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|14 August, 2018

Cheaper medicine?: New generic drug rules in Abu Dhabi will boost market, but wider integration requires public awareness - analyst

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Image used for illustrative purpose. Smiling pharmacist with commissioning machine in pharmacy.

Image used for illustrative purpose. Smiling pharmacist with commissioning machine in pharmacy.

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A recent decision in Abu Dhabi aimed at increasing demand for generic medicine - drugs that use formulas similar to branded drugs, but sold at cheaper prices - needs time to gain public acceptance to achieve the positive impact it is expected to have on users and insurance companies, an analyst has said.

The Abu Dhabi-based Department of Health announced on July 31 that “a new mechanism to mandate dispensing of generic medicines… for patients as prescribed by their doctors and are covered by Health Insurance” would be introduced in a post on its website.

“The new mechanism that will come into effect starting September 1, 2018, is aimed at increasing consumer access to efficient medicines and medical innovation in the Emirate by encouraging the use of generic medications, as well as opening new prospects for broadening local pharmaceutical industry horizons,” it added.

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According to Jose Sreedharan, general manager of the Aster Pharmacy brand, which was founded in the United Arab Emirates, the rule will only be applied in Abu Dhabi and not in other emirates. The Abu Dhabi-based Department of Health is the regulator of the healthcare sector in Abu Dhabi.

“This is not a UAE-wide rule, currently the rule (will be) enforced only in Abu Dhabi… With the new rules, the pharmacist are obliged to dispense generic medicines as prescribed by doctors and the patient may choose to pay the additional cost for branded medicines,” Sreedharan told Zawya in a phone interview on Monday.

According to Sreedharan, whose pharmacy operates in several emirates including Dubai and Abu Dhabi, as well as in other countries such as India and the Philippines, the only change that this rule brings on is that it obliges pharmacies to dispense generic medications when prescribed by doctors. He said that the Abu Dhabi health department has not yet issued many details on the rule, but added that generic medications are already present across the UAE and are offered in Aster pharmacies in different emirates, including Dubai.

Issam Kassabieh, senior financial analyst in the Dubai-based Menacorp financial services company said introducing generics was “a smart thing to do”.

“In the UAE, the healthcare sector here is growing and it needs to mature. So you need to start introducing international practices,” Kassabieh told Zawya in a phone interview on Monday.

Current healthcare expenditure (CHE), which is the total amount spent on healthcare goods and services used or consumed in a given period of time - excluding capital expenditure by government and private firms - is expected to grow to $25.6 billion in 2022 – a 9.6 percent average annual increase from $16.1 billion in 2017, according to a report by Alpen Capital in March.

Knowledge needed

According to Kassabieh, a wider adoption of generic medicine in the UAE could face some resistance from consumers.

“The challenge in the market is to explain the difference between branded and generic medications. I think here a lot of people are not familiar with that and that is definitely a challenge. Maybe at the initial stages, we will not see the positive upside I am talking about as the insurance companies will be pressured by the insured people to cover branded medications, but later on, at a different stage when awareness levels become higher, insurance companies will start introducing more generic medications,” Kassabieh said.

Kassabieh added that with the exception of some expats who are familiar with generic drugs in their home countries, many living in the UAE who have not been exposed to them could resist them at first, so they may need to be introduced gradually. Expats constitute the majority of the 9 million people living in the UAE, according to official statistics.

Greater choice

Kassabieh said issuing more rules to encourage doctors and pharmacies to use generic drugs will also boost the UAE’s healthcare insurance sector as consumers will have access to lower cost options in the market.

“Certainly… When doctors and hospitals prescribe branded medications, they come at a higher cost due to production being done abroad, the shipping costs and patents and other related issues. So the generic medication is definitely much cheaper and surely insurance companies will benefit from that greatly,” Kassabieh said.

The UAE is the biggest insurance market in the GCC, with gross written premiums (GWPs) of 44.8 billion dirhams ($12.20 billion) in 2017, up from 40 billion dirhams in 2016, according to the UAE Insurance Authority’s website. GWPs are the total amount of revenue that insurance companies receive from clients during the lifespan of an insurance contract.

Further reading:
Saudi Arabia healthcare providers show divergent performance as austerity, inexperience bite 
Health check: Oman's insurance sector set for a boost when compulsory health insurance for all is finally rolled out - analyst 
NMC Health to form new hospital group in Saudi Arabia 
INTERVIEW: UAE drug maker Julphar seeks revenue recovery through entry into new markets 
Health insurance for all Bahraini citizens with no financial cap on treatment
INTERVIEW: UAE plans new regulations to boost insurance industry - Insurance Authority head

(Reporting by Yasmine Saleh; Editing by Michael Fahy)
(yasmine.saleh@thomsonreuters.com)

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