Medicine in Motion

With plans to compete globally in the biotechnology market, and to have an AED One billion (US$272 million) capital value by 2010, Gulf Pharmaceutical Industries (Julphar) will be pumping out masses of drugs. Still, the Ras Al Khaimah-based manufacturer is choosing to take care of distribution all by itself

Abdul Razzaq Yousef, Chief Executive Officer, Gulf Pharmaceutical Industries (Julphar)

Big name pharmaceutical companies like Pfizer, Merck and Eli Lilly, likely have very few kind words for Abdul Razzaq Yousef. He is the Chief Executive Officer of Gulf Pharmaceutical Industries (Julphar), a drug manufacturer based in Ras Al Khaimah, and the market leader for generic medicines in the Middle East.

The company produces over 800 formulations and 184 brands in every major therapeutic category, including analgesics, anti-malarial drugs, anti-biotics, anti-amoebics, anthelmintics, antihistamines, vitamins and steroids.

“The big multinationals have a patent right over their products for 20 years, but still they want that right to continue,” says Yousef. “It becomes like a monopoly.”

And these companies can play dirty games in the name of profit, for example keeping newer generations of drugs off the market, as long as the preceding generation is still under patent and making money. “When the patent dies, then they’ll start introducing the new generation of the drug,” he explains.

But Gulf Pharmaceuticals is about to step into the multinational league, investing heavily in biotechnology, which involves producing medicine with live
cells, rather than chemical processes. The company recently spent millions of US dollars, for example, to purchase a particular strain of modified E. Coli bacteria which can generate human insulin. They are investing AED 260 million (US$71 million) in a plant which will produce 1,500 kilograms of human insulin crystals annually, as well as AED 100 million (US$27 million) in a biotechnology filling plant, producing 35 million each of vials, cartridges and ampoules. Both plants are scheduled for completion by the end of 2009.

“We have entered the biotechnology era,” says Yousef. “We are the pioneers of biotechnology in the Middle East. We are the first company among 216 pharmaceutical in the MENA region to adopt biotechnology.”

He says he is aware of the challenges of marketing genetically engineered medicine.

“With simple generic products, it is easy to prove to the doctor that your product is equivalent to another. But when you are producing biosimilar products, it is very difficult to prove that two products are identical.”

He knows he is going to have to earn the confidence of the doctors who could prescribe his drugs. “If your products are 10 or 15 per cent cheaper than the competition, a doctor will have no interest. And if you’re 50 per cent cheaper, the doctor does not trust you.”

The company is also constantly challenged by counterfeit drug producers
from countries such as Pakistan and Yemen, where Yousef says the law does very little to protect his products. He gives the example of the burn ointment
MEBO: “A company in Pakistan took our brochure, our leaflet, our promotional materials. They copied the marketing of the product 100 per cent, and they’ve registered the ointment in Pakistan as ‘Mebo’,” he says. “But it’s a totally different product – some gasoline, and some grease.”

Yousef says he’ll never know exactly how much money his company loses due to counterfeits.

One of Julphar’s plants

 
Gulf Pharmaceuticals has commissioned SSI Schaefer to build a
20-conveyor distribution centre

OUR WAY With AED 660 million (US$180 million) of sales in 2006, Gulf Pharmaceuticals ships approximately 1,000 containers a year, mostly by truck within the GCC and Middle East, but also by air as far as Europe, Ecuador, the United States and Malaysia.

“We prefer to transport by truck to the whole MENA region,” says Yousef. “There is no direct line from the UAE to North Africa. You have to go to Italy, and then reship the container. This takes far too long.”

In fact, Julphar recently spent AED50 million (US$14 million) on 50 Volvo trucks and 50 refrigerated 40 foot containers made by Saudi company Matlak to set up its own transportation company, Menacool.

“The inside temperature of dry containers in the summer here reaches 80 to 90 degrees Celsius,” says Yousef. “We discovered that some of our products reached the customer in deteriorated quality, because trucks were turning off their generators when they were stopped at the borders. We decided we needed to form our own transportation company to guarantee to our customers that all our products are reaching them at a constant temperature and condition.”

Yousef says Julphar’s set up of Menacool was in no way a cost-cutting measure. “The cost of transportation is two to three per cent of the medicine,” he says. “If it starts to cost four per cent, that doesn’t matter.”

He knows Menacool is going to have to expand in the future, as Gulf Pharmaceuticals is ramping up its production, with four new plants planned within the next few years, giving them a total of 14 production facilities.

“Now we are transporting about 1,000 containers a year,” he says. “This will increase to up to 3,000 containers by 2010.”

Yousef says Julphar is also exploring the idea of setting up a division of Menacool to transport drugs from distribution centres to pharmacies. “We are studying this system in the UAE and I think we are going to implement this system in Saudi Arabia, UAE and Oman in the near future,” he says, mentioning that the company will need a chain of smaller vans and cars in constant motion.

But he says his team has not yet decided whether or not to outsource the service. “We are studying this also,” says Yousef.

If it goes forward with distributing to pharmacies, the company is going to need a lot of trucks, as Julphar plans to expand its own pharmaceutical network of 110 in the UAE to 2,000 in the region within the next few years. Yousef says this project, Planet Pharmacy, will help Julphar compete with multinational giants like Boots who are setting up their own chains in the Middle East. “We have to have a relationship with the distributors, and we have to have a relationship with the pharmacists,” he says.

“Why don’t we start our own big chain in the MENA region?” Yousef says this chain will sell both Gulf Pharmaceuticals’ and competitors’ products. “We will
make sure customers have everything available under one roof.” But will Gulf Pharmaceuticals ever distribute via the Internet?

“I do not encourage that,” says Yousef. “I do not think it is a healthy way, because you cannot guarantee the quality of the drug you are buying. It’s a lot of question marks.”

INNOVATING Inside the Julphar premises, Gulf Pharmaceuticals is also investing heavily in its logistics infrastructure. The company has recently commissioned Dubai- based SSI Schaefer to build a 20-conveyor distribution centre to process customer orders. Three infeed lines supply pallets to one of 20 pallet positions for each conveyor line, each designated to a particular destination, for example Saudi Arabia. When the truck headed to Saudi Arabia arrives at the loading gate, another transfer car loads the ordered pallets on an outgoing conveyor. The outgoing conveyor then moves the pallets to a forklift, that stores it in the truck. The entire process is sensor-monitored by Sick.

“With the design of the Schaefer system, we can ship 20 40-foot containers a day,” says Hasan Jibreel, Director Projects Dept., Gulf Pharmaceutical Industries. That’s between 2,000 and 3,000 pallets a day, he says, “if we work 10 hours a day.”

“I don’t think any pharmaceutical company in the region has such a sophisticated system,” adds Yousef.

WAREHOUSING Gulf Pharmaceuticals built 10,000 sq metres of cold storage last year, which includes 2,000 sq metres of -20 degrees Celsius space and 2,000 sq metres of four to eight degrees Celsius.

It also has a warehouse for raw materials, which can handle up to 8,000 pallets, and a warehouse for packaging, which can take 50,000 pallets. “We use a lot of bottles, which take up space,” explains Jibreel.

The finished goods warehouse can handle up to 15,000 pallets, but is not yet automated.

“This can be a possibility in the future,” says Jibreel. And judging from Julphar’s eagerness to invest, it probably will be.