,OICmembercountriesasagroupaccountedforabout 7%ofdevelopingcountriesandabout1%ofworldtotalpharmaceuticalexports. OIC Pharmaceutical exports remained highly concentrated and a large share of these exports come from the member countries located in Middle East & North Africa (MENA), Europe & Central Asia (ECA) and East Asia & Pacific (EAP) regions. These three regions, collectively accounted for over 90% of OIC total pharmaceuticalexportsduring20052010.AsshowninFigure6,MENAremained


thetopOICexportingregionwithashareof45.8%in2010.However,itssharein OIC total exports has witnessed decrease of 6.5 percentage points since 2005. Meanwhile, share of EAP and ECA region witnessed some improvement and recordedat24.3%and24.0%respectivelyin2010.Amongtheotherregions,South Asia(SA)accountedforover5%,SubSaharanAfrica(SSA)around1%andLatin America & Caribbean less than 1% of OIC pharmaceutical exports during 2005 2010.

Figure6:RegionalDistributionofOICPharmaceuticalExports

2005

SA SSA 6.7% 0.8%

EAP 17.4%

2010

SA 5.1%

SSA 0.8% EAP 24.3%

MENA 52.3%

ECA 22.8%

MENA 45.8%

ECA 24.0%

LAC 0.2%

LAC 0.1%

Source:UNComtradeonlinedatabase.

Provided the weak production capacity and limited technological knowhow, majority of member countries are unable to locally produce sufficient amount of pharmaceuticals needed to meet their domestic needs. As a result, they have to import from other countries. During the period under consideration, OIC pharmaceuticalimportshavewitnessedanupwardtrendandincreasedfromUS$ 13billionin2005toUS$19billionin2009beforedecliningtoUS$16billionin2010 (Figure 7). Compared to the pharmaceutical exports, OIC share in developing countries and world total pharmaceutical imports remained much higher. On average,membercountriesaccountedfor24%ofdevelopingcountriestotaland4% of world total pharmaceutical imports during 20052010. This clearly shows that member countries are heavily dependent on imports to meet their local pharmaceuticaldemand.Inaddition,italsogivessomeinsightsabouttheissuesof inaccessibility and unavailability of necessary medicines especially in the least developedmembercountries.

 Figure7:OICPharmaceuticalImports20052010
BillionUS$ 20 15 10 5 0 TotalImports Source:UNComtradeonlinedatabase. ShareinDCsTotal ShareinWorldTotal Percent 28 21 14 7 0

OICPharmaceuticalimportsalsoremainedhighlyconcentratedandalargeshare ofimportsisconsumedbythemembercountrieslocatedinMENA,ECAandEAP regions. These three regions, collectively accounted for over 85% of OIC total pharmaceutical imports during 20052010. As shown in Figure 8, ECA remained thetopimportconsumingregionwithashareof39.0%in2010.Since2005,itsshare inOICtotalimportshaswitnessedanincreaseof9percentagepoints.Meanwhile, shareofMENAregionwitnessedsignificantdeclineandrecordedat35.9%in2010 compared to 51.1 % in 2005. Among the other regions, EAP accounted for 11.9%,

Figure8:RegionalDistributionofOICPharmaceuticalImports

2005
SA 3.90%

SSA 7.36%

EAP 7.44%

2010
SA 4.1% ECA 30.16%

SSA 9.0%

EAP 11.9%

MENA 51.09% LAC 0.22%

MENA 35.9%

ECA 39.0%

LAC 0.4%

Source: UN Comtrade online database.


SSA for 9%, SA for 4% and LAC less than 1% of OIC pharmaceutical imports in 2010. Very much like their regional distribution, OIC pharmaceutical exports remained highlyconcentratedattheindividualcountrylevelaswell.In2010,morethan90% oftheOICpharmaceuticalexportswerecontributedbyonlytenmembercountries (Table 1). Jordan remained the top OIC pharmaceutical exporter with exports of US$688millionwhichconstituted26%ofOICtotalpharmaceuticalexportsin2010. Among the top ten OIC exporters, first five member countries namely: Jordan, Turkey, Indonesia, Malaysia and Egypt accounted for 83% of OIC total pharmaceuticalexportsin2010. Asimilartrendcanbeobservedincaseofpharmaceuticalimportsaswell.In2010, top ten importers accounted for more than 80% of OIC pharmaceutical imports (Table1). Turkeyremained the top pharmaceuticalimporter with imports ofUS$ 4778 million which constituted 30% of OIC total pharmaceutical imports in 2010. Among the top ten importers, top five importers namely: Turkey, Algeria, UAE, EgyptandMalaysiaaccountedformorethan60%ofOICpharmaceuticalimports in2010.

Table1:OICTop10PharmaceuticalExportersandImporters,2010
Rank 1 2 3 4 5 6 7 8 9 10 Country Jordan Turkey Indonesia Malaysia Egypt UAE Pakistan Morocco Oman Kazakhstan Exports (mln.US$) 688 611 333 308 250 162 136 82 24 17 Share inOIC Total 26% 23% 13% 12% 9% 6% 5% 3% 1% 1% Rank 1 2 3 4 5 6 7 8 9 10 Country Turkey Algeria UAE Egypt Malaysia Kazakhstan Indonesia Pakistan Morocco Jordan Imports (mln.US$) 4778 1719 1259 1246 1133 940 736 650 548 483 Share inOIC Total 30% 11% 8% 8% 7% 6% 5% 4% 3% 3%

Source:UNComtradeonlinedatabase.

