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Ali Mosawi writes about the misconceptions of Iraq's often inhospitable landscape, the essential role of international expertise in driving growth, and how the sector has adapted to meet the challenges of the COVID-19 pandemic.
Once the largest market in the Middle East, Reuters News Agency has recently reported that official government figures indicate that the Iraqi pharmaceutical sector is now worth $4.6 billion and growing. Ali Mosawi, Chairman of Al Hayat, one of Iraq’s oldest pharmaceutical distributors, writes on the misconceptions of the country’s often inhospitable landscape, the essential role of international expertise in driving growth and how the sector has adapted to meet the challenges of the COVID-19 pandemic.
In 1989, Iraq had the largest budget for healthcare in the Middle East. While that is surprising now, at that time, its healthcare sector exceeded even those of Saudi Arabia, Egypt and Turkey, now powerhouse economies of the region.
The events and politics which hindered and reversed this growth during the 1990s are well known and best reported elsewhere. But I vividly remember my shock, upon returning to Iraq after the first Gulf War, to see the sudden shortage of basic medicine in my country.
Global pharmaceutical companies, owed vast unpaid debts by the Hussein regime, had been forced to halt the supply of vaccines. So acute was the need that, working as a consultant with SmithKline Beecham, it was necessary to form a delegation with the Iraq Ministry of Health which negotiated with the Bank of England and Department of Trade to source essential vaccines by using frozen assets to fund the repayment of these debts.
Throughout the 1990s, UN sanctions and increasing global isolation continued to drain the brains, resources and money from this and many other sectors, inhibiting growth and development, degrading infrastructure and allowing informal business practices to flourish.
So, it was in this context that 25 years ago I founded Al Hayat to provide safe access to life-saving medical products for the people of Iraq, even in times of disruption and upheaval.
At the heart of our success is an uncompromising adherence to the standards required by our international partners. Over the years, we have benefited from their expertise in compliance and distribution, and applied this knowledge to our increasingly mature market. Despite this, there remains some misunderstanding of the Iraqi market, the level of risk and the opportunity within it for international partners.
When people think of Iraq, they think of Saddam Hussein, of conflict, of ruined cities, of ISIS. This is understandable – the front pages and war correspondents have set the tone. While the consequences of Iraq’s often tragic history are still visible, you will also see modern office buildings, advanced facilities, busy universities, and an ambitious, well-educated population. Most of all, you might notice a rapidly growing middle class which is driving growth in our sector.
Counterintuitively, the fact that Iraqis have experienced so much turbulence is what causes the country to be increasingly less affected by it. In the background of every well-publicized period of conflict and political change, away from the pockets of unrest, businesses adapt and carry on as usual. Cancer patients still need oncology drugs, diabetic patients still need insulin and almost everybody, at some point, needs antibiotics.
International partners that have either remained in or returned to Iraq acknowledge this resilience and have seen it first-hand in recent months as the country tackles the coronavirus pandemic. Most understand and welcome the ability to maintain services. The best of these organizations play a proactive and demonstrative role in supporting local companies and communities and building national GDP.
The Iraqi healthcare sector is worth $2bn and growing fast. It is fueled by a resurgent middle class, but also the fact that the existing public health system is increasingly less able to satisfy growing demand for its services.
In the main, access to medicine via public hospitals can be a process beset by staffing shortages, bureaucracy and waiting times. Al Hayat and its partners have seen first-hand how this has created a healthy and competitive environment in which the private sector can grow. To illustrate the difference: in the private sector, there is around one nurse to every five patients. In the public sector, the ratio is closer to one in forty.
Just as the Iraqi people are used to change, as a business we have learned to increasingly scan our horizons to predict the impact of sudden environmental or political events and mitigate the risk to our customers, products, and partners.
On the ground, our General Manager is the impetus behind our risk mitigation strategy. Well versed in the anticipation and management of risk, he has steered our operations safely through many challenging times. The support of our international partners has been invaluable; we regularly source external auditing of our operations from neighboring countries and respected multinationals. By constantly checking and stress-testing our procedures in line with the highest international standards, we evolve our crisis preparedness to exceed the demands of typical business. Because ours is not a typical environment.
