Israel Pharmaceuticals and Healthcare Report Q2 2008

Israel's pharmaceutical market was estimated to be worth US$1.52bn in 2007 and should grow steadily at a little below 5% year-on-year (y-o-y) over the forecast period to reach a value of US$1.88bn by 2012.

The market is relatively mature, with per capita expenditure on pharmaceuticals US$210 in 2007 - high by regional standards.

Despite being home to the world's largest generics drugmaker, Teva Pharmaceutical Industries, Israel's high per capita drug spend and Western disease profile ensures patented drugs are the most valuable sector of the pharmaceutical market Local industry will not be overly concerned about limited domestic drug market growth and regional isolation, since the major players already have well established exports to developed markets of the US and Western Europe. Teva' US sales are 15 times the value of its home market sales.

The domestic pharmaceutical manufacturing industry remains focused on generics. However, Israel's traditional strength in research offers the biotech industry a good base from which to grow. There are certainly promising signs, with a healthy number of biotech start-ups emerging to take advantage of publicly-funded research. However, the issue of finance continues to dog the sector, despite the government's US$100mn Bio-Plan for 2000-2010, making it challenging for start-ups to steer their innovations through clinical trials to market. The problem has been compounded by the wide berth given to Israel's biotech industry by most multinationals.

In BMI's updated Business Environment Ratings, Israel continues to be held back by its regulatory environment. The country ranks equal sixth out of 14 Middle East and Africa (MEA) countries surveyed, alongside Jordan. While there has been talk of an overhaul of the country's intellectual property (IP) laws from the government, with no timescale set for changes and powerful opponents from the generic manufacturing sector, BMI does not expect any changes in the short-term. For this reason, we expect Israel to once again feature on the USTR's Special 301 Report Priority Watch List when it is republished in 2008.

Government reimbursement policy took a step forward with the 2008-2011budget including an increase in spending. However, industry association Pharma Israel continue to complain that an opaque assessment process leaves it in the dark on the cost effectiveness measure used to determine whether a new drug will be included in the national formulary reimbursement list.