The Final Code

Feb, 2008Cairo- Egypt

École Supérieure Libre des Sciences Commerciales Appliquées (ESLSCA)

Master of International Business Administration

Research Project Supervised By Dr. Wafaa Marzouk

The Impacts of PharmaCode on the Pharmaceutical industry in Egypt

Presented By Ahmed Hassan

ESLSCA 18

October 2008

Acknowledgement

I would like to thank Dr. Wafaa Marzouk for the effort

she spent with me during each step in this research

project. I am also so grateful to all instructors who have

used their experience and knowledge during different

courses sessions.

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Table of content

Executive summary

Introduction.

Chapter 1 Literature Review.

1.1 What is the Code of Conduct?

1.2 Code of Promotional Practices for Pharmaceutical Representatives in

Egypt

. 1.3 The role of pharmacy board in regulating promotional activities

1.4 Code for pharmaceutical promotion in Egypt.

1.5 Ethical standards.

1.6 Global Pharmaceutical Market.

1.7 Egyptian Pharmaceutical Market.

1.8 Top leading corporations in Egypt

1.9 Top leading products in Egypt

1.10 Industry Developments

1.11 Healthcare sector

1.12 Pharmaceutical sector

Chapter 2 Research Methodology.

2.1 Research Problem.

2.2 Research Objective.

2.3 Research Hypothesis.

2.4 Research Design.

2.5 Population and sampling.

Chapter 3 Research results and Hypothesis testing

3.1 Testing H1–All Pharmaceutical companies operating in Egypt applying

PharmaCode

3.2 Testing H2 the majority of Physicians aware of PharmaCode and its

Importance

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3.3 Testing H3-The implementation of PharmaCode has a positive effect on

industry image.

3.4 Testing H4-The application of PharmaCode Reallocate the Marketing

Expenditure / Budget

3.5 Testing H5- The physicians and pharmaceutical sales representatives

react positively with PharmaCode

Chapter 4

Research Conclusion and Recommendation

4.1 Conclusion.

4.2 Recommendation.

References

.

4

5

List of Acronyms

CPP Certificate of Pharmaceutical Product

DIC Drug Information Center

DPPC Drug Planning and Policy Center

EIPR Egyptian Health and Human Right

FDI Foreign Direct Investment

GDP Growth Domestic Product

GNP Growth National Product

IMS International Medical Statistics

IPR Intellectual Property Right

MENA Middle East and North Africa

MNC Multinational Corporation

MOHP Ministry Of Health and Population

NODCAR National Organization for Drug Control and Research

OECD Organization of Economic Co-operation and

Development

OTC Over the Counter

PhRMA Pharmaceutical Research and Manufacturers of America

TRIPS Trade Related Agreement of Intellectual properties

WTO World Trade Organization

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EXECUTIVE SUMMARY

The Pharmaceutical industry is one of most strategic industries in Egypt and it is fully

supported by the government since its essential to improve the Public Health and the

quality of life.

The Pharmaceutical industry always has great impact on the Egyptian Economy as it

is very large business and divided into

1 -Local Governmental companies

2-Local Companies owned by individuals

3-Multi National Manufacturing Companies

4-Multi National operating through scientific offices

The biggest Markets in The MENA (Middle East and North Africa) are Turkey, Egypt

and Saudi Arabia Respectively and Egypt is considered the largest producer of

Generic drugs

TRIPS (Trade Related Agreement of Intellectual properties) and GATT (General

agreement for trade and Tariffs) are widely applied in Egypt which extend the patent

protection of the product

Recently, in the last few years the pharmaceutical corporations in Egypt especially the

Multinational companies embark in the application of PharmaCode which is crucial

factor for industry to maintain the growth and improve the industry image as well,

The main purpose of this study is to assess the expected influence of Pharmaceutical

code of conduct on the Egyptian Pharmaceutical Market and how the industry

members would react

Six experts' interviews were conducted to explore the effect of Pharmaceutical code

of conduct on the Egyptian Pharmaceutical Market, industry image, awareness of the

physicians, and reallocation of pharmacy budget under PharmaCode

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In the short run the PharmaCode application have impact on business as the customers

(physicians) may develop resistance; it takes time for the customers to react positively

when they find that certain benefits presented by the pharmaceutical companies like

food, travel and entertainment are no longer available .

In the long run the PharmaCode is a fact in the pharmaceutical industry not only in

Egypt but also in the global Market and that’s due to

Consistency of PharmaCode application

Alliance of all pharmaceutical companies operating in Egypt to apply the

PharmaCode

The Media will play a great role in awareness of PharmaCode

The code will be widely distributed in the pharmaceutical industry

The Pharmaceutical companies will make effort to manage their marketing practices

according to the Code and where Necessary will modify their marketing practices

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Introduction

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The pharmaceutical industry is one of the oldest industries in Egypt and it starts its

evolution after the Egyptian revolution in 1952, where the government started to

invest in this industry as part of its programs to support health care system.

The industry started to be pure governmental where the government controlled the

drug market, knowing that the main objective at that time is to secure traditional

medicines to Egyptians at affordable prices. Effective indicated period, government

commenced to interfere the pricing process belongs to medicines.

By 1975 the government permitted the private investment in the pharmaceutical

market by both sectors national and foreign multinational companies; Based on that,

many drug factories have been established.

The market started to evolve and the market dynamics was in the favor of the

multinational companies till the beginning of the 21st century where the market

dynamics started to be in favor of the national companies

Medicines form a critical part of the healthcare system. The challenge facing most

healthcare systems today is to enable the public access medicines that are of good

quality, safe and economically affordable. Ethical promotional activities for

pharmaceuticals should enhance access to medicines by the general Public. Increased

access should go hand in hand with rational prescribing, dispensing and use.

Ethical promotional practices by the Pharmaceutical Representatives must be founded

on the following principles:

Appropriate and uniform training curriculum

Standard licensing procedures

Universally acceptable Code of Promotional Practices

Currently, a majority of persons practicing as Pharmaceutical Representatives lack

Pharmacological training hence are not able to conceptualize medical issues. On the

other hand, the Pharmacy and Poisons Act, does not provide for training and licensing

of the Pharmaceutical Representatives exhaustively. The Act only prescribes the

licensing of Pharmaceutical Representatives to carry Part I Poisons, ideally omitting

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relevant aspects of the Practice. It is noteworthy that most Pharmaceutical

Representatives lack ethical knowledge on advertisement and promotional activities

for pharmaceutical products as well.

In an attempt to counter the adverse effects of unethical promotional activities in the

pharmacy industry, the Pharmacy and Poisons Board together with the stakeholders

established a sub-committee to come up with appropriate guidelines on the challenges

stated in the preceding. At national level and in major hospitals, the Ministry of

Health through the Pharmacy and Therapeutic Committees endeavors to promote

rational use of medicines by overseeing adherence to the established Essential Drugs

List.

With regard to pharmaceutical promotion, the pharmacy industry is faced with an

enormous challenge of striking a balance between promotional activities for branded

names and the WHO recommended rational use of Essential Medicines. As we

grapple with various dilemmas in the industry, the big question remains ‘IS there a

need for PharmaCode?

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Chapter 1

Theoretical Framework

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1.1What is the Code of Conduct?

Code of Conduct sets the standards for the ethical marketing and promotion of

prescription pharmaceutical products in Egypt. It complements the legislation

requirements of the Therapeutic Goods Regulations and the Therapeutic Goods Act. .

The following are the key amendments to the Code:

Level of substantiating data

Promotional material – including advertising, brand name reminders,

competitions and printed promotional materials

Company representatives

Product starter packs

Product familiarization programs

Sponsorship

Research – PMS studies, market research

Patient support programs

Relationship with Health Consumer Organizations

Travel

Consultants and advisory boards

Administration of the code

Sanctions

Appeals – appeal process open to complainants

Membership of Committees

External reporting – quarterly reporting

Code provisions include standards for appropriate advertising, the behavior of

medical representatives and relationships with healthcare professionals. Medicines

Egypt’s Code of Conduct, which was established in 2002, has been revised on a

regular basis.

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http://www.medicinesaustralia.com.au/pages/images/Code%20of%20Conduct%20Briefing%20Paper%202004.pdf

The Code of Conduct has two arms, firstly the adjudication of complaints undertaken

by the Code of Conduct Committee and secondly the proactive monitoring of

promotional activities undertaken by the Monitoring Committee.

