An Open Mind

How has the local healthcare industry evolved over the history of Gulf Drug?

The country is still young. If you compare the UAE to other countries of the same age, the UAE is far ahead of the game. However, if you compare it to the Western world, there is still a lot of room for improvement. There have been investments from both the government and private sectors, but the investment is not enough. You can get the best equipment and have the fanciest hospitals, but you still require the people to manage them and the doctors to provide healthcare. There are two aspects: one is the products and devices a medical professional uses, and the other is the knowledge. The knowledge base takes time to build and will take a few more decades to be solidified. A knowledge base cannot be acquired through money; it has to be built over time.

What are your core services?

We are in the top 10 pharmaceutical distributors in the UAE. We are in the top three medical equipment agents and service providers in the UAE and also the top three medical consumables providers in the country, including one of the largest turnkey project providers in the country. From the moment a hospital is planned, the contractor builds the basic infrastructure for the hospital, which is the cement and steel, and we do the rest; pretty much everything from communications to the operating theaters, recovery rooms, and even the waiting lounges.

As a local company, how do you compete with huge, multinational enterprises offering the same services?

There are two factors. First we try to understand the local market. Second we aim to fully understand the agency laws, which protect local companies. This legislation is good and bad at the same time; the country is not that large, and the law protects local businesses from being overtaken by the globalization movement and international ownership, which local companies have no chance to compete against. The law is bad because many newcomers in the market have a difficult time, although those who have a good concept or product usually succeed. In the medical field, the investments required to bring a product to the market are usually very high, and the competition is so fierce that the returns are limited. In pharmaceuticals, we gross anywhere between 8% and 10%. Our margins are set by the Ministry of Health and are pegged once every year or two. In this way, we absorb the currency fluctuations. This means that at certain stages it is possible to lose the whole gross margin, and we would have to pay from our pockets to provide medicine to the market. Out of social concern, this is one good thing about being a local company; we have a social responsibility to make sure this medicine is available on the market because it can save lives.

What are the benefits of controlling the cost of pharmaceutical products?

One aspect is for the expatriate community not to pay too much for their medication, but at the same time it is for those UAE citizens who choose not to go to the government hospitals, where UAE citizens get their medication and healthcare for free. Otherwise, UAE citizens have to acquire medication at a higher cost if they do not carry private healthcare insurance. Price controls help the consumer. However, certain medications are not worth bringing to the market for multinational companies, since the margins are very slim, and the competition is tough. Most of the medication in the country has a generic version, and it is up to the consumer to choose which he or she wants to use. With branded medicines, the customers knows that the product is 100% what it says it is, but generics could be made in Asia or Eastern Europe; we do not guarantee their effectiveness.

How does the market in the UAE compare to the surrounding markets?

Every country protects its own pharmaceutical market by default. The UAE is more open-minded than most GCC countries. For example, in the UAE a Qatari can own a pharmaceutical drugstore. A UAE citizen may not own a drugstore in Qatar, so the UAE is much more open-minded when it comes to business than most of its counterparts in the region, and its laws are ahead of most other countries. The only country that would be comparable would be Oman, but it’s not a large market compared to the UAE or Kuwait. The medicine in UAE is 30% cheaper than in Kuwait, on average, although Kuwait is on the same level as the UAE when it comes to oil exports and GDP.