Pharma sector to grow 270% in seven years
Ashaba K Abdul Basti
Published Wednesday, February 27, 2008
Pharma World Holdings (PWH) is to invest up to Dh109 million in the next five years to expand its pharmaceutical logistics business.
The pan-GCC storage and distribution firm was formed recently as a 50-50 joint venture between UAE-based Belhoul Group and Saudi's Banaja International Group.
PWH hopes to tap into the Middle East's pharmaceutical market, which is estimated to be worth Dh16 billion and is expected to grow to Dh43.5 billion by 2015.
"The potential of this vast and lucrative market is high compared to our initial investment," said Maher Kheder, Banaja's Group Business Development Director. "The returns are expected to be high and the wise thing for us to do is to increase our level of investment in the coming years."
PWH has invested Dh37m in fixed assets including warehousing facilities at Jebel Ali with a capacity of 10,000 palettes.
The company will channel part of its future investment into establishing a facility in Egypt's free zone that will cater for the North African market. "We know the Middle East and North Africa region well and so we want to focus ourselves there and be the leaders in third-party pharmaceutical logisitics (3PL)," added Kheder.
However, he did not rule out expanding into African countries such as Sudan, Djibouti and Somalia.
"It is not enough to be the GCC's first 3PL provider – our target is to give ourselves a solid foundation that will enable us to withstand any future competition.
There is a shortage of pharmaceutical manufacturing firms in the Middle East so orders are shipped to local distribution agents, who in turn distribute to hospitals and pharmacies. The UAE imports 90 per cent of the drugs used locally.
Kheder said his firm would not compete with existing agents but would complement them by eliminating existing logistics pitfalls and ensuring they make savings.
A research study conducted by PWH revealed problems such as poor stock forecasting coupled with a fragmented supply chain had led to drug shortages on the local market.
PWH will bridge the gap between manufacturers and hospitals by taking orders from customers, processing and shipping medicines, managing product profiles, and carrying out forecasts for each country using high-tech software. Drugs will be stored in state-of-the-art warehouses.
"The pharmaceutical industry in Europe has succeeded because of an effective 3PL system. Our approach in the Middle East will help open the pharmaceutical industry to increased growth by ensuring supply meets demand and will ensure manufacturers enjoy better distribution, with less administration and more cost efficiency. And the 3PL model will help to fight counterfeit drugs."
He said since most of existing agents did not have sufficient capacity to become 3PL providers they would be left to concentrate on distribution, sales, marketing as well as collection.
PWH is already introducing its services to major pharmaceutical companies and is in discussions with giant manufacturers in Europe, US and India.
The pharmaceutical industry is one of the world's largest, with sales exceeding $300bn annually.
The industrial countries, where 14 per cent of the world's population lives, consume medicines worth $240bn per year. Consumption in Arab countries, which contain 4.5 per cent of the world's population, is just $5.5bn.
The UAE tops the list of Gulf and other Arab countries in annual per capita consumption of medicines. Average individual consumption in the Gulf countries is Dh190 while in the other Arab countries it is Dh74.2 – but in the UAE it is about Dh293.
Third-party logistics firm
A third-party logistics provider (3PL) is a company that provides outsourced or "third party" logistics services to companies for part, or sometimes all of their supply chain management function.
Third-party logistics providers typically specialise in integrated warehousing and transportation services, which can be scaled and customised to customer's needs based on market conditions and the demands and delivery service requirements for their products and materials.
Non asset-based 3PLs performs duties such as quoting, booking, routing and auditing, but does not need to own warehousing facilities, vehicles, aircraft or any other transportation assets.
This type of 3PL may possess only desks, computers and freight industry expertise.
4PL is advertised as a refinement on the idea of 3PL, a firm that provides outsourced or "third party" logistics services to companies for part or sometimes all of their supply chain management function.
A 4PL uses a 3PL to supply service to customers, owning only computer systems and intellectual capital to them.