Healthcare Opportunities

Transcription

1 Healthcare Opportunities in Saudi Arabia Market Overview Healthcare sector across the Middle East is evolving to meet growing demand, and Saudi Arabia is leading the way Deloitte Demographic Overview and Growth Projections Saudi Arabia is the largest economy in the GCC region and is the world s largest producer of oil. The GDP for the period of grew between 4.4% and 7%, with a 4.8% average growth projection for the next four years. With an estimated population of 29 million residents and an annual population growth rate of 3.3%, the Saudi Arabian healthcare sector caters to a rapidly growing population and a concurrent rise in demand. KSA has the largest and one of the fastest growing population in the GCC The overall supply of healthcare facilities struggles to keep pace with the burgeoning population, a situation recognised by the Government which has recently introduced initiatives to encourage the private sector to match the shortfall and benefit from this potentially lucrative sector. 1 Healthcare Infrastructure and Human Resources The Ministry of Health operates over 250 hospitals in the Kingdom, which represents over 60% of total hospitals. The private sector owns 30% of the sector, while other players include the National Guard Health Affairs, Ministry of Defence and Aviation, Ministry of Interior and Royal Commissions. Expats are being forced out of public hospitals, and it is speculated that they will not be allowed to use public hospitals in the near future. With a strong increase in expat population, which is expected to reach 45% of the total population by 2020 (from 25% today), there is extensive There is a shortage of doctors, nurses and beds in Saudi Arabia need for new private hospitals; especially as they have an average of 30 beds less per hospital than public hospitals. Compared to developed countries, Saudi Arabia has a shortage of doctors, nurses and beds. The health sector in Saudi Arabia remains relatively under penetrated with around 2.2 beds per 1,000 population against a global average of 2.7, and around 4 for the West and Europe. 1 To reach the 1 Farouk Miah, Head of Equity Research, NCB Capital 1

2 Ministry s goal of 3.5 beds per 1,000 population in the next two years, over 40,000 beds must be added. Ministry of Health s Strategies and Budgets In 2013, there was a substantial increase in the healthcare budget from SAR 30 billion (US$ 8.2 billion; 6.3% of total government budget) in 2008 to SAR 100 billion in 2013 (US$ 27.4 billion; 11% of total government budget). Based on NCB Capital s estimates, this expenditure is expected to increase to SAR 174 billion (US$ 47.7 billion) in Dr Abdullah Al-Rabeeah, the Minister of Health of Saudi Arabia has announced this August that 10 hospitals are to start operating within the next few months in different parts of the Kingdom. The ministry is currently working on 138 more hospitals, which once completed, will increase the total bed capacity of the country's healthcare system by around 44,000 beds. In the ninth development plan, the government aims to achieve a hospital beds-to-population ratio of 3.50 beds per 1,000 by The healthcare needs in Saudi market have grown due to high prevalence of diabetes and cardiovascular diseases However, the country has witnessed a dramatic shift in the disease profile of its citizens, with a high increase in lifestyle-induced diseases. One of the Ministry s main task will be to educate and prevent diseases such as diabetes and cardiovascular diseases. Current and Future Projects The Ministry of Health is developing five Integrated Medical Cities intended to offer high quality healthcare services for the populace of the Kingdom. These cities are expected to add 6,200 beds in the Kingdom. Ministry is expected to spend SAR 15.1 billion (US$ 4.1 billion) to develop 22 new health projects throughout the country, which will include construction of 19 medical complexes, including hospitals and three healthcare facilities for mentally disabled and autistic children. 2 Saudi Arabia s largest medical project, and also the largest medical project in the GCC, is the estimated US$ 6.7 billion King Abdullah Bin Abdulaziz project for the development of Security Forces Kingdom is heavily relying on imported medicine and medical equipment, allowing higher return for solution providers Medical Complexes, which comprises two separate medical cities for security forces that are being developed in Riyadh and Jeddah on behalf of the Kingdom s Interior Ministry. The third referral specialist medical city in the country after King Fahd Medical City and King Fahd Specialist Hospital in Dammam, the King Abdullah Medical City in its design phase project will cover an area of 350 hectares and cost an estimated US$ 1.2 billion. The capacity of the primary five- 2 Healthcare Overview - Kingdom of Saudi Arabia, 2013; Colliers International 2

