The government of Saudi Arabia in cooperation with the Saudi General Investment Authority ("SAGIA"), the Saudi Food and Drugs Authority ("SFDA"), the Ministry of Labour ("MoL"), and the Ministry of Health ("MoH") are working recently to find solutions to overcome obstacles facing pharmaceutical business sector in Saudi Arabia.
It is known that SAGIA towards the end of 2016 and earlier on 2017 has started issuing trading license to a number of international pharmaceutical companies ("Pharma Cos") through a 100% structure or Joint Venture. Whilst some of Pharma Cos are yet to consider applying for the trading license and still operating through their Technical and Scientific Offices ("TSOs") which are generally in practice when it comes to marketing, may cause some confusion issues from an employment point of view, and as a result of such confusion, the MoL has alerted the market as such practice would result in violating relevant laws and in particular Residency Law and Labour Law.
The purpose of this article is to focus on the Pharma Cos who are still doing business through their TSO only. There is no doubt that the main concern for such companies is the marketing employees who are technically under the agent's or distributor's sponsorship but controlled in a certain way by the Pharma Cos. There was a huge demand and pressure recently from Pharma Cos to convince SAGIA and SFDA to allow them to conduct marketing activity through their TSOs. However, because TSO is not allowed to conduct marketing activity per se, Pharma Cos are not interested to increase the number of their TSO employees since they cannot promote or market their products.
As a result of the coordination the concerned authorities, the scope of TSOs in terms of marketing has been defined, where marketing can be conducted but should limited to the purpose of identifying the products scientifically and technically and is not meant for the sales purpose. SAGIA has given a green light for Pharma Cos to start transferring the employees who are under the agents or distributors sponsorship to be under the TSO name, with a deadline until December 2017. TSOs usually has around 10 number of employees, however, they are now welcome to increase that number up to 50 employees or even more by submitting a request to SAGIA. It is very important for Pharma Cos to note that conducting marketing of their products to the TSOs would be subject to some arrangements and approval of the Saudi Commission for Health Specialties ("SCHS").
Based on these foregoing significant developments, we would expect a more balance shift in transferring the marketing employees, from the agents and distributors to the TSOs, which we can consider as an excellent step to correct the situation of pharmaceutical business in Saudi Arabia in terms of compliance and regulatory.