The health care sector in Saudi Arabia receives an average of 16.5% of the government’s annual budget, reflecting its importance to socio-economic development. The Covid-19 pandemic placed significant pressure on health care systems worldwide, yet the intensified throughput allowed governments to identify weaknesses in their health services and supply chains. Saudi Arabia’s substantial sovereign reserves have seen it emerge from the worst of the pandemic in a strong position to remedy the vulnerabilities exposed by the unprecedented events of 2020-22.
Prior to the pandemic the Saudi health care sector was undergoing a major overhaul. It is one of the areas of the economy strategically identified to propel the Kingdom towards the realisation of the goals of Vision 2030 – the government’s overarching economic development blueprint. Increased privatisation and growth in health insurance coverage and premium were complemented by a drive to expand local pharmaceuticals manufacturing, and raise the value profile of medical supplies and equipment produced in-country.
Moving forwards, the government plans to increase efforts to create an integrated, high-quality, value-based health care system. Public-private partnerships (PPPs) are targeted at strengthen specific areas of health care infrastructure, while investment in research and development capacity is set to increase.
Structure & Oversight
Traditionally, the Ministry of Health (MoH) has been responsible for regulating, providing and funding health care in Saudi Arabia. As of mid-2022 a new governance structure was being implemented to facilitate the sector’s modernisation.
In June 2022 the Cabinet approved the formation of two new entities to which the MoH will transfer significant responsibility. Day-to-day health care operation and provision will be carried out by the Health Holding Company (HHC). The HHC will effectively take ownership of 20 new health care clusters that will operate as individual subsidiaries and offer primary, secondary and tertiary care services. Those clusters will be spread throughout all regions of the Kingdom in a bid to increase access to health care for the entire population. Each cluster will have either a medical city, a general hospital or a specialty hospital. Meanwhile, the National Health Insurance Centre will assume responsibility for the annual health care budget, and the entity will pay for and purchase health services provided by subsidiaries of the HHC. This separation of roles enables the MoH to focus solely on regulating and supervising the public and private health sectors.
Operations
Various other public and semi-public entities play significant roles in sector operation. The National Unified Procurement Company procures and supplies pharmaceuticals, equipment and other consumables for publicly operated health care facilities and services; the Saudi Food and Drug Authority (SFDA) regulates the import, licensing and distribution of food products, medicinal drugs and medical equipment, and sets price limits for such items; the independent but government-owned Cooperative Council of Health Insurance regulates the health insurance segment; and the Central Board for Accreditation of Healthcare Institutions (CBAHI) develops the standards against which the quality of health care facilities and services are measured.
The public health care system is open to Saudi citizens and public sector workers. Its constituent services – such as general practitioner appointments, hospital and dental treatments, and prescription medicines – are available free of charge. Non-citizens must pay for health care services from private providers.
According to the most recent MoH data available, of the 504 hospitals in the Kingdom in 2020, 287 – or approximately 56.9 % – were run by the MoH, making it the primary health care provider in Saudi Arabia. The public sector accounted for a further 50, or around 9.9%, of those facilities with other public entities, such as the Ministry of Interior and the Ministry of Education, each independently governing a number of hospitals. The remaining 167, around 33.1%, were privately owned. In the same year, 73 MoH and 110 private hospitals held CBAHI accreditation, representing 25.4% and 66% of the total number belonging to each denomination, respectively.
Guiding Strategies
The National Transformation Programme (NTP), now in its second phase ( 2021-25), was launched alongside Vision 2030 in 2016 to provide a detailed cross-sector roadmap guiding progress towards Vision 2030 goals. It contained multiple targets for the health sector. These revolved around increasing job creation, raising the number of Saudi nationals employed in the sector, boosting private sector contribution to national health expenditure from its 2016 level of 25% to 35% by 2020, expanding physical and digital infrastructure and accessibility, and raising service standards.
The MoH and other public entities, such as the SFDA and the Ministry of Investment, were tasked with launching initiatives to achieve said goals. A number of Vision Realisation Programmes (VRPs) were also launched to advance progress towards Vision 2030. The updated VRP for the health sector was released in 2022, providing a strategy more relevant to post-pandemic Saudi Arabia. It was built around four key objectives: to facilitate access to health care services, raise the quality and efficiency of health services, promote health risk awareness and disease prevention, and enhance traffic safety.
Positive Indicators
Between 2016 and 2020 the total number of hospitals rose from 470 to 504. During that same period, the number of hospital beds per 10,000 inhabitants rose from 22.3 to 22.4 beds. In 2016 the sector employed 89,675 physicians; 180,821 nurses; 25,119 pharmacists; and 107,323 allied health professionals. By 2020 those figures had grown to 114,958; 196,701; 27,529; and 123,793, respectively. The proportion of Saudi nationals employed in those professions rose by 11% over that period, accounting for 45% of physicians, 43% of nurses, 35% of pharmacists and 81% of allied health professionals by 2020. In addition, by April 2021 the private sector’s contribution to Saudi health care expenditure had risen to 40%.
