Opportunities for Market Access for Life Sciences Companies: A New Landscape for Import, Distribution, and Manufacturing of Pharmaceutical Products in the UAE

The UAE is a dynamic and growing market for life sciences companies, offering opportunities and challenges for the import, distribution, and pricing of medical products, including pharmaceutical products and medical devices. In this article, we will provide a summary of the applicable laws and recent changes that affect the regulatory landscape for medical products in the UAE, as well as some practical tips and examples on how to do business in the UAE, avoid common mistakes, and leverage opportunities through a healthcare lens.

The main law governing medical products in the UAE is the Federal Law No. (8) of 2019 on Medical Products, Pharmacy Profession, and Pharmaceutical Establishments (the “Pharmaceutical Law“), which covers areas such as import, export, distribution, warehousing, manufacturing, pricing, advertising and promotion, pre- and post-clinical trials, safety reporting, and product recalls. The Pharmaceutical Law applies to all medical products, pharmacy profession, and pharmaceutical establishments in the UAE, including free zones.

A recent amendment to the Pharmaceutical Law is the Law No. (11) of 2023 (the “New Pharmacy Law“), which introduces new requirements for companies importing products into the UAE. According to the New Pharmacy Law, the Marketing Authorization Holder (“MAH“) must have two or more pharmaceutical establishments for importing and marketing medical products and must appoint at least two pharmaceutical establishments to import medical products into the UAE and one or more establishments to distribute the products. The supporting regulations for the New Pharmacy Law have not yet been published by the Ministry of Health and Prevention (“MOHAP“), making the practical application of these new requirements unclear.

Another recent development is the establishment of the UAE Drug Authority by the Federal Decree-Law No. (28) of 2023, which aims to improve public health levels and make the UAE a global center for pharmacological and medical industries. The UAE Drug Authority is a federal institution affiliated with the Cabinet, with independent legal personality, financial and administrative independence, and headquarters in Abu Dhabi. The UAE Drug Authority is responsible for regulating medical products in the UAE, developing policies, approving entities for research, establishing research centers, testing medical products, and more. The UAE Drug Authority succeeds the MOHAP and the Ministry of Climate Change and Environment in rights and obligations related to medical products.

To import, register, and distribute medical products in the UAE, a UAE company must be established and registered with MOHAP, with the correct business activities on its economic trade license to allow for a pharmaceutical distribution business. No medical products can be circulated in the UAE market without prior marketing authorization, known as the “marketing office license.” The distributor must hold the MAH locally, and this is reflected on the MOHAP registration for each of the products to be distributed. An application must be submitted to MOHAP for a pharmaceutical distribution license under the category of “licensing of a pharmaceutical facility,” which takes approximately six months to obtain. A medical warehouse license from MOHAP is also required for importing, exporting, storing, and distributing pharmaceuticals, with strict technical and health and safety regulations to be followed.

While holding a pharmaceutical distribution license used to be the exclusive purview of companies wholly owned by UAE Nationals, and latterly those owned 51% by UAE nationals, in a recent change that brings MOHAP into alignment with other changes to the UAE Companies Law allowing wider participation of foreign ownership of companies onshore in the UAE, MOHAP has recently permitted pharmaceutical distribution companies to be 100% owned by foreign companies. This now applies on the mainland as well as in free zones. We would therefore recommend exploring the opportunities and incentives offered by the UAE government and the free zones for life sciences companies to set up either Representative Offices, Marketing Offices, or full distribution facilities that are available more widely, but in the Dubai Science Park, the Dubai Healthcare City, and the free zone of Masdar in Abu Dhabi. It is also now possible for a foreign producer to own a manufacturing facility, with a significant drive by MOHAP to make the UAE more attractive to manufacturing and these free zones are offering attractive set-up arrangements for manufacturing.

The New Pharmacy Law’s requirement for multiple distributors could impact business plans, potentially requiring companies to have two companies/distributors in the UAE for importing and marketing, and one for distribution. Existing products already registered with MOHAP and distributed by a current distributor cannot be distributed by a new entity unless the current distributor is terminated. This could pose challenges for companies seeking to change or expand or set up their distribution network in the UAE.