3 story hospital building will be 1,500 beds. The Tabuk Province has undertaken health projects worth SAR 2.1 billion (US$ 575 million). The projects are to raise hospital capacities to nearly 2,475 beds. Tabuk Province is also set to witness the addition of 1,400 beds with the opening of the King Abdullah Medical Complex and two hospitals in Dhuba and Amlaj, with a capacity of 100 beds each at a cost of SAR 400 million (US$ 110 million). 13 new medical centres are currently under construction at a cost of SR 50 million (US$ 13.3 million) and another 17 medical centres are in the pipeline for the region. Other health facilities include a 200-bed gynecology and maternity hospital at a cost of SAR 409 million (US$ 112 million), specialised centres within the King Abdullah Medical Complex, including a 100-bed cardiac centre at a cost of SAR 120 million (US$ 32 million; under award), the regional centre for blood banks and poison centre at SAR 60 million (US$ 16.5 million; under award), a dental centre at SR 20 million (US$ 5.5 million) and a diabetics centre costing SAR 7.5 million (US$ 2 million). With an overall bed capacity to reach 1,000, King Fahad Specialist Hospital has been allocated SAR million (US$ 79.2 million) for operation, maintenance and medical supplies. How to do Business in Saudi Arabia? The two most common ways to penetrate the market and conduct business within the healthcare sector in Saudi Arabia are a partnership with local distributors and strategic joint venture partnerships. Although several distributors operate only in the specific regions, most operate throughout the country with a base either in Riyadh or Jeddah. Distributors play a major role in registration of products, acquiring Joint ventures and contracts, introducing new products, supply, distribution and distribution partnerships logistics of healthcare in KSA. Large distributors are also are main forms or involved in after sales service and maintenance. Medical conducting a business in device manufacturers, pharmaceutical companies, furniture Saudi Arabia manufacturers amongst others typically do business through distributors in the country. Biggest distributors in Saudi Arabia include Al Faisaliah Medical, Tamer Group, Salehiya Medical Est., El Ajou Group, Ejada Systems, and Arabian Health Care Supply Company. The most effective way to approach and select a medical distributor for Saudi Arabian market is through exclusive one-to-one business meetings at the Patient Relations Symposium. All meetings between distributors and solution providers are pre-scheduled after mutual interest is confirmed. To set-up manufacturing facilities in the Kingdom it is necessary to form local joint venture partnerships, which has become increasingly profitable, due to numerous incentives introduced by the Ministry of Health and the Government of Saudi Arabia to attract foreign direct investment. These incentives include grants, land and interest free loans for extended periods. This is emphasised for local manufacturing in the pharmaceutical industry, as over 60% of drugs produced is directly bought 3

4 by the government. Other dominant forms of joint ventures include setting-up of diagnostic centre, private hospitals, clinics, obesity, dialysis, rehabilitation and diabetic centres. Healthcare Investment Initiative is a platform to introduce healthcare investments opportunities to strategic partners and investors from Saudi Arabia. Ten pre-qualified business cases in healthcare will have up to six meetings with pre-screened healthcare investors. Each investor is pre-qualified and confirmed to have a minimum investment budget of US$ 25 million, actively seeking investment opportunities and confirmed to be the decision maker for investment placement. Health IT Sector Investment in healthcare IT is expected to show strong growth in Saudi Arabia this year, as the Kingdom increases budgets for major new projects in the sector. Kingdom's IT expenditure is expected to reach SAR 15.3 billion (US$ 4 billion), a growth of 6.6% this year. There are several elements that are driving the growth of IT healthcare solutions in the Kingdom; large and affluent population that is willing to support the adoption of leading medical systems and practices, a robust ICT sector, and increasing government focus on improving the quality of life of residents and citizens. The industry is seeking to capitalise on this ideal environment to boost IT healthcare research and development. 3 A newly established data centre has already been set-up at the Saudi Ministry of Health, and will promote better health services in the Kingdom by linking 22 regional health directorates, 166 hospitals and more than 40 hospital management centres across the Arab world. The data centre will help in provision of better medical services through improved communication among government agencies and health centres. On the occasion of the centre s inauguration, the Saudi Minister of Health, Dr Abdullah Al-Rabeeah said that, The Ministry of Health has taken a major step in the development of information technology, facilitating the concept of e-government in dealing with other governmental bodies throughout the Kingdom. In recent years, the Saudi government has actively pursued the e-health National Project. Under this vision, it will undertake around 100 large-scale technical projects to provide high quality health care services in the Kingdom. To ensure successful execution of these projects, the government has employed highly Kingdom's health IT expenditure is expected to grow to US$ 4 billion this year dedicated and talented professionals. The project will allow the government to monitor and support the patient s health according to the e-health system s stringent criteria. The e-health National Strategy strives to improve healthcare services by providing better patient care, establishing effective connectivity between all hospitals, linking them to a national database, facilitating patient referrals and promoting Performance Measurement Program. The health strategy is expected to lead the way for integrated healthcare services across the Gulf through the introduction of information technology. 4 3 Thomas Reitmayr, Vice President -Business Development, CGM CEE 4 Arabian Gazette 4