The economy-wide focus on the digitisation of public services during the 2016-20 phase of the NTP placed the sector in good stead at the onset of the pandemic, enabling a shift to online provision of many health services, and providing the digital infrastructure required to monitor and mitigate the spread of Covid-19. Despite established preparedness, the number of digital applications related to health services in the Kingdom continued to grow and, as of mid-2022, has more than quadrupled since the pandemic began.
“The digital transition underpins the health sector’s growth and development,” Tarek Othman Al Kasabi, chairman of Dallah Health, told OBG. “The pandemic has helped accelerate this trend. Now there are multiple ways customers can interact with their health care provider online and through smartphone applications. Patients demand this, and doctors are adapting to the rapidly changing situation.” In February 2022 the MoH announced the opening of the world’s first fully virtual hospital, connecting 130 of the Kingdom’s health care institutions via a live digital network, further underlining the prominent role digital health care will play in service provision moving forward.
Gaps Exposed
The above indicators demonstrate solid progress towards the goals of the NTP, while the unforeseen outbreak of Covid-19 makes the preceding focus on transformation all the more timely. Indeed, the government’s response to the pandemic has garnered positive recognition from international health organisations and other entities. In response to the pressing need to treat Covid-19 patients and restrict the spread of the virus, the government opened the public health system to the entire population. Resources were redirected away from primary care facilities and services, while hospital beds were largely reserved for Covid-infected patients. With medical professionals spread across the primary health care system, people needing care for non-Covid-related sickness faced delays in receiving treatment or consultations, and in some cases their conditions deteriorated, causing patients additional distress and placing further strain on government finances.
A 2021 Economist Intelligence Unit report on Saudi Arabia’s preparedness for and handling of the pandemic highlighted a need for more physicians and infectious disease specialists. According to the report, there is a need for better distribution of human resources, both geographically and across the different areas of the health care system, particularly the primary care segment. Indeed, in 2021 Saudi Arabia housed 11 health care professionals per 1000 inhabitants, half the average number for G20 countries, while the number of physicians in the Kingdom was 40% lower than required. Looking ahead, the continued recruitment and training of qualified health professionals is a major priority for policymakers.
Public Expenditure
Health care is a priority sector in Saudi Arabia, traditionally receiving the third-largest portion of annual government expenditure, after education and defence. The 2022 budget saw health care and social development allocated $36.8bn, equal to 14.4% of total planned government expenditure. That figure reflects a 27.7% decrease from the $50.9bn allocated to the sector in 2021. Reducing government expenditure through increased privatisation is central to Vision 2030; however, such a significant drop between 2021 and 2022 was likely due to the easing of pandemic stresses during that period, reducing the need for emergency public funding.
During the second phase of the NTP and under the guidance of the new Health Sector Transformation Strategy, the sector’s long-term goals remain largely the same. The aforementioned structural changes, designed to facilitate the corporatisation of the sector and the creation of an efficient, value-based system, have been in the pipeline for a number of years. Yet the pandemic has shown the government where it needs to focus its investment. In 2021 it announced that, in addition to annual budget allocations, it would spend $66bn on upgrading health care infrastructure and service provision by 2030, with the improvement of access not only to health care, but the correct type of health care services and facilities a priority. The remit for the newly formed HHC includes developing capacities and facilities for oncological, cardiac, kidney failure, stroke, critical care and serious injury treatment services, while the expansion of digital and virtual health care is also a priority. Therefore, a significant portion of the planned investment will be channelled into these areas.
Meanwhile, the Public Investment Fund (PIF), the Kingdom’s sovereign wealth fund, announced in August 2021 that health care is one of 13 sectors targeted for development in its 2021-25 investment strategy. The PIF stated that it would back innovations capable of enhancing sector performance and capabilities, facilitating the localisation of pharmaceuticals production, empowering the private sector and creating employment opportunities for Saudi nationals.
Lifestyle Awareness
Increased average disposable income in Saudi Arabia has given rise to more sedentary lifestyles and less healthy dietary choices, subsequently increasing the prevalence of non-communicable diseases (NCDs), placing further strain on government finances. Around 68% of all mortality in Saudi Arabia is caused by NCDs, and in 2020 between 25% and 35% of the health care budget was spent treating diabetes, obesity and cardiovascular conditions. In 2021, 33.7% of the population was obese, while 68.2% was overweight. The diabetes prevalence rate is around 18%, which is well above the 9% global average. The mortality rate relating to cardiovascular complications among type-2 diabetes patients in the Kingdom is 52%. Furthermore, 15.2% of Saudi adults suffer from hypertension, while 40.6% are borderline.
