Although imports currently represent 90% of the market, the Saudi government is encouraging development of a domestic manufacturing base for medical devices and instruments.
Curt Cultice and and Linda Abbruzzese
Saudi government initiatives and lifestyle trends continue to drive Saudi Arabia's healthcare market to be the largest in the Middle East. While the government accounts for nearly 80% of healthcare expenditures, privatization is creating new opportunities for U.S. businesses in specialties such as medical facility construction, hospital management and operation, information technology, education and training, medical devices, pharmaceuticals, and more. In the following Q&A, senior commercial specialist Anwar Shaqhan, U.S. Consulate General, Jeddah, Saudi Arabia, discusses these opportunities. Shaqhan is part of the U.S. Commercial Service's worldwide network of 108 offices across the United States and in U.S. embassies and consulates in more than 75 countries that help U.S. companies export.
Learn how to meet tough regulatory requirements and design devices hospitals will actually buy at the MD&M Minneapolis Conference on September 21, 2016.
Q: Why should U.S. healthcare firms consider doing business in Saudi Arabia?
A: The Saudi healthcare sector is the largest in the Middle East. Healthcare and education remain top priorities for the Saudi government, representing about 44% of government spending. In 2015, budgeted expenditures in the healthcare and social affairs sectors totaled $42.67 billion, boasting a 48% growth compared to 2014 figures.
The following are examples of trends in Saudi Arabia's healthcare market:
- Greater awareness of health issues and a growing need for healthcare services are sustaining a strong market for medical equipment. The Saudi market for medical devices is estimated at just under $2 billion and is estimated to grow 10% annually.
- The 2015 Saudi budget included funds for the construction of three hospitals, three blood bank centers, 11 primary healthcare centers, 10 comprehensive care clinics, and five tertiary-care medical cities, which fall under the Ministry of Health's 10-year development plan, which runs from 2010-2020.
- The Saudi health information technology market lies between $500 million and $1 billion. The Saudi government has taken several significant steps to create a national eHealth network. A two-phase, 10-year plan to modernize and expand the Integrated and Comprehensive Health Program has been implemented. This alone is expected to connect more than 3000 government-managed health-care facilities by 2020.
U.S. Medical Exporter Sees Growing Market in Saudi Arabia, Kuwait
Techno-Aide is a Nashville, TN, firm that designs, manufactures, and distributes high-quality radiology accessories and protective apparel around the world. Starting from its humble beginnings 46 years ago on a kitchen table, the company has grown to 50 employees, with much of this growth attributed to exports.
Among the firm's key markets are Saudi Arabia and Kuwait. To start its expansion into the region, Techno-Aide partnered with the U.S. Commercial Service, the export promotion arm of the U.S. Department of Commerce. The U.S. Commercial Service in Nashville, consulting with colleagues at overseas U.S. embassies, helped Techno-Aide meet requirements for importing healthcare products into Saudi Arabia and Kuwait. Trade Specialists provided export counseling, guidance on market entry planning, details on tariffs, export documentation, product registration, as well as how to register with the local governments.
"With support from the U.S. Commercial Service, our company's sales in Saudi Arabia and Kuwait have boomed in the last four years and now account for 25% of all international sales," said Teresa Quirante, national sales and marketing manager for Techno-Aide. "With increasing consumer demand for quality healthcare in the Middle East, Techno-Aide is poised for even more growth in the region. Overall, exporting has made us a better company by making us more competitive while sustaining and supporting new jobs at our Nashville headquarters."
The healthcare and education budgets were the only line items in Saudi Arabia's 2015 budget to be increased. However, given lower oil prices, those sectors have seen decreased budgets in 2016. Despite such budget reduction, the Saudi government is extremely keen on improving the efficiency (and service) of its healthcare industry; thus, the Saudi government is looking for more outside help from U.S. private sector healthcare and technology partners to streamline processes.
In an effort to spur economic diversification, Saudi Arabia is encouraging development of a domestic manufacturing base for medical devices and instruments (currently, Saudi manufactures medical commodities such as bandages, gloves, syringes, and some furniture). Imports represent approximately 90% of the market, and American products account for 21% of total imports. The growth of the country's health-care and education budget in 2015 reflects the importance of these two sectors for the government.
Q: What American products are in most demand by the Saudi healthcare industry?
