CHANGING FACE OF SAUDI’S HEALTH SECTOR

Saudi Arabia 2017 | HEALTH | FOCUS: HEALTHCARE

Vision 2030 calls for the privatization of a broad spectrum of sectors, but the health sector stands out for its scores of applicable subsectors, PPP opportunities, and pilot projects.

Saudi's health industry is undergoing a huge restructuring as part of the Vision 2030 and National Transformation Program 2020. In health, more so than in most other industries, the opportunities for private investors will be as widespread as ever, ranging from general private healthcare facilities to medical insurance, increased use of technologies, training, and local manufacturing of pharmaceuticals.

Each of these services were previously managed and regulated by government bodies, most notably the Ministry of Health (MoH) and the Saudi Food and Drug Authority (SFDA). Today, this is shifting rapidly toward the private sector and clear targets have been put in place. Namely, up until 2020, the government is working toward boosting private healthcare expenditure from the current 25 to 35% of total expenditure. This projection would imply an increase in private sector revenue from SAR3 billion (USD799 million) currently to SAR4 billion (USD1.1 billion).

Speaking exclusively to TBY, Deputy Minister of Health and Director of the ministry's Vision Realization Office Dr. Khalid Al Shaibani outlined the steps already taken by the government and the challenges that lay ahead: “One of the themes of our transformation is collaboration with the private sector. We have identified more than 40 [PPP] opportunities…we have already released two out of nine major initiatives that involve clinical services provision in the country under the MoH. Clearly, as a massive health structure, we need to pilot our plan before we truly scale up and implement our plan across the board."

By “across the board," the Deputy Minister is referring to the over 365 hospitals and 2,500 primary care centers operated, and regulated, by the MoH. “That cannot be the case. We have plans in 2018 to separate this process so that the MoH will no longer provide care. The provision of care will be given to multiple corporates that will then compete with each other on the basis of quality of services and patient care, experience, and safety," he explains.

A key segment within healthcare that is expected to see widespread reform and increased private sector participation is pharmaceuticals. While there are over 200 drug producers and retailers registered with the MoH, the market remains largely dominated by European suppliers while local manufacturers hold a mere 20% market share. Yet, with the pharmaceutical sector expected to grow by 10% annually to reach USD13.6 billion by 2020, the opportunity for private investors has never been greater. As explained by Mohammed Saud Al Badr, the Managing Director of public-listed Saudi Chemical Company, which recently launched a drug manufacturing plant in Hail through its subsidiary AJA Pharma, the importance of producing medical supplies locally is not only an issue of national security, “but also a source of diversification for the economy." Several other investors from across the industry interviewed by TBY, including Sidanah and Sudair Pharmaceuticals, likewise expressed their enthusiasm for the government's initiatives to empower local private sector manufacturers and indeed outlined their own plans to expand production capabilities in light of the NTP and Vision 2030 ambitions. such, the government has taken a backseat and is allowing the private sector to shape the future of healthcare. As detailed by the Deputy Minister, PPPs are expected to kickstart this process; it is a model the government has much experience with in sectors such as transport and energy, and it ensures the state's stake in a booming industry. In some segments, such as medical equipment or technology, joint ventures will be sought with international players due to their increased R&D capabilities. In others, such as pharmaceuticals, loans and other financial incentives are being prepared to support local production.

Saudi's health sector is clearly in a transitional period towards a more privatized future. Nonetheless, all eyes remain on the government to ensure that this transition is smooth and beneficial for the state, investors, and citizens alike.