Rising demand for health care combined with the graduated introduction of the National Health Insurance Scheme (Seha) look set to boost Qatar’s nascent pharmaceuticals and medical products segment.
Health care spending in Qatar and across the Gulf region is projected to maintain strong growth for the foreseeable future, as populations increase and as non-communicable diseases generally associated with more sedentary lifestyles become more prevalent.
There are fewer than 50 manufacturers in the GCC producing medicines and pharmaceuticals and only a handful of firms focusing on medical devices and technology. Two such companies operate in Qatar, though this could change as domestic and regional demand rises, with reports suggesting that pharmaceutical sales alone in Qatar will rise 7-10% annually until the end of the decade.
Compulsory insurance scheme to drive growth
The sector will also receive a shot in the arm from the new health care scheme. The programme, which is being implemented in three stages, will see all Qatari citizens and expatriates provided with comprehensive health coverage by 2015. According to Faleh Mohamed Hussain Ali, acting CEO of the National Health Insurance Company, which is responsible for operating Seha, the programme is in its second stage. Coverage for all Qatari nationals’ basic health care needs was rolled out at end-April.
Ahmed Mohammed Al Sulaiti, chairman of Qatar Pharma, is hopeful the national health insurance scheme will not only support sales, but also encourage others to invest in the local production of medical devices, equipment, drugs and other products. Even with the scheme in its early stages, sales and activity in the sector are growing, he told OBG.
“We have already seen a noticeable increase in orders coming from Hamad Medical Corporation so this should be an indication that the amount of goods being consumed in the health care industry is on the rise,” Al Sulaiti said.
State support for expansion
The government is offering a range of incentives to prompt more local firms to break into this expanding market. As part of Qatar National Vision 2030, the state’s blueprint for social and economic development, increased support is being given to encourage the growth of industries not dependent on hydrocarbons.
Along with chemical, metallurgical, eco-friendly and high-tech industries, pharmaceuticals and health-related services have been identified as areas where there are significant investment opportunities for small and medium-sized businesses.
In late June, the minister of energy and industry, Mohamed bin Saleh Al Sada, announced the state would be offering incentives to investors in pharmaceuticals and other identified sectors, including tax holidays, exemption from export tariffs and funding support through the Qatar Development Bank.
While government support for the sector may encourage more entrants, the market is already tight. Competition from regional and international manufacturers is one factor limiting the broadening of the health and medical supplies sector in Qatar. According to Emre Anlar, CEO of local equipment and device producer Qatari German Medical Devices, domestic firms are under pressure from both ends of the market.
“We are facing severe competition from the big companies that have an established brand name, as well as from the low-cost producers from emerging markets,” Anlar told OBG.
Across the GCC, imports account for more than 90% of pharmaceuticals, equipment and medical devices, despite the increase in local production, with most products sourced from the US or European suppliers, according to Al Sulaiti.
Even with the growing opportunities presented by the Seha, Qatar is likely to remain a relatively small market, with manufacturers focusing largely on external sales. Most local pharmaceuticals and medical device production – up to 90% in the case of some lines – is exported. Saudi Arabia is the leading market, accounting for around 60% of all sales in the region.