Booz Allen Hamilton: The new Saudi Arabian healthcare market (page 1 of 3)

Most observers believe that population growth, a slowly aging society, and the conditions that affluence often exacerbates, such as obesity, diabetes, and cardio-vascular diseases, as well as cancer, will create a tremendous new demand for healthcare services.

"Saudi Arabia's healthcare system is ripe for investment opportunities," said Mr. Ziad Fares, Booz Allen Hamilton Health Expert. "The growing affluence of Saudi Arabia and the GCC region as a whole will mean that the healthcare systems of these nations will need both money and expertise from outside sources in order to cope with an aging, yet well-to-do population."

At present, the Saudi Arabian government funds most of the demand for healthcare capital and operating expenditures. However, analysts believe that government alone will be unable to continue to meet this demand. They have concluded that the only way to ensure that Saudi nationals' health needs will be met without adversely affecting economic progress is to increase private sector participation in the health care system. The Saudi government has recognized this situation, and has identified healthcare as one of the key sectors targeted in its wide-ranging privatization program.

Today, the Ministry of Health (MOH) is working with the Saudi Arabian General Investment Authority (SAGIA) to prepare the sector for this essential but difficult transition. As a first step, the two agencies have studied the best practices of the countries with the most successful healthcare systems and drafted plans that adapt these practices to the unique needs and circumstances of Saudi Arabia. The underlying goals have already been established:

• Create a stronger institutional set-up and effective regulatory framework to promote private sector investment in healthcare and the production and distribution of pharmaceuticals and medical supplies,
• Develop a business environment that will make Saudi Arabia a more attractive destination for private healthcare providers, and
• Attract investors and other partners to the Middle East's largest market for healthcare

The takeaway for healthcare providers and producers of pharmaceuticals and medical supplies is clear: the Middle East's largest market of healthcare consumers will become increasingly open to private investment.

Growth unsustainable without increased private sector participation

Between now and 2016, the population of Saudi Arabia is expected to grow by more than 20 percent, from 23 million to 30 million. Over the same period, health expenditures are expected to increase dramatically, even faster than the rate of population growth. Demand for hospital beds is likely to grow from 51,000 to 70,000, demand for physicians is likely to rise from 40,000 to 54,000 - and the number of hospitals is likely to rise from 364 to 502. There are several reasons MOH planners see such a sharp rise in health needs:

• Saudis will become older. The percentage of the population over 60 is rising, and is expected to more than double by 2020. By 2020, the number of old people is expected to grow from approximately 1 million (4 percent of the population) to roughly 2.5 million (7 percent of the population). At the same time, as incomes increase, Saudis are likely to spend an increasing amount of money on healthcare treatments, such as leading-edge therapies.

• ...But wealth will not always bring health. As most countries have learned, affluence is not an unmitigated benefit to health.