Less than 10 per cent of goods in Egypt’s chemists are imported. However, the £E 2,000 million ($650 million) Egyptian pharmaceutical market remains dominated by large multinational companies. Four of the top five local pharmaceutical manufacturers are joint ventures with an international partner, according to the latest figures released by International Marketing Statistics.
More than 50 per cent of the pharmaceuticals sold during the 12 months up to 31 March 1994 were produced by 15 local companies. Bristol Myers Squibb Egypt was the market leader, followed by the recently privatised Egyptian International Pharmaceutical Company (EIPICO). Ciba-Geigy, Pfizer- Egypt and Hoechst Orient were ranked third, fourth and fifth respectively.
Bristol Myers Squibb Egypt took 8.1 per cent of sales during the 12-month period. Total sales in the market were $654 million, of which Bristol Myers took $52.9 million. EIPICO had a significantly smaller 5.3 per cent share with sales of $34.2 million. Ciba-Geigy’s sales were $29 million, Pfizer-Egypt’s $25.6 million and Hoechst Orient $23.2 million. The private sector purchases about 80 per cent of the total pharmaceuticals sold, with the remainder going to public institutions.
Over the past decade, local production has increased as a number of local manufacturing facilities have been built, cutting imports by about 60 per cent. Import sales of £E 140 million ($41 million) now account for only 7 per cent of the market. Imports are restricted to breakthrough products and those for which the necessary advanced production technology is not available locally. These include insulin, cytotoxic drugs, infant formulae and vaccines.
Local manufacturers remain confident that they will maintain more than 90 per cent share of the market. Despite the government’s recent moves to liberalise trade, the regulations restricting the import of pharmaceuticals are still in place.
The main threat is seen in the government’s control of pricing. The 1991 cost-plus pricing policy was received positively, yet the government has been reluctant to introduce regular price increases. One local producer has described regulations as showing a ‘realistic and more flexible pattern’, but there is little expectation that any new pricing formulae will be forthcoming before 1995. A price rise was announced in December 1993, the first for two and a half years, yet by April 1994 the government had reduced the original increase by half.
While sales prices are static, the steadily increasing production costs are squeezing profit margins. One major reason for increasing costs is the heavy dependence on the import of raw materials. This is subject to a 10 per cent customs duty, compared to only 5 per cent for the import of finished pharmaceutical products. A further cause for concern is the introduction during the last year of a sales tax of 5 per cent on all locally produced pharmaceuticals.
Many companies have embarked on refurbishment and development plans to position themselves for the projected 8-15 per cent growth in the market. However if the government fails to put up prices, companies will be pressed to meet the costs of these projects as well as their production costs. While imported goods remain more expensive, they are easily available and are subject to low customs duties. Any curtailment in local production due to lack of financing could be the moment that pharmaceutical imports regain their position on the chemist’s shelf.