The pharmaceutical and healthcare sector in the GCC region has over the past few years enjoyed one of the most robust growth rates in the world with an average annual growth considerably larger than that of other regions.
This growth has been driven by the expanding middle class (which has more income to spend on non-prescription healthcare products) and the continued importance placed by local governments on well-funded healthcare programs.
This growth is also partly driven by the use of the GCC region as a base for expansion into nearby developing markets such as Africa and this is particularly true of manufacturers of generic drugs.
The rapid economic development in the region has also given rise to related diseases such as obesity, diabetes and cardiovascular disease. The region has a high prevalence for rare and genetic diseases. Whilst this has a negative impact on the countries and populations affected, both of these factors give the pharmaceutical industry further opportunities to grow. Despite this stellar growth, low oil prices have and will inevitably continue to affect government healthcare budgets and private healthcare programmes meaning that large price reductions across multiple therapeutic areas are to be expected. Added to this is the fact that the regulatory authorities are continuing to become more sophisticated and likely to continue to expand the regulatory regime for healthcare products.
Despite these uncertainties, the GCC continues to offer exciting opportunities for the pharmaceutical industry. In this article, we set out some of the key considerations for companies looking to expand into the region with a focus on manufacturers of pharmaceutical products who do not have a legal presence in the GCC.
Commercial Agency Laws
In general, an overseas manufacturer wishing to import pharmaceutical products into a GCC country must either have a legal presence in the relevant territory or must appoint a local agent or distributor which is approved by the regulatory authorities to import pharmaceutical products into the territory on behalf of the manufacturer.
Many of the jurisdictions across the MENA region have specific laws which give registered commercial agents certain rights as set out in those laws, the most important of which tends to be the agent’s right to compensation on termination of the relationship with their principal. In general, these commercial agency laws only apply when the agent is appointed on an exclusive basis. It is not uncommon for distributors of pharmaceutical products to claim that they must be appointed on an exclusive basis in order to comply with local pharmacovigilance requirements. If this is true, the distributor could seek to register the distribution agreement with the authorities and thereby gain rights under the relevant commercial agency law.
Using the UAE as an example, the UAE commercial agencies law will only apply if the agency agreement between the agent and principal is registered in the Ministry of Economy’s commercial agencies register. In order for an agency agreement to be registered with the Ministry, it must meet the minimum qualifying criteria being:
- the agent must be a UAE national
- or an entity that is wholly owned by UAE nationals;
- the agreement must grant exclusivity over all or a part of the UAE;
- the agreement must be notarised and attested by a notary public in the jurisdiction in which it is signed and authenticated for use in the UAE; and
- the agreement must be in Arabic, or in dual language form (e.g. English and Arabic).
Principals should note that, in the UAE, a registered commercial agent can prevent the principal’s products from being distributed in the territory for which they have exclusive rights.
As in other jurisdictions, it is not possible to place a pharmaceutical product on the market without first having registered that product with the relevant authorities (subject to limited exceptions which we do not explore further in this article).
In the UAE for example, the application must be prepared and submitted in the joint names of the manufacturer who holds a marketing authorisation for the product in its home jurisdiction and the local representative. The local representative can be the distributor of the products as long as: (i) it has the ability to act as the authorised representative in relation to the manufacturer’s obligations and responsibilities; and (ii) it has been appointed by the manufacturer to act as authorised representative. The local representative will be responsible for post-market surveillance of the product and for dealing with the relevant authorities in relation to the product. Alternatively, the manufacturer can appoint a separate local representative under a suitable contract.
The precise paperwork which is to be submitted as part of the application will vary but in general, the documentation to be submitted with the application may include:
- a certificate stating that the products have been manufactured in conformity with the laws of the country in which they are manufactured;
- a ‘free of sale’ certificate;
- a certificate stating that the products can be manufactured and exported from the manufacturing country;
- documentation relating to the site at which the products are manufactured;
- documentation detailing the approved use of the product;
- documentation detailing safe use and precautions for the products;
- a copy of the product’s instructions for use;
- copies of the labelling to be used on the product;
- an audit plan; and
- a pharmacovigilance plan for the product.
Manufacturers should note that the regulatory authorities can ask for additional documentation to be submitted once they begin their review of the application.
Distribution Agreements – Treatment of marketing authorisations
Given that the distributor acting as a local representative may be required to hold the marketing authorisations in its name, manufacturers should consider how those marketing authorisations will be: (i) transferred to a new distributor; or (ii) deregistered and reregistered in the name of the new distributor on expiry or termination of the underlying agreement.
In some jurisdictions, it may be possible to draft a contract so that the distributor holds the marketing authorisation on trust for the manufacturer. However, this common law concept is not widely recognised in the region.
Alternatively, it may be possible for the distributor to grant the manufacturer’s nominee a power of attorney to transfer/ deregister the marketing authorisations on behalf of the distributor. Again, this may not work in all jurisdictions due to restrictions on the granting of powers of attorney.
Obtaining marketing approval to sell pharmaceutical products in the UAE is not dissimilar to the process in other jurisdictions. However, overseas manufacturers who do not have a legal presence in the region should also consider how the commercial agency laws will impact their operations.