BMI View: Bahrain is a developed pharmaceutical market with patented drug spending accounting for over 83% of the total pharmaceutical expenditure in 2011. However, political unrest has dented investor confidence in the country, which also offers limited long-term pharmaceutical market potential at best given its small population of just over 1mn. Additionally, expansion of public sector healthcare provision will require more economical spending by the government, which is expected to prioritise generic drugs.
Headline Expenditure Projections
- Pharmaceuticals: BHD91mn (US$241mn) in 2011 to BHD100mn (US$264mn) in 2012; +9.4% in local currency and US dollar terms. Forecast broadly unchanged from Q112.
- Healthcare: BHD379mn (US$1.00bn) in 2011 to BHD421mn (US$1.12bn) in 2012; +11.3% in local currency and US dollar terms. Forecast broadly unchanged from Q112.
- Medical devices: BHD26mn (US$68mn) in 2011 to BHD28mn (US$74mn) in 2012; +8.9% in local currency and US dollar terms. Forecast broadly unchanged from Q112.
Risk/Reward Rating: In Q212, Bahrain continues sliding down our proprietary Pharmaceutical Risk/Reward Ratings (RRRs) matrix for the Middle East and Africa (MEA). The country's composite score stands at an unchanged 54.9, but Bahrain is now seventh out of the 30 markets surveyed in the MEA region, down from sixth previously. Globally, Bahrain is 42nd out of the 95 markets assessed in total using our RRR model.
Key Trends And Developments
- At the 72nd session of the Gulf Cooperation Council (GCC)'s Health Ministers Council in January 2012, the ministers announced the formation of a unified drug pricing unit for the region, the job of which will be to set pharmaceutical prices for branded drugs across all member countries so the maximum profit margins for distributors and retailers combined do not exceed 45% of the cost, insurance and freight (CIF) import prices. The establishment of a joint GCC drug pricing unit vindicates our view that public regulatory bodies in emerging markets will become increasingly involved in reducing the prices of pharmaceuticals, especially in markets where the state is responsible for a large percentage of total healthcare spending. Furthermore, the growth of health insurers as an interest group in pharmaceutical pricing means there is additional commercial pressure to control drug prices in the region.
- Similarly, in February 2012, it was reported that the GCC is looking to introduce a pan-regional IT system that will link the medical records of prospective workers and expatriates from 11 'labour exporting countries' to the GCC Health Ministers' Secretariat and to the ministries of health in the GCC states. This is part of the regional drive towards better integrating health information systems (HIS's) to improve the quality and efficiency of patient care.
BMI Economic View: Bahrain's longer-term outlook is broadly positive, assuming oil prices do not collapse and political stability is restored. That said, the start of violent unrest in early 2011 raised a number of questions about Bahrain's long-term outlook, with concerns growing that the country's financial services and tourism sectors will suffer heavily. Additionally, we do not see growth returning to the levels seen over 2001-2008 (an average of 7.8%), which will continue to affect political developments and government investment in public projects.
BMI Political View: Bahrain's reputation as one of the most stable countries in the Middle East has been shaken by the unrest since February 2011, much of which developed along sectarian lines. Although Bahrain has a Shi'a majority (65-75% of the country's Muslim population, according to the Pew Forum), the country is ruled by the Sunni minority, led by King Hamad bin Isa al-Khalifa. The Shi'a community have long complained that they are repressed by the Sunnis by being denied political representation commensurate with their demographic weight and equal access to public jobs, housing, and welfare. We envisage democratisation rolling out gradually, though questions remain over whether this path will be entirely peaceful.