Growth Opportunities for KSA Healthcare Industry, Forecast to 2020

Amid the volatility in oil prices and dampened global economic growth due to the outbreak of COVID-19, the Kingdom of Saudi Arabia (KSA) healthcare market is expected to grow to $16.1 billion in value at 8.8% in 2020. KSA’s pharmaceutical and MedTech markets are primarily import driven, therefore the impact of COVID-19 cannot be measured in terms of incidence of COVID-19 in KSA but in terms of the disruption in the global supply chain of the EU and China, which will impact the KSA healthcare industry.

Health and social development is the key sector in the KSA government, as it holds 16.4% of the country’s budget expenditure, the third-largest share in 2020. There has been a relative decrease in the allocation of healthcare budget which can be attributed to the increase in private player participation and the focus on preventive care through various awareness programs. KSA free public healthcare system (Saudi citizens and public sector workers) is essentially funded by oil revenue which is under great strain. The rising cost of medical technologies, the changing demographic profile, the increasing prevalence of chronic diseases, and the increasing demand for quality healthcare are putting pressure on the KSA healthcare system to adopt cost-containment measures.

For KSA, 2020 will be a reality check on its National Transformation Program (NTP 2020), the biggest vision realization program of its ambitious Saudi Vision 2030. KSA’s top priorities in the healthcare sector are to enhance the role of the private sector through privatization of government healthcare services, to increase public-private participation (PPP) healthcare delivery models, to scale up medical education and training of its local workforce and to boost the adoption of digital information systems, thereby creating a plethora of opportunities for investors, pharmaceutical and MedTech manufacturers, healthcare IT vendors, and support services.

The low level of domestic pharmaceutical drug production (about 20% to 30%), coupled with the ambition to diversify into non-oil sectors (e.g., bioeconomy) will continue to make the localization of pharmaceuticals manufacturing a lucrative opportunity for KSA in 2020. In addition, the disruption of the global supply chain due to COVID-19 outbreak can create a shortage of APIs, drugs, medical products, and equipment. To reduce its dependence on imported drugs, KSA can upscale its manufacturing capacity and strive to become an alternative supplier in 2to 3 years. Government initiatives to increase local pharmaceutical manufacturing through public-private partnerships have led to the increasing collaboration between the domestic and global pharmaceutical formulation manufacturers, creating a win-win situation for both and making KSA a potential generic manufacturing hub of the MENA region.

Despite the presence of several general hospitals, there are supply gaps for several specialty areas, spurring governments to harness PPP models to build specialty clinics for gynecology, oncology, and cosmetology. Lifestyle disorders and the shift toward wellness and preventive care will boost the demand for remote health monitoring solutions that leverage Artificial Intelligence (AI) platforms. This will catapult investment toward non-hospital settings, such as long-term rehabilitation centers, and fitness and wellness centers.

The private sector has a larger role to play in filling the demand-supply gap in healthcare infrastructure and services. The increasing number of private hospitals will bridge the gap of quality and accessibility of healthcare services in public hospitals which is a major concern in healthcare delivery. The increase in investments in enterprise healthcare IT solutions and connected medical devices with AI capabilities that drive efficiencies will play a major role in the shift to a performance-based value system.

KSA will continue to hold the largest share in the MENA healthcare market. An increasingly affluent population will drive the demand for research-based branded generic drugs, connected medical devices, next-gen Imaging equipment, quality point-of-care diagnostic tests, and digital health solutions.