Exploring Middle Eastern healthcare markets: A new frontier of opportunities?

The global medical device markets will reach approximately US$380 billion in 2015. Although the Middle East represents a tiny fraction of this total, most of the countries in this region are heavily reliant on medical device imports and some have serious plans to improve healthcare for citizens...and the funds to make it happen.

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.

The increased role of the private sector has the potential to introduce some considerable advantages: 
•    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
•    Helping government services operate competitively with the private sector

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.

Factors contributing to growth 

• 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)  

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 more than 70% of the healthcare workforce is comprised of expats.

Saudi Arabia and UAE 

Saudi Arabia (KSA) is by far the largest market. In 2014 KSA funded 11 new hospitals, 11 new medical centers and two medical complexes, on top of the 130 hospitals and healthcare centers already under construction, thus doubling capacity over a period of five years. 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. 

The UAE is the second largest market in the region. 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 School, Johns Hopkins and the Cleveland Clinic). This approach proves to be a successful attempt to establish a regional medical hub that is visited annually by approximately 1.8 million patients.

Other Middle East markets 

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. These markets obviously have ongoing issues with civil unrest as well. 

GCC: one region, different ways of doing business

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 may remember that a large number of Middle Eastern hospitals were managed by US hospital management companies and purchasing decisions were a bit biased. In addition to the installed equipment, hospitals had back rooms 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. Still, purchasing procedures can be bureaucratic.

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.

Want to learn more about specific markets in the Middle East? We have a variety of medical device market intelligence reports available for Saudi Arabia, UAE, TurkeyEgypt and many other markets worldwide

A special thank you to medical device business intelligence provider TforG for providing much of  the information contained in this article.

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