Intellectual Property Protection
Saudi Arabia has had a patent law in place providing product patent protection for pharmaceuticals since 1993. Nonetheless, no pharmaceutical product patents have issued from the Saudi patent office. The lack of issuance of any pharmaceutical product patents in the Kingdom represents a serious barrier to American inventors doing business in Saudi Arabia.
Price Controls and Lack of Payment of Government Debt
The Saudi Ministry of Health is pursuing a draconian price control and reduction policy, completely at odds with its regulations on the sourcing of medicine supplies. The Saudi authorities will accept as legal sources of medicine imports only a handful of North American and Northern European production sites owned and operated by international research-based companies. Yet, as a condition of registration, they also require that companies submit price information from as many as 42 countries, including many developing and least-developed countries, such as Bangladesh and Libya. While prices in these markets may be lower than those in the country of export, it is also true that the Saudi market, with the Government requirements that companies hire a certain number of Saudi nationals, and the overall high cost of doing business in the Kingdom, dictate that pharmaceutical companies doing business in the Kingdom obtain prices high enough to support the scale of investment in the market requested by the Government. Furthermore, the Government has recently begun a policy of arbitrary price reductions and reductions in approved shelf-life of products, creating additional costs of doing business.
Recently, the Saudi Health Ministry has requested global price information on all products currently registered in the kingdom, for the stated purpose of re-registration. It appears the Government is working toward a policy of pricing all pharmaceuticals at the lowest global price, notwithstanding investment levels, and Saudi Arabia's relative income and GDP status.
Finally, since the Gulf War, the Kingdom has experienced varying degrees of cash-low problems. As a result, the Department of Health has stopped remitting payments on pharmaceuticals sold to Government-run institutions. A recent industry estimate indicates that as much as $225 million in overdue receivables are held by international pharmaceutical companies. The combination of arbitrary price reductions, government mandates, such as local hiring that drive up the cost of business, and lack of payment for sales made to the Government, are creating a rapidly deteriorating commercial environment in Saudi Arabia.
Potential Exports/Foreign Sales
It is not possible to provide a reliable current estimate of the potential market size for PhRMA member companies in Saudi Arabia, if current deficiencies were rectified. However, arrears to U.S. pharmaceutical companies are in excess of $200 million.
For all the aforementioned reasons, PhRMA believes that Saudi Arabia should be listed as a Watch Country under Special 301 in 1999.