The government is attempting to raise awareness of lifestyle-related NCDs and has unveiled various initiatives under its Quality of Life Programme – another of the VRPs. National Walking Day and various walking initiatives have been implemented to address the fact that less than 20% of the population adheres to international physical activity recommendations. During the lifespan of said challenges, citizens are able to record and log weekly walking activity through the MoH’s Sehhaty app, with rewards extended to those recording the highest total steps.
Promoting diet awareness is also a priority, with increased taxes being implemented on sugary drinks, front-of-pack food labelling and educational programmes. Through these and other initiatives, such as encouraging more frequent health checks, implementing advanced technologies like artificial intelligence and tele-ophthalmology in health care provision to facilitate earlier diagnosis, and promoting health-related wearable technologies, the government aims to achieve a 0% rise in the diabetes mortality rate by 2025 and reduce its prevalence to 10% by 2030. Smoking is also a concern, and the government aims to lower the percentage of smokers from around 22% of the population in 2021 to 5% by 2030.
Private Investment
The health care sector is open to 100% foreign business ownership, and incentives are offered to multinationals interested in establishing a headquarters in the Kingdom. High funding requirements have proven a deterrent for some investors. Technical standards, regulations, and performance and localisation requirements also present challenges; however, for investors with access to the necessary capital and who are prepared to cooperate, opportunities abound in the dental, digital health, insurance, medical devices, pharmaceutical and biosciences segments. The government believes that once the 20 health clusters are operational, visits to primary health care centres will double. Thus, the targeted privatisation of 2300 primary health facilities should be of interest to foreign health care providers, particularly in light of the World Bank’s estimation that the Saudi population will rise from 35.9m in 2022 to 45.1m by 2050. In 2021 investment opportunities in 74 MoH primary health centres were announced, with an estimated total value of $266m.
In March 2019 the government revised the Private Health Institutions Law to allow foreign investors to own hospitals through build-operate-transfer PPPs. The government is targeting the privatisation of 290 hospitals. More recently, in September 2021 the MoH announced it had entered into partnerships worth over $3.7bn with private companies for the construction and operation of hospitals, medical cities and primary health centres. In December of that year the National Centre for Privatisation released expressions of interest in the King Faisal and the Prince Mohammed bin Abdul Aziz medical cities, which will serve the southern and northern regions, respectively.
Life Sciences
Insufficient intellectual property (IP) rights legislation saw Saudi Arabia placed on the US Trade Representative’s Special 301 Priority Watchlist in 2018. However, the government’s aim to transform the Kingdom into a regional innovation centre, and increase private investment in local pharmaceuticals and biotech prompted regulatory reform, with the Saudi Authority for Intellectual Property announcing a new IP strategy in 2021, and the Kingdom was removed from the list in 2022 (see Innovation chapter).
Enhanced protection, the government’s willingness to form cooperative partnerships and the opportunities presented by the GCC’s largest consumer market are encouraging pharmaceutical multinationals like Novartis, Merck, Johnson & Johnson and GSK to establish or expand their involvement in the Saudi life sciences sector. Furthermore, the SFDA’s drive to speed up licensing processes for medicines and medical technologies has made products available in Saudi Arabia shortly after they are approved in the US – and sometimes before they reach the EU, making the Kingdom a priority market in launch sequences.
Recent investment in local pharmaceuticals manufacturing was beneficial during the pandemic (see analysis). Furthermore, a new medical biotech strategy, announced in 2021, aims to turn Saudi Arabia into a regional centre for medical trials, and biotech innovation and manufacturing. This necessitates significant investment to bolster research capacities and infrastructure. The new biotech strategy seeks to cultivate a regulatory environment allowing leading research centres, such as the King Abdulaziz City for Science and Technology, the King Abdullah International Medical Research Centre and multiple universities to spin off biotech companies that can focus on taking innovations from concept to market and which can be absorbed by larger companies.
Meanwhile, medical technology multinational companies like Boston Scientific, Medtronic and Becton Dickinson have adopted the Kingdom as an early launch market for the latest medical devices and data-driven digital solutions. In 2017 the value of the domestic medical technology market was $2.3bn, and it is expected to reach $3.9bn by 2023, representing compound annual growth of around 9.5%.
Outlook
The sector’s recent rapid transformation has already paid dividends by better preparing the Kingdom for the challenges of the pandemic. Moving forwards, the high level of investor interest shown in both medical service provision and multiple areas of the life sciences industry is due in large part to the Saudi government’s proven ability to listen to its existing and potential partners, and exact significant positive reforms – creating a safer, more profitable environment for all interested parties.
Attracting the sector’s leading multinationals is also encouraging knowledge and skill transfer, further boosting human capital capacities. Heavy investment in digital technologies and physical infrastructure has increased accessibility, efficiency and value for patients. Meanwhile, the focus on preventive measures in relation to NCD prevalence should benefit the sector and the population in the medium to long term.
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