Welcome to the Saudi Arabia focus edition of Law Update.
One of the key markets in the Middle East and North Africa (MENA) that continues to lead from the front is the Kingdom of Saudi Arabia (KSA). As the largest country in the Middle East and the 18th largest economy in the world, the progress KSA continues to make is underpinned by its Vision 2030 that envisions developing the country as an investment powerhouse and hub that ultimately connects Asia, Europe, and Africa. Given Saudi Arabia’s significance to the regional economy, our team of experts have prepared a range of pertinent articles that provide insights into new laws, regulations, and the legal landscape in the Kingdom.
This edition will provide you with an up-to-date guide on matters such as; the framework issued by the Saudi Central Bank on IT governance, the anti-corruption landscape under Vision 2030; we also provide practical tips for dispute avoidance. This is only a snapshot; there are many more articles within the KSA focus section for you to read, which we hope you will find valuable and enjoyable.Read the edition
Article 64 of the Federal Law no. 4 of 1983 concerning the Profession of Pharmacy and Pharmaceutical institutions (“Pharmacy Law”), states the following:
“The Minister may at the recommendation of the committee stated in article 63 decide the following: 3. Fixation of the price of any medicine or pharmaceutical preparation and consider pricing.”
Accordingly, the main legislation governing the fixing of prices for drugs in the UAE is the Pharmacy Law. The sole authority to fix and consider the price of medicines and other pharmaceutical preparation is vested in the Minister of Health (“The Minister”). These fixed prices include the price sold by from the wholesaler to distributors to pharmacies. According to his authorities, the Minister has the power to fix the price of any medicine, and this should include the price through its different stages (Company to distributor, distributor to pharmacy and from pharmacy to customers).
Article 2, 3 and 4 of the Ministry resolution No. 834 for the year 2008 concerning the pricing of drugs, clarified how to calculate drug prices and accordingly divided this into two categories as follows:
First: the prices of selling imported drugs to the public shall be calculated as follows:
1. Drugs of chronic diseases and antiviral
Selling price to the public = CIF cost x Currency Exchange Rate + (profit margin to the agent (%15 of Cost, insurance and Freight in Dirham) + profit margin of the pharmacy (%18 of CIF in Dirham)
2. Concerning drugs not stated in item “First” (Non-chronic diseases and non-antiviral)
Selling price to the public = (CIF cost x Currency Exchange Rate) minus %10 + (profit margin to the agent (%20 of Cost, insurance and Freight in Dirham) + profit margin of the pharmacy (%24 of CIF cost in Dirham)
Second: the prices of selling local drugs to the public shall be set as follows:
Selling price to the public = ex-factory price + (profit margin of the agent (%20 of the ex-factory price) + profit margin of the pharmacy (%24 of the ex-factory price).
The profit margins of distributors and pharmacies are fixed as per to the Ministry Resolution No. 171 for 2011. According to this resolution, the discount on drugs must comply with the fixed profits stated above according to the resolution no. 834 of the 2008, as the following:
Drugs companies cannot offer their distributors a discount which exceeds the fixed margin in the UAE laws. Also these companies can not waive any percent of the specific discount of laws in favour of the distributor; as this would be considered as a direct violation of pricing Law & regulations as per to laws and the above two resolutions.
Commissions, Incentives or any other financial benefits given to distributors are subject to the aforementioned regulations. As a general rule, any discount other than the permitted discount by law, at any level, is not permitted under the UAE laws and regulations.