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During the period 20052010, pharmaceutical imports in the group of the OIC countriesincreasedhigherthantheirexports.ThisindicatesthattheOICcountries, as a group, are net pharmaceutical importers, where the majority of them still heavilyrelyonimportsofvariousmedicinesandvaccinestomeettheirincreasing domestic demand. As shown in Figure 9, pharmaceutical trade deficit of the OIC countries has increased rapidly from US$ 11 billion in 2005 to US$ 17 billion in 2009. However, it witnessed some improvement in 2010 and recorded at US$ 13 billion.During20052009,MENAregionrecordedthehighestpharmaceuticaltrade deficit, followed by ECA and SSA. However, in 2010, ECA region recorded the highestpharmaceuticaltradedeficitamongtheOICregions.

Figure9:OICPharmaceuticalTradeBalance
2005 0 3 US$Billion 6 9 12 15 18 EAP SA Source:UNComtradeonlinedatabase.

2006

2007

2008

2009

2010

ECA SSA

LAC OICTotal

MENA

IntraOICPharmaceuticalTrade
At the intraOIC level, pharmaceutical trade volume increased from US$ 1469 million in 2005 to US$ 1910 million in 2010. As shown in Figure 10, IntraOIC pharmaceuticalexportshaveshownanupwardtrendduringtheperiod20052010 and increased from US$ 778 million to US$ 1255 million. On average, IntraOIC exports accounted for half of the OIC total pharmaceutical exports during this period. Nevertheless, intraOIC pharmaceutical exports remained highly concentrated in few member countries. In 2010, more than 82% of intraOIC pharmaceutical exports originated from four member countries, namely: Jordan (47.1%),Egypt(14.5%),UAE(10.3%)andTurkey(10.1%).

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 Figure10:IntraOICPharmaceuticalExports

IntraOICExports ShareofIntraOICinOICTotalExports OICNonOICExports

1500 1200 MillionUS$ 900

56 52 48 Percent

600 300 0 2005 2006 2007 2008 2009 2010 44 40

Source:UNComtradeonlinedatabase.

During the period under consideration, IntraOIC pharmaceutical imports have alsoshownupwardtrendbutintraOICimportshaverepresentedatinyshareof 4.2 % of the OIC total pharmaceutical imports. This indicates that many OIC member countries rely heavily on nonOIC countries to fulfill their domestic pharmaceuticaldemand(Figure11).Morethanhalfofpharmaceuticalsproduced inOICmembercountrieshavebeenimportedbyAlgeria(28.0%),UAE(12.3%)and Egypt(10.9%)in2010.

Figure11:IntraOICPharmaceuticalImports

IntraOICImports ShareofIntraOICinOICTotalImports OICNonOICImports

20000 16000 MillionUS$ 12000 8000 4000 0 2005 2006 2007 2008 2009 2010 Source:UNComtradeonlinedatabase

10 8 Percent 6 4 2 0

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CONCLUDINGREMARKS
Despiteshowingrapidgrowthovertheyears, global pharmaceutical industry remained highly concentrated which in the developed the global countries, dominate

pharmaceutical production, consumption and trade. Although some developing countries emerged as major contributor, the share of developingcountriesinglobalpharmaceutical industryremainedverylow. OIC countries, as a group, remained net importer of pharmaceuticals and with few exceptions, the majority of them have very low pharmaceutical production base. Consideringtherelativelyhighcostofhealthcareandunavailabilityofmedicines, many OIC member countries have to make some serious efforts to boost the pharmaceutical industry in their economies. To this end, the following related concludingremarkscanbemade: Pharmaceutical production requires skilled human resources like scientists, pharmacists, biologists and lab technicians. Therefore, OIC member countries should encourage and empower their education system to impart quality knowledge in academic disciplines like Chemistry, Biology, Medicines and other natural sciences. On the other hand member countries should also give due attention to convert the brain drain of highly skilled people into brain gain by facilitating the nationalDiasporatoreturntheircountries. Pharmaceutical industry relies heavily on research and development (R&D) activities. Hence proper R&D facilities should be built and researchersandtechniciansshouldbeprovidedwithnecessaryfinancial resources to develop an innovative pharmaceutical industry in the membereconomies. At the intraOIC level, member countries should collaborate with each other by sharing expertise for the development of pharmaceutical industry. At the same time students mainly from least developed countriescanbeenrolledinpharmaceuticalrelatedacademicdisciplines in member countries with substantial pharmaceutical base like Turkey,

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Egypt, Jordan and Malaysia to equip them with necessary knowledge andexpertiseinthisfield. Attheinternationallevel,OICmembercountriesshouldcollaboratewith the international agencies like WHO and World Bank to benefit from their expertise and financial contribution to build their domestic pharmaceuticalindustry.

REFERENCES
BateDr.Roger(2008),LocalPharmaceuticalProductioninDevelopingCountries. Dara Carr (2004), Improving the Health of the Worlds Poorest People, Health Bulletin 1, PopulationReferenceBureauWashingtonDC. European Federation of Pharmaceutical Industries and Associations (EFPIA), The PharmaceuticalIndustryinFigures2008. EuropeanFederationofPharmaceuticalIndustriesandAssociations(EFPIA),Medicinesfor MankindMedicinesforDevelopingCountries,2007. ExportPromotionCentreofTurkey,PharmaceuticalIndustry2008. House of Commons Health Committee Report 20042005 Session, The Influence of the PharmaceuticalIndustry. IMSHealthMarketPrognosis,March2011 Kaplan Warren and Richard Laing (2005), HNP discussion paper, Local Production of Pharmaceuticals:IndustrialPolicyandAccesstoMedicines. NCB,InFocusReport:SaudiHealthCareServicesSectorReview,December2007. WorldHealthOrganization(WHO),TheWorldMedicineSituation2004. WorldHealthOrganization(WHO),TheWorldHealthReport2008.

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