Pharmaceutical distribution market in KSA now open to international investors

A new Pharmaceutical Establishments Law came into force on 24 August 2020. A key change is that the Saudi Food and Drug Authority (SFDA) will now license foreign owned entities to open and operate businesses trading and distributing pharmaceuticals in Saudi Arabia.

This is a departure from the old law which required all such entities to be wholly-Saudi owned. This change may attract global pharmaceutical companies to invest in the pharmaceutical sector in the Kingdom by establishing wholly owned companies, having an investment stake in local distributors, or to enter into new joint venture partnerships, to ensure international quality standards are closely monitored and controlled.

Prior to applying for SFDA licensing, a foreign applicant company will first need to obtain a commercial foreign investment license from the Ministry of Investment to set-up a corporate presence in the Kingdom. For a 100% foreign owned business this will require initial cash capital of SR30 million as well as an investment of at least a further SR200 million over the initial five year period after the foreign investment license is granted.

Other noteworthy changes in the new law are:

  • the SFDA replacing the Ministry of Health as the supervising and governing authority for
    such businesses; and
  • harsher punishments for committing violations of the law. Such violations include fraud in preparing, selling or importing pharmaceutical formulations or using misleading information on the packages.

Download the PDF version of this brief here.

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