Industry Trend Analysis – Pharmaceutical Forecast Upgraded Despite Cost-Containment Measures – OCT 2015
Middle East Africa September 2015 / Bahrain / Industry
BMI View: Bahrain’s government will continue in its attempts at containing the rapidly expanding cost of healthcare. Private sector engagement and increasing generic substitution will continue to be employed, although government spending on the sector will continue to increase given its importance in social stability.
The availability of new pharmaceutical trade data from UN Comtrade has prompted a revision in our market forecast for Bahrain. Confirmed data now values Bahrain’s pharmaceutical market at BHD122mn (USD324mn), up from our previous value of BHD114mn (USD302mn). Our growth trajectory remains unchanged but by 2024 we now forecast the market will reach a size of BHD246mn (USD653mn), up from our previous estimate of BHD229mn (USD609mn).
Pharmaceutical expenditure growth will slow over the next five years to a 7.5% compound annual growth rate (CAGR), down from the previous five year CAGR of 20.1%. This will be a result of the unification of drug prices throughout the Gulf Cooperation Council (GCC), resulting in lower prices in Bahrain, as well as the enactment of cost-containment measures and increasing generic medicine consumption.
Bahrain’s Minister of Health, Sadiq AbdulKarim Al Shebhabi confimed that a total of 2,852 medicine prices have been cut since June 2014 when the first phase of the unification process was initiated. Throughout the GCC, generic drug penetration has been traditionally low given the preference for branded products among payers, prescribers and consumers. However, generic substitution is being increasingly encouraged by governments in order to contain rapidly rising healthcare costs, particularly given its weak fiscal position in light of lower oil prices. BMI‘s Country Risk team forecasts government consumption to grow by 2.9% in real terms in 2015 and 3.2% in 2016 – sharply slower than the annualised rate of 11.6% between 2009 and 2013.
The financial burden of the healthcare sector is being switched to the private sector with private health insurance compulsory for private sector workers since the start of the year. Despite the implementation of cost-containment measures, public healthcare spending will continue to increase given the importance of social services expenditure in maintaining political stability. Funding of BHD234mn (USD620mn) in 2015 and BHD239mn (USD634mn) in 2016 for the healthcare sector have been announced in the 2015-16 draft budget, up from BHD219mn (USD581mn) in 2014.
Government Spending To Increase Bahrain: Healthcare Sector Allocations (BHDmn)
f = Draft Budget Allocations. Source: Ministry of Health
Revenue Earning Opportunities
Bahrain’s pharmaceutical market is almost entirely reliant on imports, with Germany, France, the US, the UK and Switzerland the top suppliers. This most likely represents higher value branded medicines, with patented medicines continuing to dominate the market by value at 58% in 2014. The uptake of compulsory health insurance and increased government spending will continue to drive growth within the pharmaceutical market, with drugmakers viewing Bahrain as a small, but attractive market.