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: Government through a rigid registration and price control system that lacks transparency and delays product introduction. Saudi Arabia uses a very simplistic, and burdensome, reference price system. The Government requires the Pharmaceuticals are highly regulated and controlled by the Saudi company to provide the price of the candidate product in as many as 30 other countries, many of which, e.g., Lebanon or Jordan, are not comparable economically. The authorities will typically choose the lowest of the 30 prices as the Saudi price. Additionally, the Saudi Government is currently proposing a new pricing policy which, again, lacks transparency, is not based on the principle of market based pricing, and stipulates compulsory price reductions.
Introduction of new medicines is also delayed, mainly due to unnecessary laboratory analysis by the Saudi Ministry of Health, a requirement even for products approved by the FDA & EMEA.
Protectionism: Saudi Arabia does not allow foreign direct investment; rather, foreign investors are required to partner with local distributors who are the actual legal representatives of the company in the Kingdom. In other words, legally speaking foreign companies has no legal status in the Kingdom though they could have been operating there for many years. There is also a lack of national treatment in public procurement, with the local company, SPIMACO, being treated more favorably than non-Saudi companies. We believe Saudi violates WTO rules on these issues, but as yet Saudi is not a WTO member. We have brought these issues to the attention of the US Government in the context of Saudi's WTO accession negotiations.
Lack of Payment of Government Debt: 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 more than $200 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. The Saudi pharmaceutical market was estimated at more than one billion dollars in 1997. If the Government of Saudi Arabia were to adopt a patent regime consistent with WTO TRIPS standards, the U.S. share of this market would likely expand substantially, even if the market itself did not grow significantly.