Exploring the Middle Eastern Healthcare Markets: A new Frontier of Opportunities?

The global medical device markets will reach approx. $380 bln in the year to come and the Middle East will contribute a mere $ 3.5 bln, e.g. less than 1 % to that total. Even in the “newly applied” definition of Middle East, including North Africa (MENA) but excluding Turkey in the west and Pakistan in the east.

Still, with a market growth above the world average of around 5%, a couple of sleeping giants, another couple of countries with serious intent and plans to improve on healthcare and (still) an abundance of funds, the Middle East is an attractive region.

Rapid growth and development

The Kingdom of Saudi Arabia is by far the largest market with an estimated €1,8 bln Medical Device market. In 2014 KSA funded another 11 hospitals, 11 medical centers and two medical complexes, on top of the over 130 hospitals and healthcare centers already under construction, thus doubling capacity over a period of five years.

The second largest market is UAE (going towards $860 bln), closely followed by Iran ($800 bln).

Some of the less wealthy Middle Eastern countries like Iraq, Yemen and Syria are still struggling with low scoring healthcare indicators, shortages in healthcare professionals and infrastructure as well as outbreaks of communicable diseases.

Factors contributing to the growth in the area of healthcare include:

  • Significant population growth rates. However, access to comprehensive healthcare remains limited and the availability of health services are skewed towards urbanized areas and higher socioeconomic status.
  • Improved healthcare indicators leading to extended life expectancy. The Middle East (and surrounding areas like North Africa) has relatively young populations, a factor that has contributed to a relatively low cost of healthcare.
  • Expansion in the usage of health insurance. However, with the exception of the Gulf Cooperation Countries (GCC), most of the Middle Eastern (MENA) countries still have a high dependence on direct, out of pocket payments by households, which account for more than half of total healthcare spending.
  • Increased rates of chronic illnesses and conditions related to lifestyle changes (e.g. obesity, diabetes, cardiovascular diseases as a result of sedentary lifestyles and tobacco smoking)

The Kingdom of Saudi Arabia is likely to pursue its “one new hospital a month (on average)”strategy, but other countries like the Gulf States – in particular UAE, Kuwait, Qatar, Bahrain and Oman – may continue to catch up on the quality and capacity of Healthcare.

In spite of the appreciable progress in its efforts to improve healthcare in the region in terms of access and quality, pressure on capacity is increasing and remains a prime priority.

The GCC states will have to cope with another problem as no less than an estimated 70% of the healthcare workforce is expatriate.

Dubai Healthcare City (DHCC), the 2002 initiative by the UAE is an example of the approach to close the gap in education, quality and capacity that some countries are applying nowadays. DHCC is home to two hospitals, over 120 outpatient medical centers and diagnostic labs with over 4.000 qualified and licensed professionals. DHCC has entered into strategic partnerships with renowned academic institutions and medical boards (e.g.: Harvard Medical, John Hopkins and Cleveland Clinic). This approach proves to be a successful attempt to establish a regional medical hub that is visited annually by approx. 1.8 million patients of which an estimated 15% is from outside the country.

There are similar initiatives in the Emirates and to some extent also in the Kingdom of Saudi Arabia. Other countries, especially Iran, may prove to be worth keeping an eye on, now that the ban on US supply is potentially behind us.

Market Characteristics

Healthcare in the Middle East is mostly provided by the public sector, although local governments are taking measures to introduce programs and incentives to encourage private sector presence through public/private partnerships (PPP’s).

The increased role of the private sector has the potential to introduce some considerable advantages:

  • Helping government services operate competitively with the private sector
  • Conserving government resources by using private capital for infrastructure development
  • Improving quality and efficiency by accessing private sector expertise and experience
  • Promoting technology transfers and capacity building
  • Risk sharing

Although an increased private sector role is seen as beneficial in a variety of ways, the shift does have some difficulties attached like the need for general policy changes, changes in the organizational structure and the need to create new incentives.

Aware of the importance of meeting the increased healthcare demands that are currently taking place and are set to increase in the next few years, Middle Eastern countries are putting much effort into the expansion of healthcare infrastructure.

In most cases, expansion projects take the form of small general facilities in rural areas or highly specialized units in the main cities (which also tend to be on the small side).

The extent, to which Market Characteristics in the Middle Eastern Region differ between countries, is larger than in any other region in the world. For a long time, there was a gap between oil producing countries with very limited population, a relatively small healthcare market, countries that were less oil rich but well populated, and countries that have both. That gap has closed or is closing. Some of us may remember that a large number of Middle Eastern Hospitals were managed by US hospital management companies and purchase decisions were somewhat biased. It was also in that time that – in addition to the installed equipment – hospitals had a cellar full of “spare-equipment” to compensate for deficient technical service and a lack of spare-parts.

Nowadays, most hospitals in the Middle East have developed into professional organizations, with academically educated staff.

The only element that has survived this professionalization is the lengthy, sometimes erratic purchasing procedures. With the exceptions of the Kingdom and the GCC, the market is less conservative, willing to consider alternative manufacturers, including low cost competition. Installed base is of less importance and of impact than in other parts of the world.

Many Middle Eastern countries, especially those in the GCC, have been focusing their efforts on the expansion of primary care facilities as well. They most often take the form of small, mobile, rural clinics and are usually staffed with trained community health workers rather than physicians. These small centers also allow the GCC countries to provide healthcare access to for women, children, the elderly and other vulnerable populations.

What’s Next…

Despite some of the obvious challenges within the Middle Eastern healthcare market, recent years have shown considerable progress in terms of infrastructure development and improved healthcare indicators. Many of the governments in this region are committed to strengthening and further developing the healthcare sector. To this end, they are forming alliances and partnerships with neighboring countries.

There is of course, still a long way to go in order to keep up with demand … creating many government aided opportunities for private investors… .

 

For further quantitative information on the Middle East healthcare system and the macroeconomic climate, please look into our Business intelligence platform or order the TforG Deep Dive report for Midde East at a reduced price, containing volumes of 620 surgical procedures in 13 specialisms for Turkey – Egypt – UAE – Saudi Arabia.

About Helgert Van Raamt

Helgert van Raamt has 35 years of experience in running and setting up companies, big and small, in EMEA (and beyond).
After his senior marketing positions with Organon Teknika and Abbott Labs and four years in Venture Capital as an investment manager for US, UK and NL based funds, he joined Nellcor Europe in 1989 and has lead this company through two consecutive M&A’s (Puritan Bennett and Mallinckrodt). The acquisition by Mallinckrodt for 2.7 Billion made Nellcor the most successful Medic venture after the Second World War.
He left to set up the International Operation of Aspect Medical Systems and brought that to success. In three years it reached a revenue level of $10 million and was profitable two months after the start of the operation.
Since then (2003) he has successfully advised numerous companies about setting up internationally or cleaning up an existing international operation, both independently and as a partner for TforG Group.