Jordan Pharmaceuticals and Healthcare Report Q4 2009

BMI's new Pharmaceutical & Healthcare Report for Q409 forecasts that the value of the Jordanian drug market will increase from around JOD263mn (US$370mn) in 2008 to JOD369mn (US$519mn) by 2013.

This represents a compound annual growth rate (CAGR) of around 7.0% (in both US dollar and local currency terms), which is broadly in line with the country's expected GDP development. The main drivers of this pharmaceutical expenditure growth include the planned expansion of health insurance coverage, changing epidemiological profile (with a rising number of chronic patients), the construction of new healthcare facilities and the strengthening of both intellectual property (IP) regulations and trade relations.

In BMI's Business Environment Ratings Table for Q409, Jordan improved its position in the Middle East and Africa region from eighth to fifth, out of the 17 regional markets surveyed. However, Jordan's overall drug market size is limited by its 6mn population; the recently introduced unified purchasing system for medicines used by the public and military sectors and modest per capita spending on pharmaceuticals.

Nevertheless, the country has considerable commercial potential in regional terms, boosted by friendly relations with the West and growing Arab regional co-operation. An additional draw is the authorities' success in fighting counterfeiting. In fact, July 2009 local press reports indicated that the value of fake drugs dropped from JOD16mn in 2007 to just JOD1mn in 2008, as a result of improved monitoring and public awareness systems.

Around the same time, Jordanian authorities were in the process of finalising a trade agreement with Iraq, with the aim of exporting pharmaceuticals there. An increase in exports is likely to benefit the country's major players most, especially Hikma. However, around the same time, local news sources reported that pharmaceutical exports from Jordan experienced a setback in Q109 compared with Q108. Export revenues were down by 22.6%, largely due to falling demand in the US, although we expect drug exports to recover in the coming years. Indeed, intense competition among domestic generics firms and a small domestic market is forcing many to look overseas to generate revenues, with such processes encouraged by the improvement of domestic IP regulations.

In the retail pharmacy sector, one of the most recent trends is the emergence of pharmaceutical franchises.

Pharmaserve is the first such national group created by independent retail stores, which receive logistical support, including an electronic ordering system and inventory management. Other developments include the announced four-hour strike to be staged by the Jordan Pharmacists Association (JPhA) in renewed protest against the 4% sales tax on medicines. The tax, which has been in place since 2002 for pharmacies with a turnover of over JOD75,000 (US$105,000), will reportedly lead to further price increases, thus discouraging sales. Nevertheless, the Sales Tax Law is unlikely to be scrapped, even though the government only receives around JOD4mn (US$5.6mn) per annum from the levy that affects a third of approximately 1,800 retail pharmacies in the country.