Areas covered by the Code of Conduct include:

Nature and Availability of Information and Claims – false and misleading

claims, level of substantiating data

Types of Product Information

Promotional Material – advertisements, brand name reminders, competitions,

gifts and offers

Company Representatives – medical representatives

Product Starter Packs

Involvement in Educational Symposia, Congresses and Satellite Meetings –

trade displays

Sponsorship

Research

Relationship with the General Public

Relationship with Healthcare Professionals – travel, hospitality, remuneration,

entertainment, consultants and advisory boards

Administration of the Code – complaints process, committee membership

Sanctions

Appeals

1.2CODE OF PROMOTIONAL PRACTICES FOR PHARMACEUTICAL

REPRESENTATIVES IN EGYPT

It is the goal of the Ministry of Health and that of the Pharmacy and Poisons Board to

provide the public and healthcare providers with accurate, fair and objective

information about medical products so that rational decisions can be made as to their

use. With this in mind the Board has domesticated the International Code for

Promotion of Pharmaceuticals to guide the work of Pharmaceutical Representatives.

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This code is not intended to restrain the promotion of medicinal products in a manner

that is detrimental to fair competition. It is intended to promote rational prescribing,

dispensing and use by the players in healthcare systems.

These guidelines should be read in conjunction with the Report of the Sub-committee

on Pharmaceutical Representatives of May 2006, Pharmacy and Poisons Act, and the

International Code for Promotion of Pharmaceuticals.

DEFINITION OF TERMS

Pharmaceutical Product: All Pharmaceutical or biological products which are

registered by the Pharmacy and Poisons Board as drugs including Part I and Part II

poisons.

Promotion: Any activity undertaken or organized or sponsored by a company,

distributor, or and importer that is promoting the prescription, recommendation,

supply, sale or distribution of a Pharmaceutical product.

Health care professionals: Members of the medical, dental, pharmacy and nursing

professions and any other persons who may as a result of their legal qualification be

able to prescribe, supply or administer medicines.

Pharmaceutical Representative: Those persons whose duties comprise calling upon

doctors, dentists, pharmacists, wholesalers or government officials who are involved

in the provision of healthcare.

1.3 THE ROLE OF THE PHARMACY BOARD IN REGULATING

PROMOTIONAL ACTIVITIES.

The Pharmacy and Poisons Board is empowered under sections of Pharmacy and

Poisons, to control pharmaceutical advertisements whereas Form 18 and 19 of the

same act give provisions for licensing of Pharmaceutical Representatives to carry Part

I Poisons as free samples.

Nothing is mentioned about the minimum qualification for one to be considered for a

Pharmaceutical Representative Permit. There is also nothing about licensing

procedure and Code of Promotional Practices. Through these guidelines the Pharmacy

and Poisons Board wishes to define a criteria for registration as a Pharmaceutical

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Representative, licensing procedures and an applicable Code of Promotional

Practices. Subsequently Cap 244 shall be reviewed to reflect these changes.

GENERAL PRINCIPALS

Pharmaceutical Representative

A representative of manufacturing company, importer, distributor, wholesaler, etc.,

licensed by the Pharmacy and Poisons Board to conduct promotional activities

through provision of information about drugs on behalf of the firm to health care

professionals. They are also licensed to carry drugs as samples in the course of their

duties.

Order Takers

Shall be involved in taking orders on behalf of their companies. They shall not be

involved in provision of scientific information about drugs and will not carry and/or

issue out samples.

Training and Academic Qualifications

The following qualifications shall be the minimum criteria for consideration as a

Pharmaceutical Representative by the Pharmacy and Poisons Board.

A degree in Pharmacy

A diploma in Pharmacy,

A degree in Medicine and Surgery,

A degree in Veterinary Medicine,

A degree in Dentistry

A degree in Nursing

A diploma in Clinical Medicine

A diploma in Nursing,

Any other qualification the Pharmacy and Poisons Board deems satisfactory

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Transition Period

All Pharmaceutical Representatives in the field by the commencement date of these

guideline will be absorbed subject to the following conditions:

A) Pharmaceutical Representatives with a field experience of four (4) years or more

will be evaluated by a committee appointed by the Pharmacy and Poisons Board,

based on criteria to be established for the purpose of enrolment.

B) Pharmaceutical Representatives who have been in the field for less than four years

will be expected to undergo an appropriate Pharmacological training as prescribed by

the Training and Assessment Committee of the Pharmacy and Poisons Board.

Licensing

A person requesting to be issued with a Pharmaceutical Representative Permit shall

submit an application to the Registrar, Pharmacy and Poisons Board on a prescribed

form

The Pharmacy and Poisons Board may, upon consideration, approve with or without

conditions, or reject, such an application.

If a permit is allowed, it shall be valid for a period ending on 31st December of the

calendar year.

A licensed Pharmaceutical Representative must, at least three (3) months before the

expiry date, apply to the Registrar, for renewal of a permit in accordance with the

procedure prescribed by the Pharmacy and Poisons Board.

The Pharmacy and Poisons Board may without assigning any reason thereof cancel a

permit for a Pharmaceutical Representative

A roll of Pharmaceutical Representatives will be kept by the Registrar, Pharmacy and

Poisons Board, and every employer will have to pay a fee for the annual practice

license for every Pharmaceutical Representative in their firm.

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All Pharmaceutical Representatives will sign a code of conduct based on the Code of

Pharmaceutical Promotion in Egypt.

Foreign Pharmaceutical Representatives to be given temporary permits by the

Pharmacy and Poisons Board according to the guidelines to be developed

1.4 CODE FOR PHARMACEUTICAL PROMOTION IN EGYPT

The Code sets out standards for the ethical promotion and conduct of Pharmaceutical

Representatives in their interactions with healthcare professionals to ensure that they

are appropriate and perceived as such.

Interactions

The relationship of the Pharmaceutical industry with healthcare professionals is

intended to benefit patients and to enhance the practice of medicines. Interactions

should be focused on informing healthcare professionals about products, providing

scientific and educational information, and, supporting medical research and

education.

Independence of Healthcare Professionals

No financial benefit or benefit-in-kind (including grants, scholarships, subsidies,

support, consulting, contracts or educational or practice related items) may be

provided or offered to healthcare professionals in exchange for prescribing,

recommending, purchasing, supply or administering products or a commitment to

continue to do so. Nothing may be offered or provided in a manner or conditions that

would have an inappropriate influence on a healthcare professional’s prescribing

practices.

Appropriate Use

Promotion should encourage the appropriate use of Pharmaceutical products by

presenting them objectively and without exaggerating their properties.

Transparency of Promotion

Promotion should not be disguised. Clinical assessments, post-marketing surveillance,

experience programs and post-authorization studies must not be disguised promotion.

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Such assessments, programs and studies must be conducted with a primarily scientific

or educational purpose. Material relating to Pharmaceutical products and their uses,

whether promotional in nature or not, which sponsored by a company or

distributor/importer should clearly indicate by whom it has been sponsored.

PRE-APPROVAL COMMUNICATION

No Pharmaceutical product shall be promoted for use unless it has been registered by

the Pharmacy and Poisons Board.

STANDARDS OF PROMOTIONAL INFORMATION

Consistency of product information

Promotion should be consistent with the approved product information.

Accurate and not misleading

Promotional information should be clear, legible, accurate, balanced, fair, objective

and sufficiently complete to enable the recipient to form his or her own opinion of the

therapeutic value of the Pharmaceutical product concerned. Promotional information

should be based on an up-to date evaluation of all relevant evidence and reflect that

evidence clearly. It should not mislead by distortion, exaggeration, undue emphasis,

omission or any other way. Every effort should be made to avoid ambiguity. Absolute

or all-embracing claims should be used with caution and only with adequate

qualification and substantiation. Descriptions such as ‘safe’ or ‘no side effects’ should

generally be avoided and should always be adequately qualified.

Substantiation

Promotion should be Capable of substantiation either by reference or reference to

approved labeling or by scientific evidence. Such evidence should be made available

on request to healthcare professionals.

SPONSORSHIP

Companies may sponsor healthcare professionals to attend events provided such

sponsorships is in accordance with the following requirements:

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The event complies with the hospitality requirements in this code as described

in 6.0.

Sponsorship to healthcare professionals is limited to the payment of travel,

meals, and accommodation and registration fees.

No payments are made to compensate healthcare professionals for time spent

in attending the event.

Any sponsorship provided to individual healthcare professionals must not be

conditional upon an obligation to prescribe, recommend or promote any

Pharmaceutical product.

Guests

Companies should not pay any costs associated with individuals accompanying

invited healthcare professionals.

