Jordan Pharmaceuticals and Healthcare Report Q1 2013

BMI View: We expect that Jordan will continue to provide modest opportunities to research-basedpharmaceutical manufacturers. In line with the authorities' efforts to expand healthcare insurancecoverage, we envisage measures aiming to promote the use of cheaper generic medicines, in tandem withprice-reduction strategies. Nevertheless, the expansion of government provision and the higher uptake ofgeneric medicines will conspire to keep longer term growth steady, boosted by upward volume changes,with the patented drug market to continue to be supported by rising numbers of medical tourists.

Headline Expenditure Projections

Pharmaceuticals: JOD463mn (US$653mn) in 2011 to JOD501mn (US$707mn) in 2012; +8.1%in local currency terms and +8.1% in US dollar terms. Forecast unchanged from Q412.

Healthcare: JOD1.73bn (US$2.45bn) in 2011 to JOD1.87bn (US$2.65bn) in 2012; +8.0% inlocal currency terms and +8.1% in US dollar terms. Forecast unchanged from Q412.

Medical devices: JOD112mn (US$158mn) in 2011 to JOD121mn (US$171mn) in 2012; +8.3%in local currency terms and +8.4% in US dollar terms. Forecast unchanged from Q412.Risk/Reward Rating: Jordan's composite Pharmaceutical Risk/Reward Ratings score for Q113 remainsunchanged in relation to the previous quarter. At 49.9 out of the maximum 100, Jordan is again ranked10th, out of the 30 markets surveyed in the Middle East and Africa region. Jordan's rewards and riskscores remain evenly balanced, with both components standing firmly above the regional averages.

Key Trends And Developments

In July 2012, Hayel Obeidat, director general of the Jordanian Food and Drug Administration(FDA), said that the prices of 275 locally and internationally produced drugs had been reduced.The medicines affected by the changes include painkillers and treatments for chronic diseasesand cancer. Any company or drugstore found guilty of not reducing drug prices in line with thispolicy will be penalised, Obeidat added. Fines totalling over JOD1mn (US$1.4mn) have alreadybeen collected from firms that rejected the immediate price reduction. The JFDA is nowreviewing the reduction of prices for an additional 25 drugs.

The number of foreign patients visiting Jordan for medical treatment increased by 7% year-onyear(y-o-y) in H112. Although medical tourism in Jordan has emerged as the most robusthealthcare sector in the entire Middle East, Private Hospitals Association (PHA) President FawziHammouri was quoted by Jordan Times as saying that the sector still needs to overcome certainchallenges to achieve further growth in terms of patient numbers and revenues. He identifiedJordanian visa regulations and continuing brain drain to be the major barriers for medicaltourism to attain its maximum potential.

BMI Economic View: Economic growth in Jordan will remain sluggish over the coming years. Weakforeign direct investment (FDI) inflows, a flagging tourism sector and high commodity prices will dragon the economy in the near term, while policymakers have few fiscal or monetary levers at their disposalto manufacture any turnaround in the country's fortunes. We forecast real GDP growth to fall to 1.8% thisyear, from 2.6% in 2011, with the country suffering from the detrimental effect that the Arab Spring (andin particular the ongoing conflict in Syria) has had on both foreign investment and the tourism industry.BMI Political View: The October 2012 decision by King Abdullah to dissolve the current progovernmentparliament was widely expected, but is unlikely to lead to any improvement in the country'spolitical situation. With the opposition all but certain to boycott the elections, which are expected by early2013 at the latest, we expect the next parliament to look remarkably similar. This undermines thecredibility of the King's move, and denies him a much-needed opportunity to rally popular support behindhis fiscal consolidation efforts, potentially placing them in jeopardy.