Medical & Pharmaceutical Products: CHALLENGES OF THE FUTURE [Archives:1999/04/Business & Economy]
January 25 1999
1. Brief History of Medical & Pharmaceutical Trade:
Since the British colonial system started in Aden, on January 19th, 1839, trade between most of the Yemeni hinterland and the United Kingdom started and grew. First, under the East India Company and later through a multiple of channels, exports from London and Cardiff to Yemeni coastal territories increased in all fields of business, especially medical and pharmaceutical products.
By the mid-20th century, relations between the Britain and the Crown Colony of Aden blossomed. The marketing of pharmaceutical products was organized according to British Medical standards and Boards, thus giving Aden a reputable place. Many local traders and companies started to handle the businesses since the 1940’s within the colonial system as general distributors and agents. These include the Orient Pharmacy, A. Besse International Group, and Al-Shifa’a Store, etc.
The Reign of the Black Market:
With the departure of the British system, and given that it was not replaced with any system – let alone a better one, pharmaceutical services began to face a serious problem. The lack of controls and adequate supervision quickly brought in black markets in which quality was no longer subject to any check. The phenomenon of black markets continued to grow during Republican Yemen, and even more so since the reunification of Yemen.
All values and standards were eroded as illegal business deals were concluded. Corruption quickly made its mark on the business, and continues to strangle-hold this sector. One of the most common features of black markets is smuggling in of expired or sub-standard goods, over-pricing, and bad storage facilities. Often, these lawbreakers avoid the payment of any taxes and other dues.
Smugglers usually bring products across borders, without the knowledge of relevant authorities. In other words, their products might threaten the health of users. Often, senior power centers, or fat cats – such as senior bureaucrats, tribal sheikhs, and high-ranking security and military officers- are implicated in the business. They accept bribes in return for which they provide cover and facilitate the crime.
In the import of pharmaceuticals, observers estimate that more than half of the business volume is carried out through smuggling. This puts the nation at risk because the drugs are sub-standard. It also deprives the state from revenue from customs and taxes.
Legal Markets:
The laws of the Republic of Yemen provide equal chances to all citizens dealing in medical, pharmaceutical, and general trade. Under the policy of full and open competition, people engage in the business of their choice.
After May 22nd, 1990, a new system was introduced by republican decrees, which are based on decisions made by the Ministry of Public Health and the Supreme Board for Drugs & Medical Appliances. Four years later, in 1994, the government issued a guideline called the Yemen Drugs Index. This is a medical and pharmaceutical registration for almost all foreign, Arab and local medical goods legalized for importation and sale in Yemen. The guideline offers the following ATC classifications under which all medical goods are imported.
1. Alimentary Tract and Metabolism.
2. Blood and Blood-forming Organs.
3. Cardiovascular System.
4. Dermatologicals.
5. Genito-urinary System and Sex Hormones.
6. Systematic Hormonal Preparations, excluding Sex Hormones.
7. General Anti-infectives, Systematic.
8. Anti-Neo-Plastic & Immunosuppressive Drugs.
9. Musculo-Skeletal System.
10. Central Nervous System.
11. Anti Parasitic Products.
12. Respiratory System
13. Sensory Organs.
14. Various other organs
15. Medical Appliances
Many pharmacists think that, the registered drugs are not sufficient in number, although the number had reached over 12,900 items licensed to be imported until January 1st, 1999, in the Republic of Yemen. Half of the items registered are circulated and available in stock markets.
The Yemen National Drug Company (YEDCO) produces 55 kinds of medicines to meet the needs of the local society with proper-quality treatment and less cost. The number of foreign and Arab manufacturing firms exporting medicine to the Yemeni market is around 320 companies. Yemeni agents and sole distributors are more or less 100 local merchandising firms specialized in importing pharmaceuticals, perfumes, cosmetics and sanitary products. Generic names used in Yemen markets might reach 750, while trade names reached roughly 3200. The United States and Europe provide Yemen with most of its high-quality products and services, while other products come from India, Egypt, and other countries.
Producing Drugs:
Usually, pharmaceutical products gain ground in countries which become famous for chemical laboratory testing facilities and capabilities. The two activities feed on each other and complement each other. It is nearly impossible for backward societies to make a real presence in this field because of the scientific knowledge and skills required. Of course, it is possible to import – a turn-key basis – plants to produce drugs and other medical needs. But that is limited to packaging, mixing and filling of ready-made or nearly ready-made products.
