Israeli Pharma Industry Review

In its 1993 report, the chemicals and pharmaceuticals branch of the Israeli Manufacturers Association says that the 25 local drug producers exist in difficult conditions. The market is competitive, characterized by a multiplicity of suppliers (producers and importers) and a narrow, powerful customer base headed by the General Sick Fund. The supply of drugs is varied and large; 4,500 products are registered with the Ministry of Health, of which 2,500 are actively marketed.

The institutional market (sick funds, MoH, hospitals) represents 92% of the total market. Strict price control takes place at three levels - establishing a price for each product, updating of prices and monitoring of annual profitability. This control is exercised only over manufacturers, while over 50% of the retail price goes to cover pharmacists' and importer/ distributors' margins, and includes value added tax and discounts. The manufacturer is left with under half with which to cover all costs, including R&D, it says.

Nevertheless, the sector shows impressive growth and is characterized by high technological capability and stability, says the study. In 1993, six new investment applications were made, with indications that financial groups are entering the sector.