The pricing of medical products in the UAE is also regulated by MOHAP, which sets the maximum price for each product based on the evaluation of research information proving effectiveness, safe use, and quality standards. Priced medical products cannot be sold at a price higher than that set by MOHAP, and discounts from MOHAP-set prices are not allowed except for special prices in certain circumstances. The MOHAP-approved price label must be affixed to the outer cover of the medical product before sale and delivery.

The pricing of medical products in the UAE is governed by the MOHAP Pricing Rules, which are based on the Medical Product Pricing Guidelines issued by MOHAP. The MOHAP Pricing Rules set the criteria, procedures, and profit margins for pricing different categories of medical products, such as innovated drugs, biosimilar drugs, generic drugs, and drugs of various pack sizes and strengths. The MOHAP Pricing Rules also provide for periodic and exceptional re-pricing of registered medical products, and exceptions for necessary and life-saving drugs. The MOHAP Pricing Rules aim to ensure reasonable pricing with consideration of therapeutic significance, similar drug prices, pharmacoeconomic studies, ex-factory, wholesale, public prices in USD, CIF prices, and export prices to reference countries.

A common practice that has emerged over time in this market is to adjust or inflate the price above the reference price during a price application, which can lead to substantial fines and penalties, as well as damage to the company’s reputation and credibility. Article 109 of the Pharmacy Law imposes a fine not exceeding AED 100,000 for actions violating the MOHAP-set price of medical products, with the penalty being doubled in case of repeat offenses. The MOHAP Pricing Rules also state that the price of an innovated drug after the registration of a generic drug should not exceed the price of the first generic drug, and that the price of a biosimilar drug should not exceed 70% of the approved drug’s CIF price before reduction. Therefore, it is crucial for pharmaceutical companies to comply with the MOHAP Pricing Rules and avoid adjusting prices above the reference price unless there is reasonable justification for this as part of the CIF price, given the vagaries of changing product freight and import costs.

It is expected that once the UAE Drug Authority is up and running with their own product registration procedures the Pricing Rules are likely to be reviewed and updated. We would expect the UAE to give themselves some additional flexibility in terms of how they will price products, and there may be some overlapping issues regarding the ‘data exclusivity’ period for patented products to increase competition but also to ensure security of supply of a range of products. For a company that intends to distribute products to the wider GCC region this will be an important issue to track because any price set for the product in the UAE will then affect the price that will be set in other GCC countries, such as the Kingdom of Saudi Arabia that normally then sets a lower price. There is a GCC harmonization agreement for pharmaceutical products that eventually leads to downward price pressures on products.

In conclusion, the UAE offers a promising market for life sciences companies, but also requires careful compliance with the applicable laws and regulations, especially regarding the import, registration, distribution, and pricing of medical products. The recent changes introduced by the New Pharmacy Law and the UAE Drug Authority may have significant implications for the pharmaceutical sector, although the details are not yet clear. We advise companies to seek professional guidance and assistance before entering the UAE market, and to avoid common mistakes and risks that may jeopardize their business operations and reputation.

Tips and Recommendations

Here are some tips and examples on how to do business in the UAE, avoid common mistakes, and leverage opportunities through a healthcare lens:

• Conduct thorough market research and due diligence before entering the UAE market. Seek local legal and regulatory advice to ensure compliance with the applicable laws and regulations.
• Establish strong relationships with local partners, authorities, and stakeholders. Respect the cultural and business etiquette of the UAE.
• Be aware of the differences between federal and emirate-level authorities and regulations. Understand the role of health authorities in each emirate, such as the Dubai Health Authority and the Abu Dhabi Department of Health.
• Monitor developments and changes in the regulatory landscape. Be prepared to adapt to new requirements and challenges.
• Explore opportunities and incentives offered by the UAE government and free zones for life sciences companies. Consider locations such as the Dubai Science Park, the Dubai Healthcare City, and the Abu Dhabi Global Market.
• Engage in research and development, innovation, and collaboration with the UAE Drug Authority, academic institutions, and healthcare providers. Contribute to the UAE’s vision of becoming a global hub for pharmacological and medical industries.