Egypt boasts one of the largest pharmaceutical industries in the Middle East and Africa, with EGP 41.3 billion (USD 2.1 billion) of turnover in 2018 . Between 2014 and 2018, Egypt’s pharmaceutical industry has also been one of the fastest-growing industries in the MENA region, expanding at a CAGR of 24.2% on the back of solid economic and demographic fundamentals. Egypt’s population continues to expand rapidly and is predicted to reach 128 million by 2030 from approximately 100 million in 2018. Consonant with its status as a middle-income country, Egypt is experiencing both rising average life expectancy and increased demand for prescription drugs, which accounted for more than four-fifths of medicine sales in 2018.
Economic development and rapidly increased urbanization have brought about significant shifts in Egypt’s epidemiological profile. Non-communicable diseases, including cardiovascular diseases, diabetes, cancer and chronic respiratory diseases are currently the leading national cause of death, according to the WHO. Meanwhile, despite its size, Egypt’s pharmaceutical market remains underserved relative to regional peers, with significant room for further and increased healthcare awareness. At a per capita expenditure of USD 23 in 2018, this represents less than 15% of the average pharmaceutical expenditure per capita of the wider MENA region. Combined with increasing health awareness, these factors are expected to significantly boost market growth: medicine sales are projected to reach EGP 61.3 billion (USD 2.9 billion) in 2023, reflecting a local currency CAGR of 8.21% between 2018 and 2023.
Egypt’s pharmaceutical market is served by around 120 companies of various size. The industry’s manufacturing segment is significantly fragmented, with the largest manufacturer accounting for under 12% of sales in 2018. The distribution segment, meanwhile, is relatively fragmented: four distributors accounted for approximately 68% of the distribution business in Egypt in 2018 . In recent years the market has witnessed a considerable shift in demand patterns in favor of generic drugs, a trend that is expected to continue over the long-term given existing price differentials with brand-name patented medicines. Egypt’s largest generic manufacturers continue to grow at a significantly faster rate than innovator peers, a trend that has intensified since the devaluation of the EGP in late 2016 and the ensuing high inflation.
Egypt’s government has committed to raising public expenditure on healthcare services to 3% of GDP over the coming years. A key component of these efforts is the implementation of a comprehensive health insurance system, the first phase of which was launched in July 2018. The full implementation of this system will integrate the 20% of Egypt’s population which currently lacks public or private health insurance into the prescription drugs market, boosting demand for pharmaceuticals. Pharmaceutical manufacturers stand to be a primary beneficiary of these developments.
Players in Egypt’s pharmaceutical industry operate in a stringent regulatory environment. However, there have been moves toward liberalization over the past decade. In 2009, the Ministry of Health loosened markup regulation and cost-indexed profit controls, adopting the External Reference Pricing system, whereby a guiding list of 36 countries are used to price pharmaceuticals. The government’s price formula has continued to evolve in line with market dynamics. Greater responsiveness to industry requirements has been noted since the devaluation of the Egyptian pound in 2016, which raised the cost of imported key active ingredients.