The current year has witnessed an unprecedented growth in import substitution policies for pharmaceuticals in the Middle East region. Some of those initiatives are merely just a reaction to a difficult economic situation; however, others are a part of a gradual long-term strategy to boost local production of pharmaceuticals and reduce dependence on drug imports. The diversity in the type of reasons behind those initiatives was also reflected in the different paces by which import substitution policies are being pushed ahead in those countries and the nature of implementation.

In Egypt, the Ministry of Health and Population (MoHP) launched an ambitious project that aims to produce oncology drugs to replace a significant portion of the mostly-imported oncology pharmaceuticals. A new government-owned company, expected to start production in 2018/19, aims to reduce spending on imported oncology pharmaceuticals by almost 50% to USD900 from the current budget of USD1.8 billion. No further information has been disclosed regarding the know-how provider of the intended treatments, although some of the major Indian companies are believed to be linked to the project. The initiative was launched following the realisation that the current level of healthcare spend cannot be maintained, not to mention increased, after the local currency lost more than 100% of its value. The government has allocated a budget of USD50 million as a seed investment for the new project despite financing challenges, which increases the possibility of the private sector’s participation in the company in order to secure additional funding for the project to match its relatively large scope. According to the available information, the company will involve some key governmental agencies, such as the Ministry of Defence and Military Production, which reflects the importance of the project for the administration and the strong commitment to achieve the target. In a related development, MoHP decided to accelerate approvals for locally-made drugs, which would have taken years to accomplish prior to the new decision. Its another step that reflects a macro-level strategy that intends to replace imported pharmaceuticals with locally-made products in the long term.

In Turkey, the government decided to stop the reimbursement of 54 main drugs from 2018 unless the manufacturers agree to shift towards domestic production. The targeted drugs are products with a relatively high market share and already have several equivalent locally-made products. The combined annual revenues from those drugs are equivalent to TL2 billion (USD547 million), which is approximately 9.5% of total revenues in the Turkish pharma market. The initiative seems applicable on the ground as those treatments already have locally made alternatives and some manufacturers have already complied with the policy, launching new initiatives, some of which in collaboration with local companies, to start local production.

The import substitution policy came after the value of the local currency plunged partially due to the decline in foreign currency earnings as the number of European tourists visiting Turkey fell by more than 50%including tourism-related revenues. However, Turkey has been consistently taking steps to encourage local industries, including the pharmaceutical sector, although the economic pressure has indeed accelerated those steps.

Another example of how governments approach import substitution differently is Saudi Arabia. Although the situation in Saudi is relatively quiet, this might be the calm before the storm. Saudi has already laid out a plan aiming to boost its industrial capabilities, including medical industries, as part of its National Transformation Programme. Consequently, it is only a matter of time before Saudi, the largest pharmaceutical market in the Gulf and one of the key markets in the Middle East, decides to takes more steps to substitute imported drugs with the newly developed locally-made treatments, especially after a decree requiring mandatory INN prescribing was passed in July!

In the UAE, the Ministry of Health and Prevention (MoHP) will lead a major collaboration between local and multinational pharmaceutical companies to localise the production of 160 innovative medicines. The participating companies will receive a ‘pricing incentive’ that would allow selling those treatments in the UAE at their equivalent prices in their country of origin. UAE is also targeting to attract foreign investments towards its main industrial free zone ”Jazfa”, with a target of doubling the number of pharma factories by 2021. The relatively stable economic situation in the UAE and the moderate size of the country’s population have meant no ‘harsh’ policies to force import substitution were introduced – at least for the time being!

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For Algeria, substituting drug imports by locally-made drugs seems to be the only choice left for the government, after a significant decline in foreign currency sources, following the plunge of revenues from oil exports that comprise more than 60% of the country’s income. The country has already included pharmaceuticals into the list of products that require a government licence for import. However, the relatively limited domestic pharma industry, mainly focussed on generics manufacturing, cannot meet the large demand of a country with a population around 40 million people. Consequently, the government seems not to have enough tools to enforce a strict import substitution policy, which created major drug shortages in the market as there weren’t enough drugs produced locally to meet the demand, especially in certain areas such as oncology and orphan diseases. Having said that, Algeria has already started building around 15 pharmaceutical plants and is expected to gradually introduce additional restrictions on drug imports, currently equivalent to USD1.6 billion, in the future.

Another example for the sudden introduction of an import substitution policy is Sudan. The country issued a full ban for all drugs with locally-made equivalent products, with no prior warnings, in August! Despite the government’s promises of gradual implementation, the new policy has triggered major shortages in hundreds of pharmaceuticals, causing the black market to flourish! The policy, however, is believed not to be a part of a long term/structured plan for import substitution, as it was merely launched to relieve the huge pressure on the Central Bank, which is unable to provide the foreign currency needed for drug imports.

To sum up, import-substitution initiatives in the ME are a natural result of a difficult economic situation reflected in a notable imbalance in the imports/exports scale. However, the scope of the policies also reflects ambition of some countries in the region to become leading players in pharmaceutical production. A common theme in the vast majority of those initiatives, however, is the ‘strong’ determination of all governments to take the necessary measures to achieve a notable level of import substitution as soon as possible. This, in return, puts pharma multinationals in a time-sensitive situation, where they have to plan their next move carefully, as their investments in this turbulent region are increasingly becoming at stake!