Payments for Speakers and Presenters

Payments of reasonable fees and reimbursement of out-of-pocket expenses, including

travel and accommodation may be provided to healthcare professionals who are

providing genuine services as speakers or presenters on the basis of a written contract

with the company at the event.

HOSPITALITY

Appropriate Venue

All events should be held in an appropriate venue that is conducive to the scientific or

educational objectives and the purpose of the event or meeting. As a general rule, the

hospitality provided should not exceed what the healthcare professional recipients

would normally be prepared to pay for themselves.

Limits of Hospitality

Hospitality should be limited to refreshments and or meals incidental to the main

purpose of the event and not their guests, and, if it is moderate and reasonable as

judged by local standards.

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PRINTED PROMOTIONAL MATERIAL

All Printed Promotional Material including Advertisements

Must be legible and include:

The name of the product (normally the brand name)

The active ingredients, using approved names where they exist

Name and address of the company or its agent responsible for marketing the product

Date of production of the advertisement

Advertisement for OTC medicines

The advertisement shall not be run unless they have been approved by the Pharmacy

and Poisons Board.

GIFTS AND ITEMS OF MEDICAL UTILITY

Cash

Payments in cash or cash equivalents (such as gift certificate or airtime) must not be

offered to healthcare professionals

Personal Gifts

Gifts for the personal benefit of healthcare professionals (including, but not limited to

music CD’s, DVDs, sporting or entertainment tickets, electronic items) must not be

offered.

Promotional Aids

Promotional aids or items may be provided or offered to healthcare professionals and

appropriate administrative staff, provided the gift is of minimal value and relevant to

the practice of the healthcare profession.

Items of Medical Utility

Items of medical utility may be offered or provided free of charge provided such

items are of modest value and are beneficial to the provision of medical services and

for patient care.

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SAMPLES

Samples

Samples may be supplied to healthcare professionals in order to enhance patient care.

Samples should not be resold or otherwise misused.

Samples of Part I Poisons

Samples of Part I poisons shall not be offered to the general public or patients

Samples and Clinical Trials

Samples shall not be used to conduct clinical trials

Acceptance of Samples

Pressure should not be placed on healthcare professionals to accept samples

Marking of Samples

Samples must be marked in an appropriate manner

1.5 ETHICAL STANDARDS

Products, activities or representatives of other Pharmaceutical companies must not be

disparaged.

The Medical and scientific opinions of opinion leaders and health professionals must

not be disparaged.

Promotional materials must not be deliberately disguised.

During the course of study, Pharmaceutical Representatives shall not disguise

themselves as patients or relatives.

Name tags indicating Name and Organization represented shall be worn by the

Pharmaceutical Representatives for easy identification.

Pharmaceutical Representatives shall carry their registration certificates issued by the

Pharmacy and Poisons Board, which shall be produced on demand.

Clinical areas shall be out of bounds for detailing unless prior approval has been

granted.

Continuing Medical Education shall be organized and conducted on request and on

agreed terms between the group of healthcare professionals and the organizing

organization.

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INFRINGEMENT, COMPLAINTS AND ENFORCEMENT

Detailed reports of infringement and complaints shall be forwarded to the Pharmacy

and Poisons Board. However, it is recommended that industry try and resolve issues

before forwarding to the Pharmacy Board.

1.6Global Pharmaceutical Market

The Pharmaceutical Market

USA represents nearly 50% of the total world pha

Sales through Retail Pharmacies

(Twelve months to May 2008*)

NORTH AMERICA $223.3billion up 2% United States $206.5billion up 1% Canada $16.7billion up 6%

EUROPE (Top 5) $114.3billion up 4% Germany $34.4billion up 7% France $30.8billion up 4% United Kingdom $17.1billion 0% Italy $16.9billion 0% Spain $14.8billion up 7%JAPAN (including hospitals) $63.2billion

up 5%

LATIN AMERICA (Top 3) $23.2billion

up 9%

Brazil $11.6billion up 10% Mexico $8.7billion up 6% Argentina $2.8billion up 21% AUSTRALIA/NEW ZEALAND $7.8billion

up 13%

The top 5 therapy classes at ATC3 level in the 12 months to May 2008 were:

1. - Cholesterol & Triglyceride regulators

2. - Antiulcerants

3. - Antidepressants & mood stabilizers

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4. - Antipsychotic

5. - Anti-epileptics

The top 5 products in the 12 months to May 2008 were:

1. Lipitor

2. Nexium

3. Plavix

4. Seretide/Advair

5. Enbrel

The top 5 corporations in the 12 months to May 2008 were:

1. Pfizer

2. GlaxoSmithKline

3. Novartis

4. Astrazeneca

5. Merck & Co

1.7 Egyptian pharmaceutical market:

The theoretical Background focuses on the main following points:

An overview on the pharmaceutical industry in Egypt

The pharmaceutical industry in Egypt is similar to that of the developing countries in

many aspects could be illustrated as follows:

1- The market is dominated by the local companies (55%), whereas the multi-

national companies contribute by (45%)

2- The market growth is in the favor of the local companies

3- The top leading products belongs to some therapeutic classes such as anti-

infective and non steroidal anti-inflammatory which means that it is an immature

market. On the contrary, we can admit that market is dominated by chronic and

advanced medication at the developed countries.

4- No respect for the worldwide agreements such as TRIPS where many local

generic products have been registered and priced before the patency of the original

products became off.

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5- The government supports the local companies where some of these companies

are governmental companies and most of its products are cheap, which supports the

human dimensions of the government where the health care is of the top priorities for

the government.

The following graph supports the above mentioned points

2.1.1 National Companies Evolvement

Figure (1) the national companies' evolvement from 2002 to 2007.

In year 2002, number of local national companies was 272 (82% of the

pharmaceutical companies) and the number dramatically increases to 528 companies

in 2006 (92% of the pharmaceutical companies).

These data mean the followings:

The national companies are huge in numbers but most of them small in business size

whereas the multinational companies are small in numbers but giant in business size

due to merges and acquisitions.

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82%

Year 2002No. 272 Corp

Year 2007No. 528 Corp

Figure (2) the national-multinational corporations' growth evolution from 2002 to

2007.

The above graph shows the consistent growth of the national local companies

(average growth in 4 years is 23%) over that of the multinational corporations

(average growth in 4 years is 14%).

1.1.2 National-Multinational CORPGrowth Evolution

0

5

10

15

20

25

30

35

40

Val

ue G

row

th R

ate

%

National CORP 14.5 34.3 22.6 20.4

Multinational CORP 11.7 16.1 15.8 13.4

MAT/7/04 MAT/7/05 MAT/7/06 MAT/7/07

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Figure (3) the national-multinational corporations' sales evolution from 2002 to 2007.

The above graph shows the increase in value for the national companies from

2.4BLN in 2003 to 5.4BLN in 2007(cumulative growth is 225%) while that of the

multinational increases from 2.8 BLN in 2003 to 4.7 BLN in 2007 (cumulative

growth is 225%).

1.8 Top Leading CORP YTD 2007

Table (1) shows the top leading corporations in the pharmaceutical industry in Egypt.

Rank Sept. Sept. %G %MS EV G/L2006 2007 %

Total Market 0 9319.2 10957 17.6 100.0 100 0.0NOVARTIS 1 634.9 751.1 18.3 6.9 93 0.1GLAXOSMITHKLINE* 2 666.9 699.2 4.8 6.4 6.9 0.8SANOFI AVENTIS 4 598.2 657.1 9.9 6 113 0.4EIPICO* 3 550.5 642.1 16.6 5.9 91 0.0AMOUN PHARM.CO 8 434.3 519.3 19.6 4.7 95 0.0PHARCO 5 437.6 487.3 11.3 4.4 82 0.3PFIZER* 6 385.5 433.3 12.4 4 98 0.1SERVIER 9 288.4 354.3 22.8 3.2 87 0.1BRISTOL MYER SQUIBB 7 330.1 343.4 4 3.1 78 0.4EVA 10 148.2 230.8 55.7 2.1 132 0.5

National-Multinational CORPSales Evolution

0

1

2

3

4

5

6

L.E

. BL

N

National CORP 2.4 2.7 3.7 4.5 5.4

Multinational CORP 2.8 3.1 3.6 4.2 4.7

MAT/7/03 MAT/7/04 MAT/7/05 MAT/7/06 MAT/7/07

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According to the new data for In-Market Sales, which focus on the top leading

pharmaceutical companies, it is clear that four out of ten leading companies are local

while the rest are multinational, which is due to the numerous merges and acquisitions

applied in the area of the multinational companies resulted less number of companies

but huge in size and volume of business.