In the midst of the COVID-19 pandemic, these lessons have proven invaluable. Strict compliance parameters and strong internal processes have allowed us to continue our essential work in spite of the crisis. While curfews and social distancing have complicated the environment, there is unprecedented demand and we have sought to maintain distribution to the hospitals and pharmacies fighting the virus. We have done so in collaboration with the Ministry of Interior, receiving special dispensation and protection to deliver medical supplies to those most in need.
By strategically dividing our capability across separate geographies, establishing multiple distribution hubs across the country, Al Hayat has been able to guarantee distribution, even if an area has been severely affected by unrest or the pandemic. A significant investment in the insurance of our operations and products has further reduced exposure.
But as well as capital expenditure, it has been necessary to make substantial internal decisions to preserve our service. Prior to the defeat of ISIS, to maintain profitability, we would have had to cut substantial numbers of staff and reduce our service – instead, we safeguarded all jobs and the majority of our service: all members of staff from top to bottom proposed a 30% salary cut to ensure they all stayed.
Complementary to the growth of the market, we have also seen increased efficiencies in regulatory procedures. It used to take years for the government to approve a new drug. Now it can be on the market in just six months.
But there remain many gaps in the market where corrupt practices are allowed to flourish and unsafe, non-compliant medicine enters at an artificially low price. In ensuring that our own medicine is wholly compliant with GDSP, as defined by the WHO, locally tested and dual hologram med (a process safeguarded by over 45 SOPs) we are at a commercial disadvantage and lose a double figure percentage of profit. This is a worthwhile price to pay for the trust of international partners and customers.
Likewise, in spite of Iraq’s inhospitable climate and challenging terrain, strong investment in the cold chain is paramount to secure the confidence of both multinationals as well as local pharmacies. Unsurprisingly, cold chain management in 50°C (122°F) is a serious challenge. But global standards can be met through industry-tested configurations of qualified refrigeration rooms, temperature sensors and controlled drug vaults.
We work with seven major international principals and view our regulatory requirements through the prism of their local and international norms. Unfortunately, there are some well-known organizations who do not directly operate in the Iraqi market. Internally, this can leave gaps in supply where essential medicines must then be brought across borders, doubling cost and the likelihood of corrupt practice.
The market suffers when pharmaceutical companies do not operate directly on the ground. Unless those with close knowledge of the challenges and opportunities involved do not drive the necessary relationships, misunderstandings about the Iraqi business landscape can evolve into preconceptions which stifle growth. And these can erroneously influence decisions on how an organization operates in-country.
Al Hayat is not an agent, but an advocate for the companies it represents. It often refuses business because it will only work with compliant companies. Protecting the reputation of the company as a trusted partner is paramount over short-term gain and essential in creating a stable market. There is ample opportunity for international organizations to further embed this culture.
International partners bring more than their products to the market. They bring expertise. They also create a virtuous circle where the greater their investment in process and personnel, the greater the attractiveness for other investors, and the greater the growth.
They can develop the health sector as a whole, bringing scientific knowledge to Iraq and medical training. Al Hayat’s practice of quality assurance, for instance, has been substantially developed in conjunction with our brand partners beyond local requirements. Our oldest partner, AstraZeneca, would attest to the benefit of this investment and close collaboration. It regularly provides in-house training, which includes registration, importation, storing products, as well as help to the government in how to refine its structures and processes in-line with international standards. But they cannot do it alone.
New entrants to the market can supplant dishonest practices by training their personnel from scratch, ensuring that from the very beginning they know nothing other than the correct regulatory standards and world-class compliance.
International expertise continues to accelerate the Iraqi health market’s strong growth and, in recent months, has proven core to our ability to tackle the coronavirus pandemic. In the end, the pharmaceutical business is not just a business. It is about more than fine-tuning risk management or optimizing infrastructure and supply chains. It is primarily about providing the best practice and safest medicine to the greatest amount of people. This has been particularly evident during the COVID-19 pandemic. It has reminded businesses like ours of the significance of our services to those in need of essential medical products, and the importance of maintaining the most robust and compliant procedures to guarantee their safety. The key role of international partners in cementing these practices and assisting our operations in times of emergency has never been thrown into sharper relief.
Ali Mosawi is Chairman of Al Hayat.