In some cases, some products can be produced under license. This requires continued surveillance and control by the company which holds the trade mark.
In the Republic of Yemen, it is possible to meet up to 20% of local consumption through local manufacture, while the bulk of the requirement will have to be imported.
Distribution of drugs, like any other goods, depend on effective advertisements
Mass Media is a direct and efficient way to make consumers aware of any product. Television, radio, newspapers, and magazines play a great role in consumers’ tastes and orientation. Most people spend their time watching or reading special programs, which change public opinion. Other forms of advertisement use flyers, posters, placards, and even prizes.
Advertisement use exciting and stimulating methods to attract people to a certain behavior. Hence, some medicines are sold more than others, not because they are superior, though they could be, but because of a larger advertising budget.
Intangible Assets:
Usually, intangible assets affect the performance and movement of imported medical and pharmaceutical goods. The most important is the reputation of a company and its products, and the perception of users. As people usually spend a lot of their income on medical needs, many marketing agencies pay enormous attention to the image of the products they sell. Factors affecting the image of a product include:
1. Trade Marks & Patents:
Manufacturers are quite keen on the trade marks and patents of their products. Sometimes, goods are more known by such symbols than by the chemical
components. Manufacturers rarely give exclusive rights to produce and sell goods of their products. Such rights are granted on the basis of lengthy legal arrangements.
2. Copyrights:
The exclusive right to publish and sell a literary, artistic, or musical composition is granted by a copyright. Copyrights are issued by the U.S. government and extended for 50 years beyond the concerned person’s death.
3. Goodwill:
In business, goodwill refers to an intangible asset of a business that is created from such favorable factors as location, product quality, reputation, and managerial skill. Goodwill allows a business to earn a rate of return on its investment that is often in excess of the normal rate for other firms in the same business.
Policy Measures:
Today, the Republic of Yemen needs to take some visible steps in streamlining this sector. The following steps seem appropriate:
1. Ministerial Quality Control:
The government in general, and the Ministry of Health in particular, should approve certain standards for medical products. Though pricing should be left to the market, quality and standards must be guided by certain controls.
2. Prescription Supervision:
Many harmful drugs are sold over the counter. The authorities have to control the dispensing of drugs to the public. All kinds of medical/pharmaceutical products should be obtained from pharmacies by medical prescriptions only.
Of course, this does not apply to ordinary medical products such as Febs, Tussils, Strepsils, Lomotil, etc.
3. Encouraging Competition:
Given that some companies achieve breakthroughs and advanced research results earlier than others, the industry is subject to bottlenecks in competition leading to monopolies or at least oligopolies. It is up to the authorities to smooth this out by encouraging more fair and even competition.
The Supreme Board for Drugs & Medical Appliances in Yemen has the role of ensuring adequate supplies of medical needs.
4. New Projects in Medical & Pharmaceutical Industries:
The medical industry in Yemen is basically limited to YEDCO. Although there are giant importers, they have not ventured into production. I spoke with one key businessman and I barely put the question when he gushed out complaints about corruption and government mismanagement. “Most officials want to rob you by proposing to join as partners simply because they would allow you to proceed with it.”
This explains why many would-be investors have refrained from investing.
5. Low Taxation, Tariffs & Customs on Medical and Pharmaceutical Products:
Medical and pharmaceutical products are essential goods. Hence, the Yemeni government has decided to levy no/low taxes, tariffs, and customs duty on them. This policy takes into account the low income of the Yemeni society and the draconian health needs in the country.
6. Government Health Facilities:
Government health facilities are in poor shape It was a wise decision to empower the private sector to come in and provide the service. Allocations by the government are less than 4% of the budget. This means health is not a high priority, which is puzzling given the needs of society.
Conclusion:
The medical and pharmaceutical sector badly needs better management based on clear policy objectives and priorities. Most of the world gives health-related issues top priority because the growth of any nation depends directly on a healthy and knowledgeable population.
Yemen has a lot of social problems, which cannot be solved easily. Scarcity of resources does not make the job easy. But better management of existing resources will go a long way in helping alleviate the current difficulties.
The Republic can mobilize support from regional and international organizations as well as bilateral donors. In addition, Yemen needs to mobilize the private sector, which can be a source for large investments.
I am optimistic regarding the possibilities for the future. They say, “Necessity is the mother of invention.” As we approach the next millennium, we can improve our medical service delivery system. It is not just a matter of resources, it is a matter of efficiency of the system.
By: Ghassan Al-Ahdal,
Yemen Times
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