As the Saudi pharma market – worth approximately USD 8.2 billion – continues to grow, so does the need for pharma companies to efficiently distribute their medicines inside the Kingdom. Here, we present four of the main trends at play in the Saudi distribution landscape, from market consolidation to centralised procurement, and transitioning business models.
Market Consolidation
Ayman Tamer, chairman of the Tamer Group which owns one of the top 10 distributors, describes the consolidation trend in the Saudi Arabian distribution sector as “extreme,” and notes that the Top 10 players in the market now hold an 85 percent market share.
For Khaled Harb, general manager of Abdulrehman Algosaibi, another leading distributor, this trend is set to continue. “Multinational pharma companies and manufacturers have opted to consolidate in order to optimise their approach in various markets and such a trend will continue in the Saudi distribution industry. As the largest market in the region, with the highest purchasing power, such trends will first come here before filtering down to the rest of MENA.”
Centralised Procurement
The Saudi government has moved to centralise procurement in a single body – the National Unified Procurement Company for Medical Supplies (NUPCO) – to optimise healthcare expenditure. NUPCO is now implementing large-scale deals with distributors, overseeing 80 percent of the Saudi market.
“Although [NUPCO] will probably negatively impact pricing, it introduces efficiency into the system. Dealing with one customer increases efficiency and enhances the entire value chain,” says Fayad Al Dandashi, CEO of Tamer HealthCare. “We are delighted about our relationship with NUPCO and clearly understand the direction in which they are heading.”
Khaled Harb very much agrees, explaining that Algosaibi does not compete with NUPCO, but rather partner with them. “We supply our other partners’ products to them directly. I believe that the future will be an integrated system that includes distributors that facilitate purchases from the public sector.”
New Distribution Models Needed
“The distribution business has been present in Saudi Arabia for many years, initially as a simple warehousing and transport service for multinational companies’ products. However, with the development of the industry in recent years, this traditional model is no longer sufficient,” says Ismail Shehada from the Saudi Chemical Company Holding (SCCH).
The SCCH owns SITCO Pharma, one of the bigger distributors for multinationals with a market share of 11.3 percent and over 30 pharma partners. “Additionally, the Saudi FDA is focusing on ensuring supply security of certain medicines, with six months’ worth of minimum stocks, and this requires a stronger logistics infrastructure to meet the needs of the Kingdom’s healthcare sector,” he explains.
For his part, Algosaibi’s Khaled Harb reveals that “in the old model, few distributors conducted marketing and promotional activities, but this has changed as companies are encouraged to take a business from end to end. Companies in our business often do distribution, sales, marketing, and promotion. Another important change is that most multinational companies now have a trade license which were only given to Saudi companies in the past, so they can now import and sell.”
Algosaibi currently employs over 2,000 people to cover the entire Kingdom and is a strategic distribution partner of hospitals, polyclinics, community pharmacies and a wide spectrum of providers. The company established one of the first nationwide distribution networks for the wholesale of medical and pharmaceutical products and distributes for around 25 pharma manufacturers through four distribution centres, reaching almost all hospitals and 99 percent of retail pharmacies in Saudi Arabia.
“We have different business models including the traditional hosting model in which we provide sales and distribution support to partners. The other model is the end-to-end model in which we take care of promotion and create the demand, and the third is the authorized distributor model where we act as the authorized distributor of companies that already have a legal entity. In addition, we offer third party logistics (3PL),” Harb reveals. “There is healthy competition in the Saudi market. We are all trying to provide top quality distribution services to the end-user.”
From Distributor to Pharma Company
A final trend is for local distributors to transition into fully-fledged pharmaceutical companies, as the Tamer Group has. “Distributors will have to continually reinvent themselves to provide new services and solutions geared to current market realities,” says Ayman Tamer.
One of the oldest in Saudi Arabia, Tamer Group started as a pharmacy in the late 1950s, later moving into consumer healthcare, opening a medical division to distribute for Big Pharma, and finally building a manufacturing site in 1993 via a joint venture with Daiichi Sankyo and Astellas.
“We started by building our promotional capability and hiring medical reps. Today, the group has more than 600 medical reps both for our own brands and those we in-license, a promotional capability that has strengthened our go-to-market strategy, which is especially useful for our smaller partners that are unable to invest in their own teams,” recalls Ayman Tamer. “Our go-to-market reach is 91 percent for direct distribution and 98 percent for weighted distribution, with very little reliance on wholesale.
