Author byline as per print journal: Ali M Alhomaidan, PhD; Ibrahim A Aljuffali, MSc, PhD; Fahad S Alnutaifi, MHEcon, MPH; Nasseruddeen A AL-Howaimel, MSc
Submitted: 7 January 2016; Revised: 17 March 2016; Accepted: 19 March 2016; Published online first: 31 March 2016
Pharmaceuticals are one of the vital products that are subject to regulatory control in Saudi Arabia. The reason for regulation is due to the fact that pharmaceuticals are one of the most important elements of many countries’ healthcare programme spending and one of the central factors contained in the citizen spending basket, especially for low-income families, which is reflected on the health of the population . A system that installs pharmaceutical prices could be considered as an interference with the economic concept that says that the price of the commodity is determined by supply and demand . It can also be seen as a hindrance to innovation . However, it is not patients who decide what pharmaceutical they will use based on information available to them, whether it is for its properties, advantages, or price. Rather, patients depend on the physician or pharmacist to select the prescribed pharmaceutical based on several factors that direct their choice and affects their decision. Therefore, patients are at the mercy of their doctor or pharmacist . Generally, prices are negotiated by governments to meet policy objectives and by pharmaceuticals manufacturers to attain profitability.
Although it is easy to calculate the cost of manufacturing and marketing of a drug, it is difficult to calculate the total cost of getting a pharmaceutical product to the market. Therefore, the pharmaceutical companies price their products by allocating the cost distribution of all the elements involved in getting products to the market including research and development, production and quality control, administrative expenses, marketing, and distribution and retailing. However, by looking at pharmaceuticals prices and seeing differences in price between countries, one can argue that there are other factors influencing price than the total cost of manufacturing and selling these products. Examples of these factors include:
Due to high prices of pharmaceuticals worldwide, which have led to increased economic pressure on countries, countries are trying to control prices through regulation and by encouraging commercial competition among pharmaceutical companies by making way for the marketing of generics and biosimilars. In the face of these developments, countries found themselves obliged to intervene to determine the prices of pharmaceuticals in order to adjust public spending on pharmaceuticals and encourage local pharmaceutical industry growth in a way that ensures the availability of effective and safe pharmaceuticals in their markets. Countries have historically controlled prices of pharmaceuticals through one of the following options:
In 1935, the law of pharmaceuticals use was issued by the Royal Decree No. 157/1/18 . The law regulated the practice of pharmacy and the opening of retail pharmacies in Saudi Arabia. The system for pricing of pharmaceuticalswas first issued by Royal Decree No. 12 on 1953, which required the determination of pharmaceuticals prices and set a 15% profit for each of the wholesaler and retail pharmacies. Royal Decree No. M/37 on 1961 was then issued which raised the proportion of profits allowed for the sale of pharmaceuticals by retail pharmacies to 17% of the value of their purchase from the wholesaler. Profits specified for wholesalers remained the same without any increase or decrease of 15% of the value of the imported pharmaceuticals. Royal Decree No. M/37 also required wholesalers to put pricing stickers on every imported pharmaceutical .
This continued until 1977 when the Ministerial Decree No. 7 issued the regulations for the registration and pricing of pharmaceuticals . Registration and pricing of pharmaceuticals were entrusted for the first time to the Registration Committee at the Ministry of Health. The committee was to use the following when estimating the price:
Regulations also required to provide a number of reference pricing certificates when filing for registration such as certificates describing the selling price to the public in the country certified by the source of the concerned governmental authorities and from the Saudi embassy there or its substitute .
In 2004, the law of pharmaceutical products and establishments was issued. It determined in article XIII the proportion of profit is calculated for retail and wholesalers according to Table 1. One of the objectives of this law was to encourage the marketing of cheaper pharmaceuticals with smaller packages by giving higher margins for products at Saudi Riyals 50 or cheaper . In 2008, the responsibility for licensing and pricing of pharmaceuticals was transferred from the Ministry of Health to the Saudi Food and Drug Authority (SFDA). The pricing system was then reviewed by the Registration Committee. A draft executive regulation for the law for pharmaceutical establishments and products was issued and approved by SFDA’s Board of Directors in 2011 and is still in effect . The new system included rules for the first time that allow for lowering innovative pharmaceuticals price by 20% when SFDA license its first generic pharmaceutical. The new system also encouraged the marketing of generic pharmaceuticals and the transfer of manufacturing to the Kingdom. It also gives permissions to the Registration Committee to take required measures to ensure the availability of pharmaceuticals in the Saudi market.
