Iran's healthcare market growing
Iran is ranked 15th among Middle East and Africa (MEA) countries in terms of long-term investment potential—its large youth population cohort, coupled with its healthcare reforms, promise growth in the private sector and investments in the pharmaceutical, healthcare facilities and medical devices markets, according to new research from Frost & Sullivan.
With a population of 75 million people—more than 50% under the age of 35—and an enormous amount of wealth coming in from its oil and gas reservoirs, Iran's GDP is expected to grow at an average of 2.4% over the next 10 years. Iran's healthcare industry was worth $26.44 billion in 2011, and grew to $28.13 billion in 2012. Currently, healthcare out-of-pocket (OOP) expenditure is at 55%— high compared to neighboring countries. Cardiovascular diseases account for 45% of deaths, while 18% are a result of road accidents, which account for high disability and injury numbers, especially among the younger population. The third main cause of death is cancer (14%, particularly lung cancer), followed by neonatal and respiratory diseases (6%). Diabetes, osteoporosis and nutritional and psychological disorders also are on the rise. Drug addiction problems affect 3% to 5% of the population, with a correlation to HIV/AIDS cases.
Iran's pharmaceutical market was worth $3.51 billion in 2012, with a projected 13% compound annual growth rate (CAGR) through 2014, after which it will grow steadily at 8%. Expenditure on pharmaceuticals is expected to reach $4.14 billion by 2019 at a CAGR of 11%, taking inflation into account. The country produces 90% of its medicines and the Ministry of Health has put a goal of self-sufficiency within four years. Local production is focused on generic medicines, with over 70 Iranian pharmaceutical companies producing generics. But Iran's shortage of specialized medicine has opened up the doors for Indian and Chinese products.
"These lack quality and usually present side effects, highlighting the market need for high volumes of specialized medicine, preferably of European and American origin," said Uldouz Berenjforoush, Frost & Sullivan healthcare analyst. "The country is expected to turn toward high volumes of foreign imports of high-quality medicines for now."
The country's medical devices industry is import-driven and was worth $964 million in 2012. The government has been investing heavily in modernizing healthcare services and facilities. Nearly 88% of the country's medical devices are imported. Of this, 70.4% is from the E.U., mainly Germany, the Netherlands and the U.K. Continued growth is expected in the medical devices sector to address the shortage of specialized devices. This market is estimated to reach $1.05 billion by 2017.
Following the 1990 Iraq-Iran war, Iran's government saw the need for reforms, focused on increasing the number of personnel, hospital beds and facilities and improving services and infrastructure, in an effort to attract and increase foreign investments. In 2012, the physician-to-population ratio had come to one doctor per 845 people—an improvement from 1:3,120 10 years ago—and more than 90% of the population has access to healthcare services.
The government provides the majority of health insurance, although a law passed in 2001 allowed the establishment of private insurance systems. The military, National Oil and Bank Melli have their own high-quality hospitals, while wealthier Iranians enjoy better-quality private hospitals. "Private facilities are becoming more and more attractive due to the lack of efficiency in the public healthcare sector, with long waiting lines and poor facilities," said Berenjforoush. "The industry is still very young in the country, and there is considerable room for growth in this field."
Medical tourism has been flourishing in Iran, as it offers quality expertise at lower costs. In 2012, the country hosted over 200,000 health tourists, who brought over $1.5 billion to Iran, twice the amount in 2011. Health tourists come mainly from Azerbaijan, Turkmenistan, Iraq, Turkey, Kuwait, Oman, India and Pakistan, and the majority of visits are for transplant, ophthalmology, orthopedic and dentistry purposes. The Iranian government has recognized the opportunities in medical tourism, investing in infrastructure to better serve visitors. There are taxi services to take medical tourists from the border to the appropriate healthcare facility. Iran is focused on becoming the hub for medical tourism of the Muslim world, especially serving patients from the Gulf countries.
Iran's post-war healthcare industry has been improving, although sanctions have had an impact on market growth. Nonetheless, the country is striving to provide high-quality services to Iranians as well as medical tourists. It has opened its doors to private investments, especially in the medical device sector and specialized medicines.