5 To be successful in the countries of the Middle East, solution providers need to understand the scope of the local requirements, customise their systems to meet these requirements, and train a local technical staff that can support these complex systems. As the market for healthcare imaging and IT systems matures and becomes saturated in the US and Europe, the opportunity for business growth is in the emerging economies like Saudi Arabia. National e-health program set aggressive goals to double the number of beds, add another 50 new hospitals and connect them all seamlessly, with every provider using a unified medical heath record by The country is making major investments in setting up a health information exchange that allows electronic health records to exchange information for Saudi citizens, immigrants, and visitors. This effort will be accompanied by many new HIS and PACS installations and healthcare infrastructure improvements. Every effort is being made to apply the lessons learned by other countries, notably the U.S. and Canada. The very aggressive and ambitious healthcare IT effort will connect the hospitals to three major data centres, all through the Saudi Health Information Exchange (HIE). This HIE will not only function as the central repository and registry, it will also be able to run national e-health applications such as e-referrals. 5 Medical Equipment and Furniture The medical device industry is one of the largest segments of the healthcare industry in Saudi Arabia and has been showing noteworthy growth in current years, with notable quantity of hospitals announced every year. The main drivers of the growth in this industry are the increasing investments by the public and the private sectors for setting up hospitals and clinics, which will create a strong demand for medical equipment and supplies. It is also inevitable that various factors such as increasing rate of chronic diseases and rising old age population will create a substantial demand for diagnostic and monitoring devices, particularly diabetes and cardiovascular medical devices. There is substantial demand for diagnostic and monitoring devices, particularly diabetes and cardiovascular medical devices All manufacturers wishing to supply a medical device within Saudi Arabia now require Saudi Food & Drug Authority (SFDA) Market Authorisation. Manufacturers wishing to place goods in the Saudi market must now provide the SFDA with documentation that demonstrates that the device is authorised to be placed on the market. Saudi Food & Drug Authority s (SFDA) recently introduced Medical Device Regulations, part of which is the Medical Device Market Authorisation (MDMA) system which mandates the granting of a Market Authorisation License for all Medical Devices imported into the Kingdom. It has been developed in the light of the experience already gained following the introduction of this legislation into the Kingdom as the SFDA seek to enforce and achieve the objective of ensuring a regulated market for medical devices in the Kingdom of Saudi Arabia. 5 Herman Oosterwijk, AuntMinnie.com 5

6 The board of health services approves medical equipment and supplies according to the regulations set by the SFDA and the National Company for Common Purchase of Medicines and Medical Equipment (NUPCO) is mandated to purchase, store and distribute medicines and medical equipment. NUPCO is the common procurement authority in charge of stockpiling, transferring and re-exporting for the benefit of the health sectors of the government. Pharmaceutical Sector The Economist Intelligence Unit (EIU) forecasts that the MENA markets will represent a combined GDP of US$ 2.5 trillion by 2016, led by Saudi Arabia. The Saudi Arabian pharmaceutical market is the largest in the region boasting US$ 3.7 billion in There is a strong domestic demand which drives robust growth. The total pharmaceutical expenditure accounts for 2% of the GDP and makes up 18% of the total health expenditure of which 40% is public expenditure. Due to low domestic pharmaceutical production in Saudi Arabia, the vast majority of the market is provided by imports. Approximately 85% of the The Saudi Arabian pharmaceutical drugs sold in Saudi Arabia are imported. The market is the largest in the region higher than global average population growth in boasting US$ 3.7 billion in 2013 the region is making it attractive for global pharmaceutical companies to enter the market. In recent years, the government has undertaken several measures to develop a strong manufacturing base and promote the service sector in a bid to reduce its reliance on income earned through oil exports. The government is also the biggest buyer of pharmaceutical drugs as all citizens receive medicines free of charge in all governmental healthcare facilities. Procurement is done through the Central Medical Store (CMS) at National Level, also known as Medical Supply. There are existent legal provisions for companies to start working in Saudi Arabia that grant patents to manufacturers. These cover pharmaceuticals, laboratory supplies, medical supplies and medical equipment. Intellectual Property Rights are managed and enforced by King Abdulaziz City for Science and Technology (KACST). The MRA (The Saudi Food & Drug Authority) is the authority in the Kingdom for doing pharmaceutical business. The scope of responsibilities of the SFDA include marketing authorisation/registration, inspection, import control, licensing, quality control, clinical trials control and pharmacovigilance. 6