Dubai: Al Ittihad Drug Store (IDS), a distributor of pharmaceuticals with a wide regional footprint, is getting into direct manufacturing through a facility at the DuBiotech cluster in Dubai. The plant, expected to cost $20 million (Dh73.4 million), is in line for commissioning by mid-2016. Half of the cost of development is to be met by promoters’ equity and the rest through bank loans. The company’s plan is to create capacities for as many as 25 generic drugs over a five-year period once it is commissioned. The intended drugs are primarily for treating lifestyle diseases, gastroenteritis, etc. Negotiations are ongoing with pharmaceutical companies to get the licenses for production.

“It’s not a rarity for a drug distribution company to venture into manufacturing … in India, entities such as Dr Reddy’s Laboratories have had phenomenal success through such upstream integration,” said Ahmad Tabari, Group CEO at IDS.

“From a local market perspective too, the move into production is a key requirement for our group. The time required to get regulatory approval for an imported drug — even generic ones — can be anywhere between one to two years. Local production could mean that gets reduced to three to six months.”

The firm has timed its plans to diversify well. Industry giants have in the recent past picked up sizeable stakes in UAE drug manufacturing operations, like Sanofi did at Globalpharma by buying up Dubai Investments’ 66 per cent stake. (Saudi Arabia and Jordan too have multiple plants making generic medicines.) “There have been other deals in the UAE where an overseas manufacturer has bought in, which means that only Julphar remains as an exclusive local drug manufacturer,” said Tabari. “With our plant getting commissioned, we will be the second such operator with such a tag. That will be a key element in our future strategy.”

Dependency on imports

Market sources suggest more manufacturing capacities could be raised within this industry by privately owned entities. Once optimum levels of production are raised, the local — and Gulf — markets would reduce their dependency on imported drugs, even those that have made the switch to being generic.

The size of the UAE’s health care market is growing, with Raza Seddiqi, CEO of Arabian Healthcare Group estimating per capita spend to be around $1,600-$1,700 annually. “There are many factors in play that should raise the spend patterns, including the provision of mandatory health cover for by some of the emirates, a growing population base and the fact that Dubai has ambitious plans to foster medical tourism,” said Seddiqi.

With the new plant in Dubai, Tabari also has in mind opportunities he could leverage in the other Gulf markets. Currently each of the Gulf markets has its own approval guidelines — and even packaging requirements — for any new imported drug that is introduced.

“Once a drug that we plan to produce at the plant gets clearance from the UAE’s Ministry of Health, it becomes easier to clear all registration requirements for the other Gulf markets,” said Tabari. “The faster processes are absolutely vital in this industry.

“It’s quite rare for a drug registered for sale in one Gulf market not to be cleared by the others too. A localised manufacturing base can easily be translated into a regional advantage — that’s how we see it.”