MED­I­CAL IN­DUS­TRY GETS A SHOT IN THE ARM

Qatar Today - - BUSINESS > VIEWPOINT -

A brief look at Qatar's med­i­cal man­u­fac­tur­ing sec­tor which is on course to ex­pan­sion and the fac­tors im­pact­ing it.

Ris­ing de­mand for health­care com­bined with the grad­u­ated in­tro­duc­tion of the Na­tional Health In­surance Scheme (Seha) are set to boost Qatar's nascent phar­ma­ceu­ti­cals and med­i­cal prod­ucts seg­ment. Health­care 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 health­care 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 health­care needs was rolled out at the end of 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 health­care 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, HE Dr Mo­hamed bin Saleh Al Sada, an­nounced that 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.

Re­gional com­pe­ti­tion

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

BY OLIVER CORNOCK The au­thor is the Re­gional Ed­i­tor of Ox­ford Business Group.

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