Free Pricing in Qatar Sees Drug Prices Increase by over 30%

Prices Rise in Qatar As Controls Are Lifted

Drug prices in Qatar have increased by more than 30% during the first month since the government relinquished controls over drug pricing in the country from 1 April 2011, as revealed by a Gulf News enquiry. Most drug price-hikes have affected branded treatments for non-communicable diseases and antibiotics. The price rises have taken aback many customers, as the authorities had promised that the new law allowing free pricing would produce the opposite effect. Retailers are now free to fix drug prices according to wholesalers' lists, which show the wholesale and retail prices of each medicine, although there is still confusion regarding the implementation of the new system. The Pharmacy and Drug Control Department at the Supreme Council of Health (SCH) has already abolished its pricing section and is not in a position to intervene, and some traders have evidently tried to take advantage of the situation by hiking prices.

Outlook and Implications

The drug price increases in fact follow trends seen in other markets with a high per capita spend on drugs and free pricing, such as the United States and Germany. The same effect was seen in the Chinese market in 2010. The compounding factors for Qatar include its small market size and high income per capita, which mean that manufacturers cannot benefit from economies of scale, hence the need for higher prices, and the high income levels mean that there has been scant demand for low-cost drugs. Previously, there was tight control over the wholesale and retail prices of all pharmaceutical products with the department, giving a 10% profit margin to importers and a nearly 30% margin to retailers. Free pricing has paved the way for these players to increase their margins and counter foreign-exchange fluctuations, especially against the euro, as most of the country's pharma imports are derived from Eurozone countries. These price increases will support previous consumers and pharmacies' reservations that greeted the announcement of the free drug pricing law (see Qatar: 13 October 2010: Qatari Cabinet Approves Law Eliminating Government Control over Pharmaceutical Product Prices), which included the market being too fragile and players in the industry liable to take undue advantage by inflating drug prices by more than 15%.

Drug prices could fall back as more importers, distributors, and pharmacies start to operate in the country following the enactment of a new law liberalising the local pharmaceutical market (see Qatar: 12 October 2010: Qatar Approves New Drug Import Law), driving up competition, as is the case in India. The Qatari market is currently monopolised by some 18 dealers, and all medicines sold for retail are imported and distributed by these agents. Achieving competition levels as high as India is highly unlikely for Qatar given its small market size, however, as well as the population's preference for branded products over generics. Other drug price-lowering mechanisms that are currently in play include the Qatari government's drive to form and secure strategic trade partners for low-cost generic drug distribution and manufacturing under its public health strategy 2011–16. This aims to increase treatment access and affordability in the country through implementing measures to counter the ever-increasing incidence of non-communicable diseases.

In the immediate term, consumers and insurance firms' payments and out-of-pocket expenditure for drugs will increase to levels slightly higher than previously reported. A 2010 Gulf Cooperation Council (GCC) study found Qatar to have the highest drug prices in the region, 10–15% higher than Saudi Arabia and the United Arab Emirates. On the other hand, the number of drugs available on the market could increase as major pharma firms take advantage of the free pricing to counter the restrictive pricing system in Saudi Arabia, and to avoid the price cuts in the UAE. Currently, up to 7,000 medicines are on the SCH's approved list, with only 2,000 actually available throughout the country. With confusion still reigning over how to determine profit margins, and unformed mechanisms to prevent distributors and importers bringing low-quality products into the market, it is yet to be seen what the full impact of free pricing on Qatar's drug prices will be in the medium-to-long term.