1.9 Top Leading Products YTD 2007

Table (2) shows the top leading products in the pharmaceutical industry in

Egypt

Rank LE.M LE.M %G %MS EV G/L2006 2007 %

Total Market 0 9,319.2 10,957.0 17.6 100.0 100 0.0FLUMOX 1 110.8 125.4 13.1 1.1 90 (0.1)CEFOTAX 2 84.1 113.3 34.6 1 119 0.1DIAMICRON 3 93.1 109.2 17.6 1 107 0.0AUGMENTIN 4 76.5 102.7 34.3 0.9 66 0.1CATAFLAM 5 67.3 77.4 15 0.7 117 0.0AMARYL 6 99.2 75.1 -24.4 0.7 101 (0.4)DURICEF 7 59.9 67.6 12.9 0.6 76 0.0VOLTAREN 8 52.7 60.9 15.7 0.6 124 0.0INS MIXTARD 30 HM 9 62.8 59.3 -5.7 0.5 95 (0.2)CEPOREX 10 56.5 59.2 4.8 0.5 94 (0.1)

According to the In-Market Sales new data for September 2007, which focus on the

top ten leading products in the pharmaceutical Egyptian market, it is clear that four

out of the top ten leading products belongs to national companies and top two

products are local products as well, while six out of the top leading products belongs

to the multinational companies.

So, the pharmaceutical market in Egypt is a typical model for the markets of the

developing countries as market is incredibly price sensitive and responds very quickly

and aggressively to promotion.

The market is characterized by the evolution of the national companies on the expense

of the multinational ones and this phenomenon will carry on till the end of next

decade upon accomplishing the implementation of TRIPS agreement.

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Finally, the health care and in specific the medicine availability in a good and

reasonable prices is one of the top priority for the Egyptian government, so, the

government continually supports the national drug industry which mainly focuses on

the production of basic products with an economic prices.

The Egyptian pharmaceutical market is the second-largest market in the region, after

Turkey, and has about 74 pharmaceutical factories. There are around 35 drug makers

in the country, of which eight are state-owned, with the remainder in private hands.

The Egyptian drug industry is drug formulation rather than research-based. Egypt is

the largest producer and consumer of pharmaceuticals in the Middle East and North

Africa (MENA) region, because of its large population, although it has relatively low

per capita income and drug consumption.

The main growth drivers for pharmaceuticals in Egypt are the young and expanding

population and GDP growth. Healthcare expenditure is reported to be about 3.6% of

GDP and pharmaceutical expenditure was 1.5% of GDP in 2006. Per capita spending,

however, is among the regions' lowest at about US$34 in 2006, of which government

spending amounted to US$22. About 90% of private healthcare expenditure is out-of-

pocket spending; pre-paid plans make up less than 1% of private spending. Up to two-

thirds of primary healthcare visits are in the private sector, despite the cheap, heavily

subsidized healthcare services offered by the state sector.

Drug market growth is expected to continue in the short term, with the market

reaching US$2.6bn at retail prices by 2008. Along with basic social factors such as

population growth, availability of cheap healthcare is also likely to drive the growth in

the market. Spending levels are expected to increase due to improvement in health

awareness and greater access to medicines. Furthermore, the imposition of a TRIPS-

compliant intellectual property regime should help the domestic sector to develop in

the long term. However, strict pricing regulations, which do not take into account

local currency fluctuations, have discouraged foreign investment. In fact, many

multinationals operate losses in Egypt due to high production costs. In 2006,

prescription drugs accounted for 85% with OTC medicines accounting for the

remaining 15% of sales. In the prescription drug market, the two leading segments

were antibiotics and alimentary tract/metabolism drugs each reaching sales of

S$484mn and US$286mn, respectively. Central nervous system and oncology drug

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sales accounted for US$I43mn and US$89mn, respectively. Generics represent about

16% of the total market.

Pharmaceutical companies in Egypt fall into three categories: public sector companies

that are subsidiaries to the Holding Company for Pharmaceuticals, private sector

companies, and multinational companies. A significant proportion of local production

is focused on exports. Leading local producers include Egyptian International

Pharmaceutical Industries (EIPICO), El Amriya, El Nasr, Minapharm, October

Pharma and the South Egypt Drug Industries (SEDICO).

Most multinationals are active on the Egyptian market. Not all, however, have a direct

manufacturing presence, with many importing drugs or licensing production to local

manufacturers. Multinational companies supply about 65% of the market through

direct local manufacturing or through licensing agreements. Leading players with

production facilities include Bristol-Myers Squibb (BMS), Novartis and Pfizer.

GlaxoSmithKline (GSK) claims to be the domestic market leader, with a share of

about8.6%. About 90% of the subsidiary’s production is sold in Egypt, with the

remaining 10% being exported to other Middle East and North African markets.

The government is currently embarking on a restructuring process, with stakes in a

number of state-state owned drug companies being put up for privatization. In

December, it was announced that there would be an initial public offering (IPO) for

between 10% and 35% of Chemical Industries Development Company (CID).

Meanwhile, state-controlled drug distribution company Egyptian Pharmaceutical

Trading Company is also being prepared for sale to a strategic investor.

1.10 Industry Developments:

Egypt’s Minister of Foreign Trade and Industry has asserted that the pharmaceutical

and healthcare industry in Egypt faces many challenges, the most important one being

that of striking a balance between the cost and the citizen’s needs and income. The

MOHP also outlined plans to develop the local industry in an attempt to keep pace

with international competition.

30

1.11 Healthcare Sector:

The state healthcare system suffers from under-funding, poor management, obsolete

equipment and the increasing pressures on account of population growth, which is

about 2% per annum. At present, very little medical equipment is manufactured in

Egypt. Though the use of sophisticated medical equipment is growing, total

expenditures are still small for a country with a population of nearly 79mn people.

The government has outlined plans to further upgrade more than 60 general hospitals,

clinics and laboratories in rural areas. It also plans to build eight new hospitals during

the period 2006-2008. The most promising sub-sectors for further development

include dialysis equipment and lasers, medical, and laboratory equipment.

However, despite being relatively modem and well-funded, Egypt’s healthcare system

is struggling to cope with overpopulation. Egypt has approximately 2mn children born

every year and 40% of the population is under 20. This demographic shift will require

substantial investment in healthcare facilities in the future. Despite this, Egypt only

allocated 3.3% of its GNP to the MOHP in 2001, compared to a figure of 7.1% for

Saudi Arabia. Part of the problem stems from high levels of urbanization. Roughly

42% of the population reside in cities, with 24mn alone living in Cairo. As a result,

many hospitals and clinics in urban areas are unable to cope with demand.

Government spending is also biased towards higher income groups, and health

insurance only covers 50% of the population. However, the Family Health Fund has

been initiated - financed by both public and private sources - which is it is hoped will

make up some of the shortfall. In the long term, the government is planning to

implement a universal health insurance scheme in which every Egyptian is a

beneficiary. Privatization is a growing trend within the Egyptian healthcare sector and

the sector is undergoing considerable change. Prior to the 1990s, the sector was

predominantly state-controlled, with the private sector playing only a minimal role in

the provision of health care. The private sector now plays an increasingly important

role in healthcare provision, emerging largely as a result of the declining standard of

public sector care.

The inefficiency and poor quality of primary healthcare services has turned Egyptians

to the private sector, and has increased the population’s burden of health care costs.

Amid these problems, the US Agency for International Development (USAID)

outlined plans to invest a considerable amount for healthcare and family planning

31

projects in Egypt. Furthermore, the government, in its current five-year plan (2002-

2007), has allocated about US$I.5bn for upgrading medical facilities and healthcare

services, which includes the construction of new hospitals, enhancing medical

services in urban and remote areas, broadening the training of physicians, increasing

the number of nurses, supplying hospitals and medical centers with modern

equipment, and increasing the budget for research and development (R&D) at

universities and research centers. Medical imports into the country are expected to

grow at a rate of 15% and the modernization of the heath sector has been able to

generate high demand for medical items such as laboratory and testing equipment.

However, despite the problems with the healthcare system, Egypt's health indicators

have improved. Female life expectancy at birth rose from 70.5 to 72.8 years between

1999 and 2004, while male life expectancy rose from 66.3 to 68.4 years in the same

period. The infant mortality rate for under-fives declined from 36.9 per 1,000 in 1999

to 28.6 in 2004. This was largely due to immunization and other programs such as

rural healthcare schemes funded by foreign donors.

