Navigating Emerging Markets: Middle East and North Africa

The Middle East and North Africa have been rocked in recent years by upheaval ranging from moderate protest to full-scale revolution, leading to a variety of changes in government with more changes to come. Medical products companies such as GE Healthcare, however, have described the region as a “hidden jewel,” citing rapid spending growth by the various government ministries, resulting in new and growing hospitals (1). On the pharmaceutical side, countries like Morocco have enacted legislation in the past decade to attract foreign investment in the country. While the Middle Eastern environment remains unsettled, the market for pharmaceutical products is still expected to grow in many countries across the region.

Middle East Health and Pharmaceutical Market Overview
Many consider the Middle East to be a group of closely related, culturally uniform states with relatively similar forms of governance and levels of infrastructure. In fact, the region known as the Middle East contains a mixture of countries with significant differences in wealth, standard of living, and healthcare system sophistication. The region, however, does share a common thread: each country struggles with balancing a shift toward modernity with strong traditions rooted in the past. This effort is particularly evident in gender disparities in healthcare.

Geographically, the Middle East is divided into two main regions: Western Asia and North Africa. Western Asia includes the Gulf Council countries of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates (UAE); these countries are considered middle-income due to the influence of oil. The Persian Plateau includes Iran, Afghanistan, and Pakistan. The Levant includes Jordan, Lebanon, Syria, and Israel. North Africa is comprised of Algeria, Egypt, Libya, Morocco, and Tunisia.

GE’s observation that rapid spending growth in the Middle East has made it a “hidden jewel” is not merely anecdotal. Qatar, for example, went from spending US$1561 per capita on healthcare in 2010 to US$1920 in 2011, and the Ministry of Health’s Primary Health Care Corporation has called for additional spending increases from now until 2022 (2). Qatar has also announced plans to introduce a form of social health insurance by 2016.

Other countries in the region, including those much poorer than Qatar, have also begun working on increasing access to health insurance. Morocco, for example, launched a program called Regime d’Assistance Medicale (RAMED) in 2012, offering economic assistance to pay for medical care to 8.5 million people (28% of the overall population) (3,4).

These two cases illustrate the vast difference in wealth across the region. The International Monetary Fund places the Gross Domestic Product based on purchasing power parity per capita for Morocco at US$5265 in 2012, compared to US$102,211 in Qatar (5,6). Still, the governments in both countries are working to improve access to care for their citizens.

In contrast, Jordan has served as a medical tourism destination for decades, but its healthcare system faces new challenges as a result of the Arab Spring. In 2010 and 2011, protests, government changes, and regional unrest led to declining medical tourist numbers (7). More recently, refugees from civil war-stricken Syria have overwhelmed the Jordanian healthcare system. Jafar Hassan, Jordan’s minister of planning and international cooperation, has expressed concern that resources in the country simply would not be enough to meet the needs of the 2000 Syrian refugees coming into the country every day (8). Jordan does serve as a major manufacturer of pharmaceuticals, exporting the majority of its drugs to other Arab countries (9).

Overall, according to the Central Intelligence Agency’s (CIA) World Factbook, the population is growing in every Middle Eastern and North African country, and is generally younger than the emerging markets of Southeast Asia and Korea. Demand for healthcare products is growing as the population increases, but demographically, this region does not have the same health requirements as
the aging populations characterizing many developed markets in 2013 (10).

Key Regulatory Considerations
Regulations vary considerably across the region. Turkey, for example, has introduced market exclusivity as part of its efforts to become a European Union (EU) member state and has introduced other reforms to bring greater consistency with the rest of the EU. Enforcement remains an issue, and the EU has rejected several of Turkey’s GMP certificates.

The Pharmaceutical Research and Manufacturers of America (PhRMA) has flagged Algeria and Lebanon as being particularly concerning for manufacturers. In a report to the Office of the United States Trade Representative, PhRMA called out these two countries as requiring review. In Algeria, PhRMA cites weak patent protection, government-mandated price referencing, and importation restrictions as barriers to market access. The lobbying group does note that it is encouraged by the Minister of Health’s announcement at a PhRMA meeting that the government would reduce the review time required for marketing authorization and increase intellectual property protection.