A: To improve the efficiency of healthcare provision and to advance the government's 2020-2030 vision, Saudi Arabia announced its great need for international expertise in hospital management and operation, health information systems and informatics, and healthcare education and training. U.S. companies are well positioned in terms of healthcare provision because of their advanced and sophisticated information technology, healthcare training, and educational systems. There has also been a large growth in demand for pharmaceuticals, medical equipment, patient beds, and monitoring systems of which the United States is a major supplier. Additionally, the United States is a major source of blood bank equipment (refrigerators) and electro-medical equipment such as x-ray, optical and dental equipment, therapeutic appliances, and orthopedic equipment.
Q: What challenges exist for U.S. exporters in Saudi Arabia's healthcare industry?
A: U.S. exporters could sometimes face logistical and administrative challenges related to acquiring visas on short notice, as well as occasional issues with customs, standards, and other nontariff barriers. U.S. companies looking to do business in Saudi Arabia need to spend time studying and learning Saudi business-related rules and regulations and business etiquette.
U.S. companies should anticipate payment delays of three to six months when pursuing government projects and tenders, which also suffer from lengthy procurement cycles, approval processeses, renegotiation attempts, and organizational hierarchies.
Q: The Executive Board of the Health Ministers' Council for the Gulf Cooperation Council releases an annual tender for billions of dollars in medical products and services. How do U.S. companies' products and services rate when compared to other countries?
A: U.S. companies face stiff but surmountable competition from Chinese and European businesses. American companies are well positioned because Saudi Arabia has adopted many U.S.-developed standards on healthcare products and services, which are applicable when it comes to accrediting hospital facilities, and medical devices, medicine, and pharmaceutical regulations similar to FDA regulations. The majority of consumers here is pro-American with a strong affinity for brand name, made-in-the-USA products, services, and advanced technologies, and because the Saudi Riyal is pegged to the dollar, the prices of American products are more stable when compared to prices for products based on the euro or the renminbi.
Q: What should U.S. exporters understand most when exporting into Saudi Arabia's healthcare market?
A: U.S. exporters need to understand the regulatory framework of Saudi Arabia. Doing business in this region requires a long-term investment and business commitment. U.S. exporters who understand the culture of doing business in Saudi Arabia and cultivate the market will likely have more success and stay longer. A few examples are GE Healthcare, Medtronic, and Welch Allen. Lastly, U.S. exporters need to establish a network and connect with many organizations, decision-makers, and other key players in order to maximize their opportunities.
Q: From your experience, what are some common lessons learned among U.S. companies in the healthcare industry when exporting to Saudi Arabia?
A: Most importantly, people in Saudi Arabia respect and respond to businesses that show commitment to the market and possess an understanding of the Saudi culture.
Q: What's the best way for U.S. companies to get started or expand into the Saudi Arabian market?
A: U.S. businesses can contact their nearest U.S. Commercial Service office in the United States or the U.S. Commercial Service in Saudi Arabia. Our trade professionals provide export counseling, business matchmaking, market research, participation in trade shows, and much more. Businesses can also take advantage of our Country Commercial Guides. For more information, visit export.gov. Also, view the U.S. Department of Commerce's Healthcare Team web site, export.gov/industry/health/, and Top Markets Report on medical devices, trade.gov/topmarkets.
Q: If a U.S. company wants to know more about the Saudi healthcare industry, what are some other available resources?
A: There are many Web sites:
- The Ministry of Health is the main source for information about the health-care industry in Saudi Arabia, its 5-year plan, and information related to the standards and regulations changes.
- More information on medical devices and pharmaceuticals can found on the FDA Web site, which contains a wealth of information related to training, licensing of products, and steps that need to be taken.
- The Saudi Arabia Standards Organization (SASO) is an important organization in Saudi Arabia. The SASO site explains what U.S. exporters need to access to ensure compliance with conformity and licenses, standards, and labeling.
- U.S. companies entering the Saudi market should be aware of reforms underway intended to diversify the economy away from petroleum. A good place to start is the Saudi Vision 2030 and the recently released National Transformation Program.
Curt Cultice is a senior communications specialist; and Linda Abbruzzese, a senior international trade specialist. Both are with the U.S. Commercial Service of the U.S. Department of Commerce.
[Image courtesy of WIKIMEDIA COMMONS]