Egypt’s success in the public health system is measured by its ability to satisfy local

demands and to respond efficiently in crisis. In 2002, the government initiated a rapid

local development of recombinant human insulin and treated about 75% of the

diabetic population. The local firms in the country have the ability to manufacture

sufficient quantities of insulin by importing insulin crystals, which are used in their

production. Earlier, more than 90% of the country's total insulin requirements were

being imported from Novo Nordisk at a cost ofUS$35mn per annum. Egypt has

witnessed a similar success in the production, diagnostics and treatment for hepatitis

Band C, with hepatitis C being the fastest growing disease in the country.

Furthermore, schistosomiasis is a parasitic infection, which is most common in the

rural population of the country and is a leading cause of death among men aged

between 24-44 years. A project named Schistosomiasis Research Vaccine

Development was outlined in co-operation with US partners in order to control the

spread of the disease. It included the development of two vaccines called paramyosin

and the synthetic peptide called microtubule-associated proteins 4 (MAP4), identified

by the World Health Organization (WHO).

Egypt has made progress in the field of biotechnology. Several local firms have

entered this market, with most importing in bulk and then packaging the products.

Local companies such as EIPICO, SEDICO, El Nil Pharmaceutical and the Vaccine

32

and Inoculation Authority (VACSERA) have been manufacturing biotechnology

products locally.

Although Egypt has a relatively low incidence of HIV/AIDS, some 8,000 cases

according to WHO estimates, there is the potential for a rapid spread in the disease.

Part of the problem is that promoting condom use has caused discord among religious

leaders in the country, who equate such practices with promoting adultery. Sex

education in school is also not common due to the conservative nature of the country.

Social stigma surrounding the disease has discouraged many from going for testing.

However, the situation is improving. Until five years ago, all those who tested

positive for HIV/AIDS had to be reported to the Health and Population Ministry. Prior

to 10 years ago, all those who tested positive were simply quarantined in special

institutions.

1.12Pharmaceuticals Sector:

In 1950, the pharmaceuticals industry in Egypt consisted of about 50 small national

producers of drugs. Leading multinationals supplied 10% share of the local market. In

the 1960s, three foreign firms, namely Hoechst, Pfizer and Swiss Pharma, had

established joint venture operations. By 1970, following nationalization, 11 local

producers contributed 90% of the domestic market. In the 1990s a more liberal policy

opened up the market to foreign and domestic newcomers and by 1996, the industry

had nine multinationals, eight private and 11 public sector companies, employing

about 60,000 people. In the mid1980s, the share of public firms stood at 80% of the

domestic production.

Due to the great diversity of products, companies tend to specialize, thereby making

the Egyptian pharmaceutical market highly fragmented. Multinationals tend to

specialize in non-OTC healthcare medications, as they are less likely to be produced

from unlicensed generics. In doing so, they also avoid the unfair competition with

local producers, which are backed by government support and unequal treatment

when it comes to importing raw materials. Low wages in Egypt is one of the benefits

available to pharmaceutical production in the country. At less than 15% of production

costs, intermediates account for about 50%, wages are extremely competitive in what

is essentially a labor and technology intensive industry. Another major asset of the

pharmaceuticals industry is the large pool of highly trained doctors, pharmacists,

33

engineers and skilled technicians whose experience in the sector has given Egyptian

pharmaceutical products a distinguished reputation in the entire region.

Highlights of the sector include:

The private sector controls over three-quarters of the local market;

The five largest pharmaceutical companies control about one-third of the

market;

There are eight multinational corporations operating in the industry, which

account for over one-third of total private sector sales;

Egypt is the largest producer and consumer of pharmaceuticals in the MENA

(Middle East and North Africa) region;

The US plays an active role in the industry through its contribution to

investment and imports;

Local production of pharmaceutical satisfies 93% of the domestic

consumption, with imports being limited to high-technology products such as

interferon α-2b and anticancer monoclonal antibodies and small molecules;

Europe supplies the majority of Egypt’s pharmaceutical imports; and

Exports comprise about 6% of pharmaceutical production.

In the latest developments, members of the Egyptian-Russian Business Council

recently held several rounds of negotiations on the pharmaceutical industry with a

number of Russian pharmaceutical companies. Negotiations were aimed at helping

realize several agreements on joint co-operation in the manufacture of medicines and

related technology transfer, especially with regard to raw materials required for

developing vaccines. Russian expertise is being sought by Egypt to develop the raw

materials for pharmaceutical products inside Egypt itself. This should not only lead to

the achievement of self-sufficiency at a local level, but should also help Egypt export

these materials to several African countries and other countries neighboring Russia.

US-based Pfizer has also outlined plans to expand its production facility worth

US$18mn situated at Al-Maza near Cairo. The decision is significant as it represents a

long-term commitment to the country by Pfizer. The US giant had been planning to

modernize its Cairo facility for several years but has held back because of poor

trading conditions. Despite having the largest pharmaceuticals market in the region by

population, tight price controls imposed by the MOHP and the devaluation of the

34

Egyptian pound had left local pharmaceutical manufacturers unable to recover their

costs. However, with the appointment of a new cabinet assigned with the task of

liberalizing the country's economy, Pfizer has given the go-ahead to its modernization

project, although this will reportedly not include a new factory.

The WHO has outlined plans to use the new polio vaccine first in Egypt as a critical

part of its polio eradication strategy. This is being developed by Sanofi Pasteur, the

vaccines business of the Sanofi-Aventis group. It has been granted a license by the

Agence Francaise de Securite Sanitaire des Produits de Sante (AFSSAPS) for Mono-

valent Oral Polio Vaccine 1 (MOPVI), which is reported to be the first vaccine

developed to fight polio in decades. Once licensed by the NODCAR of Egypt, Sanofi

Pasteur is expected to produce 50mn doses of MOPV 1 in mass immunization

campaigns in Egypt.

In June 2005, GlaxoSmithKline Egypt was awarded a loan ofEGP60mn

(US$10.46mn) from its parent company UK-based GlaxoSmithKline (GSK) to

finance its activities in Egypt. GSK’s investments in Egypt are over US$100mn and

the company has a 9% share of the country's drug market. Approximately 90% of

production is consumed locally, while the remaining 10% is exported to the Middle

East & North Africa (MENA) region. Drug companies in Egypt are currently

suffering due to a mandatory pricing system, imposed by the government. Combined

with the high costs of production and R&D, drug firms have been forced to absorb

these losses. During Q105, GSK Egypt's net loss increased 127% to EGP24.5mn

(US$4.27mn). The company is aiming to reduce its production costs in order to

reverse losses. Sales in Q105 were positive, rising 14% to reach EGP78.8mn

(US$13.74mn).

In December 2005, the Egyptian Ministry of Investment announced that a stake of

between 10% and 35% was to be offered in the upcoming IPO of state-controlled drug

firm Chemical Industries Development Company (CID). CID is entirely owned by the

state Holding Company for Pharmaceuticals and generated profits ofEGP30.8mn

(US$5.37mn) for the financial year 2004/05, an increase of35% year-on-year.

However, the Ministry of Investment has also recently announced that the merger of

the two state-owned drug makers, Cairo Pharmaceuticals and Chemical Industries and

Arab Drug and Chemical Industries Company would be postponed. The government

is planning to conduct further studies to ensure the move would help improve the

operations of both partners. The Holding Company for Pharmaceuticals is also

35

planning to offer stakes for two other state-owned pharmaceutical companies, El Nasr

Pharmaceutical Chemicals Company and Misr Pharmaceutical Industries Company,

as the government continues to promote privatization in the public drug sector.

In another development, modernization plans are being implemented for the

pharmacies of state-owned distribution firm Egyptian Pharmaceutical Trading

Company, in preparation for selling the company to a strategic investor. Egyptian

Pharmaceutical Trading Company is responsible for the distribution of drugs to

hospitals and pharmacies throughout the country. The firm owns 41 pharmacies and

has a network of 51 distribution locations. The company’s paid-up capital stands at

GBP120mn (US$209.85mn).

36

Chapter 2

Research Methodology

37

2.1 Research Problem:

The impacts of PharmaCode on the Pharmaceutical Industry in Egypt

The Egyptian government set the health care services and medicine availability as one

of its top priorities, due to the global Implementation of PharmaCode, the application

affects the pharmaceutical industry in Egypt and consequently the drug availability

and prices.

So All Pharmaceutical Corporations sooner or later must apply PharmaCode, it has to

play a new role with the drug manufacturers in Egypt in order to minimize the

negative impacts and to work on the new opportunities that will be created upon

PharmaCode application.