In Lebanon, PhRMA notes some regulatory reforms that have improved market access, but still argues that Lebanon needs to make further changes. In particular, the group cites ineffective data protection, the lack of a regulatory system to monitor and confirm bioequivalence studies, and the existence of a “grey market” for medicinal products (11).

Implications for Successful Market Entry and In-Region Partnering
Despite regional conflict and social and economic upheaval in the Middle East, it is likely that there will be a surge in demand for healthcare products and services over the next few years. Socio-economic advancement, including increased disposable income and access to modern goods and services, is leading to changes in the region’s nutritional and lifestyle habits, increasing the frequency of lifestyle-related health concerns, such as obesity, diabetes, and heart disease.

As the standard of living in the region generally improves, healthcare providers will face rising expectations for more and better quality services. These expectations, together with population growth and increasingly educated consumers (patients), will likely drive investment in hospitals and medical facilities, and increase demand for innovative drugs, healthcare services, and the latest medical technologies.

Regionally, many countries (i.e., UAE, Qatar) are setting standards that provide state-of-the-art healthcare services, not only for the growing local population, but also for expatriate workers and patients seeking high quality medical care. In contrast, other countries in the region are struggling with overburdened government-run health systems and are turning to the private sector to provide much-needed investment and expertise (i.e., Kuwait).

In light of predictions that the region’s healthcare market is expected to continue growing over the next few years (compared to the low growth predicted in the mature markets of the US and Europe), the Middle East seems like a good place to turn to for investment.

Perhaps unique to the region is the social demand to make healthcare focused on serving the needs of the population rather than strictly profit making. Zakat, the Islamic principle of charity, is the driving force behind this perspective. Regional governments are interested in supervising and regulating the healthcare sector to ensure that private healthcare players fully understand, and embrace, this concept and preserve the existing culture.

Moving Forward in the Middle East
Population growth, rapid economic growth, and a willingness to invest in capital projects will likely make the Middle East a major growth focus for the healthcare market over the next few years. Some of the biggest opportunities will likely be in healthcare infrastructure initiatives, which has already attracted GE and Siemens, both of which have large infrastructure businesses and serve as major suppliers of healthcare IT and diagnostic imaging technologies. GE recently opened their new headquarters in Dubai Internet City, as well as a production facility in Saudi Arabia to manufacture diagnostic imaging systems.

Creation of ‘free zones’ for foreign companies, including full ownership and tax benefits, are likely to attract more organizations to the region. Recent increases in foreign direct investment particularly in biotechnology research, is fueling growth in the market for biotechnology products. Leading international biotech companies, including Amgen and Genzyme, have already set up operations in DuBiotech (Dubai Biotechnology & Research Park), with smaller companies certain to join them.

References
1. N. Parmar, The National (Jan. 25, 2012).
2. F. Astorri, “Qatar Needs More Healthcare Staff, Funding,” arabianbusienss.com (June 10, 2013).
3. WHO, “Constraints and obstacles to social health protection in the Maghreb: the cases of Algeria and Morocco” (World Health Organization, October 2011).
4. “The King of Morocco Officially Launches the RAMED Plan for Medical Assistance,” The Maghreb Daily (September 2012).
5. “Report for Selected Countries and Subjects: Morocco,” International Monetary Fund (April 2013).
6. “Report for Selected Countries and Subjects: Qatar,” International Monetary Fund (April 2013).
7. “Jordan: Managing Medical Tourism,” The Oxford Business Group (Feb. 2, 2012).
8. Sen, Ashish Kumar, “Official: Syrian Refugees Straining Jordan’s Resources,” The Washington Times (Feb. 12, 2013).
9. “Pharmaceutical Industry,” The Jordanian Association of Pharmaceutical Manufacturers (August 2013).
10. CIA, The World Factbook 2013-14 (Washington, DC: Central Intelligence Agency, 2013).
11. PhRMA, “Special 301 Submission 2013,” Pharmaceutical Research and Manufacturers of America (PhRMA) (2013).

About the Author
Jill E. Sackman, D.V.M., PhD, is a senior consultant at Numerof & Associates, Inc