A Full Control in the price system is applied to biosimilars in Saudi Arabia. Based on regulatory pricing requirements, the manufacturer is to provide a prices certificate certified by the competent authority in the country of origin and authenticated by the Saudi Embassy that contains information on the following:>
We will use Remsima, a biosimilar for Remicade (Infliximab), as an example. The company submitted pricing certificates showing the ex-factory price at Saudi Riyals 1,126.029. The cost of insurance and freight was added. Since the ex-factory price is more than Saudi Riyals 200, only 10% is added for the wholesaler profit, and another 10% is added for the retail profit when it is sold to the public. The final price is Saudi Riyals 1,362.50.
Factors influencing pricing of pharmaceuticals in general as well as approaches to pharmaceuticals price control worldwide were discussed in this paper. Pricing of biosimilars in Saudi Arabia and the system used for pricing these products was presented. Remsima was used as an example to illustrate the pricing system. Biosimilars are priced using the Full Control in the price system. Remsima was the first biosimilar registered in Saudi Arabia for Infliximab. The reference product, Remicade, is priced at Saudi Riyals 2,127.95 whilst Remsima is priced at Saudi Riyals 1,362.50, which is about 36% cheaper than Remicade. Applying this pricing system should reduce the price of biosimilars in Saudi Arabia when compared to innovator reference products, allowing for more patient accessibility and affordability. However, it may put pressure on biosimilars manufacturers due to the high costs associated with their development. Hopefully in the long term, this can be negated with more manufacturers entering this niche market. In addition, there is clarity now compared to a few years ago when the regulatory pathways worldwide were not clear regarding data requirements for biosimilars. Now the requirements are clear and some of these products are well characterized. Still, I think we will yet have a Hatch-Waxman moment for biosimilars where the regulatory requirements are streamlined allowing for more competition between manufacturers and for more investments. As it stands, biosimilars are still a high-risk investment.
Competing interests: The authors have no affiliations with or involvement in any organization or entity with any financial or non-financial interest in the subject matter discussed in this paper.
Provenance and peer review: Commissioned; externally peer reviewed.
1. World Health Organization. Zerda Sarmiento A. Alternative drug pricing policies in the Americas. Health Economics and Drugs DAP Series No. 1. 1995 [homepage on the Internet]. [cited 2016 Mar 17]. Available from: http://apps.who.int/iris/handle/10665/59412
2. John Lu Z, Comanor WS. Strategic pricing of new pharmaceuticals. Rev Econ Stat. 1998;80(1):108-18.
3. Frank RG, Salkever DS. Generic entry and the pricing of pharmaceuticals. J Econ Manag Strategy. 2004;6(1).
4. Danzo PM, Ketcham JD. Reference pricing of pharmaceuticals for Medicare: evidence from Germany, The Netherlands, and New Zealand. Front Health Policy Res. 2004;7:1-54.
5. Dickson M. The pricing of pharmaceuticals: an international comparison. Clin Ther. 1992;14(4):604-10.
6. Saudi Food and Drug Authority: Pharmaceuticals pricing system 2011:Annex 2 page 14.
7. Saudi Food and Drug Authority: Executive regulation for the law for pharmaceutical establishments and products 2011:Page 13.
8. Kraus L, Transnat’l V. The interaction of international reference pricing and parallel trade in the pharmaceutical industry. Medication misadventures. 2004.
9. International Federation of Health Plans. 2013 Comparative price report: variation in medical and hospital prices by country [homepage on the Internet]. [cited 2016 Mar 17]. Available from: http://www.ifhp.com/
10. Royal Decree number 157/1/18: The law of pharmaceuticals use 1935.
11. Royal Decree number 37/M. 1961.
12. Ministerial Decree No. 7: The regulations for the registration and pricing of pharmaceuticals. 1971.
13. Royal Decree number 31/M: The law for pharmaceutical establishments and products. 2004.
14. The Saudi Food and Drug Authority: Executive regulation for the law for pharmaceutical establishments and products 2011.
Author for correspondence: Ali M Alhomaidan, PhD, Executive Director for Products Evaluation, Saudi Food and Drug Authority, 3292 North Ring Road – Al Nafal Unit (1), Riyadh, Saudi Arabia
Disclosure of Conflict of Interest Statement is available upon request.
Copyright © 2016 Pro Pharma Communications International
Permission granted to reproduce for personal and non-commercial use only. All other reproduction, copy or reprinting of all or part of any ‘Content’ found on this website is strictly prohibited without the prior consent of the publisher. Contact the publisher to obtain permission before redistributing.
Source URL: http://gabi-journal.net/pricing-of-biosimilars-in-saudi-arabia.html
Copyright ©2022 GaBI Journal unless otherwise noted.