2.2 Research Objective:

The main purpose of this study is to assess the expected influence of application of

Pharmaceutical code of conduct on the Egyptian Pharmaceutical Industry and how

some Pharmaceutical Companies & Customers (Physicians) should react

2.3The research hypothesis

H1 –All Pharmaceutical companies operating in Egypt applying PharmaCode

H2-The majority of Physicians aware of PharmaCode and its importance

H3-The implementation of PharmaCode have a positive effect on industry image.

H4-The application of PharmaCode Reallocate the Marketing Expenditure / Budget

H5- The physicians and pharmaceutical sales representatives react positively with

PharmaCode

2.4Research design

Depth interviews are structured and direct; Personal interview is chosen to be the

design of collecting secondary data.

This method is selected the research is looking for depth information collected from

professionals and industry experts, knowing that they are competitors as well.

38

Depth interviews were the prober method of choice because the respondents were

very well selected and all of them are general managers, managing directors, and

industry experts.

2.5Population and sampling

Sampling Criteria:

The original sample was composed of Six experts in the pharmaceutical industry with

the following criteria.

The title of the expert; expert should be either Marketing Director or Chief

Executive officer.

The previous experience of the expert in the industry; long years of experience (not

less than 20 years) in the field of pharmaceutical industry

Finally we were keen to include the 3 multinational Executive and 3 Local Egyptian

companies Pharmaceutical companies industry Expert.

Secondary Data

Literature on the pharmaceutical market, the effect of pharmaceutical code of conduct

as gathered from various sources to investigate the following issue

1-The effect of PharmaCode on Industry image

2-The effect of PharmaCode on reallocation of spending marketing budget

3-The effect PharmaCode on Physicians and Pharmaceutical Representative

Primary Data:

Due to the exploratory nature of the research a qualitative approach will be employed.

Expert interview will be the method of primary data collection.

39

Chapter 3

Research Results and Hypothesis

Testing

40

3.1 H1 –All Pharmaceutical companies operating in Egypt

applying PharmaCode

Do your company applying PharmaCode?

1) Marketing Director for Multinational Manufacturing Company operating in

Egypt.

Yes, as we working in global company operate in more than 150 countries we had to

sign the PhRMA Pharmaceutical Code of Conduct

2) Marketing Company President for Multinational Pharmaceutical company

operating in Egypt.

Yes, we are Multinational Manufacturing company and we apply the PharmaCode in

Egypt since 4th Quarter 2006

Recently, a lot of pharmaceutical companies operating in Egypt is applying

3) Chief Executive officer for Multinational pharmaceutical company

Yes, we are applying code of conduct which is approved by PhRMA pharmaceutical

code of conduct

4) Chief Executive office of local Egyptian Pharmaceutical company Egypt .

Our company is implementing its own code of conduct that resembles PharmaCode in

many aspects.

5)General Manager of Egyptian Pharmaceutical Company.

.Yes, we are Multinational Company and we apply the PharmaCode in Egypt since 1st

Quarter 2006

6) Marketing Director For Egyptian Pharmaceutical Company operating in

Egypt

Yes, we are applying our code of conduct which is quiet similar to the PhRMA

pharmaceutical code of conduct

41

3.2 H2-The implementation of PharmaCode have a positive

effect on industry image.

What is the impact of application of PharmaCode on industry image?


Egypt.

Sure will improve the industry image, people do not invest in companies with bad

reputation so the pharmaceutical industry will gain the share holder value and attract

high quality qualified employees to the industry


operating in Egypt.

The code will improve the industry image among the other industries and competition

will be healthy and clean


Immediate improvement of industry image and that is good news for all employees in

the pharmaceutical industry


This will enhance its image & improve its relation with government bodies & society

which were always claiming for the right allocation of resources to decrease prices

not only aggressively marketing.

5) General Manager of Egyptian Pharmaceutical Company.

42

The code is improving definitely pharmaceutical industry image and all companies

must unite to apply the PharmaCode


Egypt

In recent studies they found that Tobacco industry had better image than the

pharmaceutical industry, it was really shameful for all employees working in

pharmaceutical industry, sure the PharmaCode will improve the industry image

What are the motives for application of PharmaCode?


Egypt.

The code regulates the marketing activities, optimizes marketing expenditure &

directs interests to invest in other scientific activities.


operating in Egypt.

Improvement of image

Right allocation of resources


Healthy competition, image, ethical environment





Improving company and industry image

Increasing the value of the career by marketing high quality products in high quality

way

43


Egypt

Healthy competition, expenditure will be for the sake of physicians education and

patients and to express the social commitment of the pharmaceutical companies

towards the society

3.3 H3 -The majority of Physicians aware of PharmaCode and

its importance

Recently, a lot of pharmaceutical companies operating in Egypt are

applying PharmaCode; do you think that Physicians are aware about

the PharmaCode and its importance?


Egypt.

The Majority Know a lot about the PharmaCode KOL, GP`s and specialists


operating in Egypt.

Fully aware and it depends on the efforts of the Pharmaceutical companies to increase

that awareness, but there are some minorities I mean Physicians they might be aware

but they try to be blind to ignore the fact of PharmaCode


Now in Egypt the pharmaceutical companies revolutionize the PharmaCode so I guess

there is high percentage of physicians aware and with the alliance between the

companies the percentage will grow high and higher


I don’t think that the whole medical community including physicians may be aware of

any kind of conduct‘s codes.

44


Not all Physicians are aware of PharmaCode, the pharmaceutical companies list do

not contain all physicians but we can say that high percentage of physicians are aware


Egypt

We can say that high percentage of the physicians are aware of the PharmaCode but

small percentage are aware of its importance and that is the more important because

the physicians can not realize the message behind the code

3.4 H4 The application of PharmaCode Reallocate the

Marketing Expenditure / Budget

Describe Marketing Budget under PharmaCode?


Egypt.

National sponsorship on single basis

International Sponsorship on single basis

PR

Market Research programs

Scientific meetings

Educational programs


operating in Egypt.

National & International Sponsorship on single basis

Donations

Educational programs for physicians held by the companies directly

Educational programs for physicians and patients held through third party like

universities


45

Pharmaceutical Company Support for Third-Party Educational or Professional

Meetings

Continuous Medical Education

Speaker Programs and Speaker Training Meetings

Scholarships and Educational Funds


We had decided on the code & started its implementation since Q3 2008. It consists of

several chapters related to all possible activity the company may perform. A new code

enforcement officer had assigned to follow its implementation. Training sessions had

been held for our staff to make sure that it is well understood thereafter follow up

sessions will be held to make sure that it is correctly implemented.


National and international sponsorship within the PharmaCode frame

Education programs for physicians and patients

Charity donation that not related to business


Egypt

Patient education

Continuous Medical Education

Donations

Sponsorship (national and for less extent international)



-MOH and Public Opinion Believe that MNC`S using aggressive

marketing practices (Please specify ………, what is the impact of

application of PharmaCode on that concern?


Egypt.

46

Aggressive Marketing practices like running PR activities , extensive repeated

scientific activities in short period of time, outstanding launch that is specially for new

drugs to increase the awareness and acquire higher percentage of market share in

shorter time , but if that activities does not breech the code so no one can blame the

company.


operating in Egypt.

If that aggressive Marketing Practices within the Legal frame of the code it will be ok

if not the company did this either local or Multinational should be punished.


The physicians who prescribe the drug not the pharmaceutical companies and

pharmaceutical companies either local or multinational spend a lot of money on

patient and physician education programs to ensure the right and appropriate method

for using the medication


N/A


Some extensive PR activities, high cost launch, huge budget to promote the drugs the

code described what is legal and what is illegal(breeching)


Egypt

Increasing the sales force, sales calls, increasing marketing budget, speaker led

meeting. But code describes what to do and what not to do and how you can things

right as well

3.5 H5- The physicians and pharmaceutical sales representatives

react positively with PharmaCode

47

How the Physicians reacting when they find certain benefits they

have become accustomed are no longer available?


Egypt.

Now it's as difficult as the physicians think that is cost cutting strategy and the

companies want to increase the profit, but for sure on the long term they will realize

The ethical benefits of the PharmaCode and we met large number of doctors specially

the KOL (Key Opinion Leaders) agree with us on the application of PharmaCode.


operating in Egypt.

It is like On/Off switch program, look if any group of people get used to receive some

benefits and surprisingly you stop that benefit what will be the reaction, it also depend

on for how long they receive these benefits? But I can say there are a lot of positive

sign especially from KOL.


Few physicians criticize the situation they are disappointed as they lost gifts, pizza

and expenses paid conferences at resorts. I met many physicians they embrace the

presence of PharmaCode

4) Chief Executive office of local Egyptian Pharmaceutical company Egypt

Definitely at beginning there will be sort of resistance, however, when realizing its

add value Drs will appreciate its importance.


It will affect the business on the short term, but in the future they will comply to the

PharmaCode


Egypt

48

I do not think it will harm the business, business will go on and physicians will react

positively but there will be few groups will be against the code. And the majority will

comply with the code

How the Pharmaceutical Representatives Reacting when certain

resources they used in the past are no longer available?


Egypt.

When our company started application of PharmaCode, they began to ask why our

company not the others and that will definitely affect our business but through

Training and with wider application of PharmaCode among all companies operating

in Egypt, this will convince them by the application of PharmaCode


operating in Egypt.

Everything by the time ill change and pharmaceutical representatives will accept that

as everything in the start is difficult but at the end they will comply with PharmaCode


Many pharmaceutical representatives are relieved after code affirmation of their

important role in physician education, only few people dislike it and they need extra

training


Probably this may happen in companies with inappropriate expenditure, for us we use

to follow the ethical & legal approaches hence this is effect is very minimal to our

reps.


49

They wonder at the beginning and ask what the reason behind the code is, but they

reacting positively as every sales rep receive training on PharmaCode


Egypt

I do not think that pharmaceutical representative have chance to just think about it, If

anyone in the organization not only the pharmaceutical representative could not

comply with pharmaceutical industry code of conduct he netter leaves the industry

What is the gain for pharmaceutical companies that applying

PharmaCode? And what will they lose if they do not apply the

PharmaCode?


Egypt.

- Image.

- Respect

More share holders will invest in the company

And the companies did not apply the code will lose the reputation and will be exposed

to penalties which will cost the companies millions of Dollars


operating in Egypt.

The companies that applying the code will gain image and good reputation, the others

will get penalties and bad image as well


The PharmaCode had significant role in organizing marketing practices and the

pharmaceutical companies exert a lot of effort to adhere to the PharmaCode for the

sake of industry image and ethical business environment, companies breeching the

PharmaCode must be penalized


50

Company gains include:

- Good image.

- More scientific & clinical researches.

- Superiority of truly good brands.

- Reduction of costs.

- Economic prices.

If a Company did not implement the code it may loss its reputation in the market

which is a pivotal issue. Later there must be a declaration for those who did not abide.


The companies that applying the code will gain good reputation, the companies which

did not apply the code will gain bad reputation and may be receive penalties


Egypt

Its all about image and reputation companies will apply will gain respect and image

and for companies ignore PharmaCode they will lose everything and there is

something else for companies ignore PharmaCode they will oblige to apply

PharmaCode in the future and that will make them late comers and adaptation to code

will be hard and harder

Who should receive training on PharmaCode?


Egypt.

All employees in the organization must receive training on PharmaCode


operating in Egypt.

All employees, vendors and distributors in the industry must receive training on

PharmaCode


51



- Industry members, including; Pharma Cos. Distribution Cos. Etc … … …

- Government members & the society.

- Medical Community, including; Drs, paramedical staff, hospital administration, etc




Egypt


What is/are aspect(S) can be discussed in the future versions of

PharmaCode?


Egypt.

More penalties for companies breeching the code and create programs for patient

awareness on the PharmaCode


operating in Egypt.

Breeching cases must be discussed, analyzed and converted to actions that must be

transmitted in the new version of PharmaCode


The code must be more strict against companies who breeching the PharmaCode


- What is to be done with Co. who did not implement it.

- Breach’s of the code.

- How to deal with its drawbacks.

52


Extra penalties for companies that breeching the PharmaCode, and the transmission of

PharmaCode to patients using the products of the pharmaceutical companies


Egypt

Cooperation between companies for promotion of PharmaCode and more penalties for

companies that breech the code

Who should supervise the application of PharmaCode?


Egypt.

Compliance Manager and finance department as well


operating in Egypt.

Legal Compliance Officer


Legal office, sales and marketing managers, a team must be formed to act as internal

auditor for applying the code


Each company should assign the code enforcement function to one of its key

manager.


Legal Compliance Officer, medical directors and all managerial level

53


Egypt

Compliance officer, medical director and every company shall form compliance

committee represents all departments in the company

54

Chapter 4

Research Conclusions

& Recommendations

55

Research Results

About Application of PharmaCode

There is a revolution in the application of PharmaCode application among the

Multinational companies operating in Egypt in the last three years as they are obliged

to apply PharmaCode, if there is minor breeching the penalty will hurt the company

financially so they are strongly committed to strict application of PharmaCode,

surprisingly the national companies operating in Egypt who did not sign agreement

for application of PharmaCode started recently to apply regulations that is quiet

similar to PhRMA , and they are developing their own copy of PharmaCode

Physicians awareness of PharmaCode

Now in Egypt high percentage of physicians' especially Key opinion leaders,

specialists even General Practitioners have strong awareness about PharmaCode, but

not all the medical society aware, pharmacists, distributors, feedback from market

tells us that some physicians are aware but they tend to be blind to get the benefits

they get used to take it in the past before PharmaCode application.

Awareness can be increased via media, local medical/pharmaceutical society's

conferences, Ministry of Health and its syndicates like general syndicates of

Pharmacists and Physicians can play an important role in increasing awareness of

PharmaCode.

Marketing Expenditure under PharmaCode

Multinational and National companies have quiet similar definition of marketing

activities under PharmaCode

Sponsorship of many scientific activities such as

National medical society's congress sponsorship

International congress outside the country, but due to the high cost of international

sponsorship, the multinational companies invest more than the national companies

56

Market research programs

Public relation

Educational medical programs

Audiovisual scientific meetings/Speaker programs and speaker training meetings

Charity donations that is not related to business

Patient education programs

Scholarships and educational funds

Motives behind PharmaCode application

Healthy competition, expenditure will be for the sake of physician and patient

education and the companies can express its social commitment to the society

Image is important motive for PharmaCode application; sure the PharmaCode

improves the industry image

Right allocation of resources is one of the major aspects of PharmaCode application

Effect of PharmaCode on Industry image

Definitely PharmaCode will have positive effect on the pharmaceutical industry not

only in Egypt but also in pharmaceutical global market

In recent study run by group of US market research centers declared that Tobacco

industry has better image than pharmaceutical industry which was shock for all

employees working in the pharmaceutical industry

Currently the pharmaceutical companies strictly applying the pharmaceutical code of

conduct in addition to extensive training programs to the employees working in the

pharmaceutical industry

The companies that applying PharmaCode will acquire respect, image and high

reputation

And shareholders will run to invest their resources in business running on ethical way

And the industry will attract high quality qualified employees who only work in

industries running its business on ethical way

57

Effect of PharmaCode on Physicians and Pharmaceutical Representative

While some physicians may be disappointed at no longer receiving gifts such as

resorts, entertainment or not being invited to attend expenses-paid conferences at

resorts the feedback received from many physicians and physicians organizations that

on the short term it will have negative impact on business and physicians would resist

the PharmaCode application but in the long term physicians will react positively and

will comply with PharmaCode

On the other side Pharmaceutical Representatives and as physicians they would not

comply at the beginning but they will comply as they will feel the important role in

the physician education

The challenge is to inform all physicians of the code and encourage them to consider

the upside of not continuing to receive benefits they have accustomed.

On the long term most physicians will embrace the PharmaCode and few physicians

will criticize it.

The effect of PharmaCode on reallocation of marketing budget

Resurgence within the pharmaceutical industry of innovative thinking regarding

effective strategies to inform physicians about the benefits of pharmaceuticals and

redirecting marketing funds previously allocated to food, travel and entertainment

A wide variety of CME continuous medical education approaches are available such

as advertising on professional journals, Support for Third-Party Educational or

Professional Meetings, Speaker Programs and Speaker Training Meetings, Develop

Clinical Practice Guidelines and sponsorship of organized CME activities,

Scholarships and Educational Funds.

Other aspects on PharmaCode application

Training

All employees in the pharmaceutical industry must receive vigorous training on

PharmaCode in their initial training and must pass exam as well.

Not only shall the employees, the consumers (patients) be informed on the basis of

PharmaCode and its benefits

58

Training and educational programs must run to inform physicians about PharmaCode

and its impact on the whole industry as the research described that physicians might

know PharmaCode but they do not know the benefits.

Future aspects on PharmaCode

Future versions of PharmaCode would discuss transmission of PharmaCode directly

to patients, moreover may ask pharmaceutical companies to provide any information

about the composition and allocation of its marketing budget. Companies found to

have breached the Code of Conduct can be fined up with more expensive penalties.

59

4.1 Research Conclusion

1-Not all the Pharmaceutical companies operating in Egypt apply the pharmaceutical

code of conduct. The Multinational companies signed the PhRMA Code of conduct

while the Local national companies struggling to apply a form that regulate their

business that resembles the PharmaCode

2-All the interviewers pretty knows what is meant by the PharmaCode, moreover,

they do believe in concept, as PharmaCode became a fact of life. Hence, the art is

how to deal with it by minimizing its negatives and making the best utilization of its

positives.

3-PharmaCode finger prints are going to reach most of the pharmaceutical

organizations in Egypt. Bearing in mind that the impact’s degree depends on the

extent to which the organization is prepared to handle the PharmaCode obligation

4-A wide majority of the physicians are aware of the PharmaCode but really not high

percentage consider its importance, some of them see that it’s a way for the

pharmaceutical companies to reduce their marketing budget rather than its ethical

value

5-At the start of application industry members will resist application of PharmaCode

like physicians and pharmaceutical representatives, but in the long term they will

value the benefits of PharmaCode a lot.

6-Marketing budget will be reallocated under the umbrella of PharmaCode and

instead of entertainment, food and meeting in resorts the budget will be directed to

CME programs, scientific meetings, donations and patient/physician education

programs. That will have great impact on quality of life of patients and business as

well

7-The PharmaCode will improve the pharmaceutical industry image, indeed attract

more employers to work in it, and more shareholders to invest in and create healthy

environment for clean competition

8-All employees in the industry must receive training on PharmaCode in their initial

training and pass exam as well testing their knowledge on PharmaCode

9-The PharmaCode application is the responsibility of every employee in the

company and must be supervised by Legal compliance officer and medical directors.

60

10-Each pharmaceutical company has its own strategy, but the common

manufacturers’ strategy is to:

Focus on the application of PharmaCode in short and midterm and keep an eye on its

marketing budget, as well as the development and training of all employees.

Support the Egyptian patients and the government by securing the availability of the

pharmaceutical products in general and new products in specific at affordable prices.

11-As the Egyptian Market grows to be very attractive in terms of revenue and profit

as well, the pharmaceutical companies operating in Egypt should serve the Egyptian

community by funding charity programs

12- The Medical syndicate function is criticized by all manufacturers whom asking

for a change in its performance mechanism, where the syndicate instead of focusing

on the development of its members, applying the code of ethics in cooperation of the

pharmaceutical companies, fighting against the malpractices of its members; On the

opposite, Syndicate used to have a political role with the government and its leader

have conflict of interest where most of them owns pharmaceutical companies in

addition to their positions as Medical syndicates leaders

13-There is a substantial debate regarding the competitive advantages status could be

provided to the pharmaceutical industry in Egypt; between the Multinational

companies and Local manufacturing companies operating in Egypt as the

Multinational companies using some aggressive marketing practices like very

expensive launch, PR activities, speaker led meetings, international sponsorship and

other activities especially for newly high priced drugs, but at the end if all that

aggressive marketing activities are within the PharmaCode so its allowed.

61

4.2. Research Recommendation

1. The government needs to:

1-Work very close to the drug manufacturers in Egypt to support the drug availability

at affordable prices.

2-Create untraditional resources to support the Governmental health sector.

3-Upgrade the Health Insurance sector using the international expertise in this field.

4-Cooperate with the Multinationals through access programs for the new products.

5-Develop new programs to increase the patient’s education that’s with cooperation

the pharmaceutical companies operating in Egypt

6-The government declared to public, through its official ministers (MOH &Industry),

that the PharmaCode agreements will be strictly implemented and any international

agreements signed by the Egyptian Government will be respected.

7-The government must issue legislations to punish any breeching violated by any

company.

The government is doing so because any violation occurred in the international

agreements will negatively affect the foreign investment in Egypt as well as the

government credit and image worldwide, which will affect the undertakings of

Egyptian Economy Vitalization Plan.

For Pharmaceutical Companies operating in Egypt either Multinational/local

1-Strong and vigorous training must be conducted to all industry members sponsored

by the pharmaceutical companies including industry employees like pharmaceutical

representative's distributors and vendors.

2- The PharmaCode must be studied during university degree, in faculties of

Pharmacy, Medicines and all faculties and institutions related to healthcare

professional

3-The Media and MOH must exerts more effort to inform the industry members about

the importance of PharmaCode

4-The Pharmaceutical companies working in Egypt either Local or Multinational must

increase its sponsorship of CME programs, Patient education programs and other

scientific activities that not based on entertainment.

62

5-Alliance of all Pharmaceutical corporations operating in Egypt for supporting the

application of PharmaCode

7-Rewards and presents must be introduced for individual & companies applying the

PharmaCode

8- To change their mindset in marketing and promotional activities as follows:

9- To be well prepared in order to successfully face prospective aggressive

competition expected to take place by the Multinational Generic Companies.

10-To invest in conducting continuous training programmes for the sake of people

development and training. Vis a Vis, attracting qualified candidates through attractive

packages, especially, in the vital functions i.e. sales, marketing, and Finance.

11- To follow the implementation of the PharmaCode agreement in view of

government collaboration..

12- To work very closely with the Ministry of health in upgrading the education

programs for physicians, pharmacist and patients.

13-To support the communities they are operating in by participating in the social and

health projects i.e. the New Paediatrics Oncology centre.

63

Research R eferences

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Wokingham, England ; Reading, Mass, Addison-Wesley .

4. Dunning, J. H., B. Kogut and M. Blomstrom (1990). Globalization of firms and the

competitiveness of nations. Lund, Institute of Economic Research Lund University ;

Bromley : Chart well-Bratt c1990.

5. Gilpin, R. (1986) U.S. Power and the Multinational Corporation- The Political

Economy of Foreign Direct Investment. New York: Basic Books, Inc., Publishers .

6. Sanjaya Lall, Attracting Foreign Investment: New Trends, Sources and Policies,

Economic Paper 31 (Commonwealth Secretariat, 1997).

7. GOLUB, S. (2003), “Measures of restrictions on inward foreign direct investment

for OECD countries”, OECD Economics Department Working Papers, forthcoming.

8. GRAHAM, E.M. (2000), Fighting the Wrong Enemy, Institute for International

Economics, Washington.

9. Pharmaceutical code of conduct USA APRIL 2002

10. HOEKMAN, B. (1995), “Assessing the general agreement on trade in services”,

in W. Martin and L.A. Winters (eds.), The Uruguay Round and the Developing

Countries, World Bank Discussion Paper No. 307.

11. UNCTAD, World Investment Report, 2003.

12. Insight Yased ‘Letter from Chairman’, Volume 4 Issue 4, 2003.

13. Dadush, Dasgupta and Ratha, “The Role of Short Term Debt in Recent Crises,”

Finance & Development, 2000 December, Volume 37, pp.54-57.

15. OECD, ‘Technology and Productivity: The Challenge for Economic Policy’.

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Markets Matter: The Benefits of Trade and Investment Liberalization’. (Paris: OECD,

1998).

64

18. Australian Pharmaceutical code of conduct 2005

19. Addison and Heshmati the New determinants of FDI Flows to Developing

Countries: Importance of ICT and Democratization.” UNU/WIDER Discussion

Paper No. 2003/45, 2003.

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618.

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Developing Countries. Discussion Paper EC10/98, Lancaster University.

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Review of International Economics, Vol. 8, 360-371.

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79, 1249-1256.

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and Host Country Strategies, London: Macmillan.

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A Quantile Regression Analysis", Oxford Economic Papers (forthcoming).

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in the UK., Manchester School, Vol. 69 (1), 103-119.

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Trends and Counter trends, Bulletin for International Fiscal Documentation, Vol. 55,

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and Firm Survival: Evidence from Irish Manufacturing., GLM Research Paper

2000/18, University of Nottingham.

65

List of TablesList of Tables

Table No. Title

Page

Table (1) Global Pharmaceutical Market

Table (2) Top leading corporations in

The pharmaceutical industry in Egypt

Table (3) Top leading products in the

Pharmaceutical industry in Egypt

List of FiguresList of Figures

Figure No.

Figure (1) the national companies' evolvement 2002 -2007

Figure (2) the national-multinational corporations

Growth evolution 2002 - 2007

Figure (3) the national-multinational corporations

Sales evolution 2002 - 2007

66

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