Iraq. Pharmaceutical Market Perspectives 2013

The next big medical market

Iraq is set to become an exceedingly attractive healthcare investment destination in the long term as the Government continues to increase funding for healthcare infrastructure development and medical training and services on the back of growing oil revenue. This is expected to spur huge demand for medical equipment and services and attract foreign interest in the country’s healthcare market estimated to be worth some US$10-12 billion by 2014. However, numerous challenges remain, not least of which is the sectarian violence which continues to flare up sporadically. Middle East Health looks at the state of heath in Iraq by outlining key points discussed in the new 2013 Iraq Healthcare Sector Outlook report by Geopolicity.

The Iraq Government has expressed its commitment to improving the healthcare sector through increased investment in funding, training and infrastructure development. This in turn is expected to spur huge demand for medical equipment and services. The country is not short of money. The healthcare budget was increased to US$6 billion in 2012 from $4.5bn in 2011 and $3.8bn in 2010. These increases come on the back of strong GDP growth – forecast at 14.7% for 2013.

The Government plans to triple oil production between 2012 and 2017/18 (to 8-8.5 million barrels per day which is expected to boost funding for healthcare and push the healthcare budget over $10- 12 billion by 2014, once private financing is included.

CHALLENGES

However economically attractive Iraq may appear, a number of challenges threaten to stifle this development. These include ongoing internal sectarian violence, balancing interests between USA, Iran and Syria, and the centralisation of power.

Specifically in the healthcare sector, in the absence of a strong public health system, a private sector has emerged which includes a black market for legal and counterfeit drugs. The private sector currently accounts for 25% of health facilities providing healthcare services to almost 50% of the population. With the considerable black market trade occurring in pharmaceuticals, greater regulatory enforcements are needed which can be achieved with re-structuring plans. As such, weak regulatory oversight, especially in the private healthcare market, is seen as another key factor affecting this sector.

The number of healthcare personnel is inadequate and geographically uneven. The World Health Organisation (WHO) has estimated a doctor : patient ratio of 0.7 to 1,000, highlighting the need for recruitment of trained personnel.

Iraq also is also short of medical equipment, an issue which may take years to address. In the past five years, there has also been an increase in demand for medical appliances, medical equipment, laboratory equipment & consumables and hospital management systems.

GOVERNANCE AND REGULATION

Although there is no formal health policy document or framework in Iraq, policies are formed through laws, regulations and strategy documents. The Ministry of Health manages the health system in Iraq. However, health policy execution is also influenced by other stakeholders such as the Ministry of Finance (budget), Ministry of Planning and Development Cooperation (capital budget), Ministry of Higher Education (training of health personnel) and the Ministry of Municipalities and Public Work (water and sanitation).

KIMADIA (the State Company for Marketing Drugs and Medical Appliances) oversees the import and distribution of pharmaceuticals, medical appliances, laboratory equipment & consumables, and medical equipment for all public healthcare facilities. The preferred means of market entry is usually through a joint venture with a local company or a “scientific office”.

There are no regulations on the import of medical appliances and no requirement of qualification of dealers. Imported pharmaceutical products and other technologies are subject to pre-shipment inspection by KIMADIA, a function that is currently outsourced to two foreign companies. All products are subject to quality testing, including local products, by the National Centre for Drug Control and Research (NCDCR) and the Central Public Health Laboratory, before they are released for distribution.

SAMARRA (the State Company for Drug and Medical Appliances) and NINEWA (the State Company for Drugs Industry and Medical Appliances) produce drugs to meet domestic demands. GlaxoSmithKline is setting up a production plant in the country in partnership with an Iraqi company, Modern Drug Industries. Public health funding

Public funding accounted for 80.5% of health spending in 2010. Private funding and International Donor Support were 18.7% and 0.8%, respectively. The public health workforce consumed 47% of MOH budget in 2010.

One area where MOH has made great gains is in increasing doctor salaries, which are roughly US$1,000 a month for starting doctors and go up to US$2,500 to US$3,000 for doctors with experience. The continued growth of dual practices suggests that while major gains have been achieved, doctors are still not making sufficiently competitive salaries since the cost of living in Iraq is also rapidly increasing. While a competitive salary will depend on the region of service, one estimate placed the necessary doctor salary for someone with moderate experience (7-8 years) at US$5,000 a month. There is also no performance-based merit pay system in place, although the MOH has apparently recommended this, according to the report.

New service delivery model

In line with the move toward devolution of power, Iraq’s current healthcare system is gradually evolving from a state-centric approach in healthcare provision to a hybrid approach that includes a combination of both public and private provision. The sector is also moving away from a specialist model centred around hospitals to the primary health care model, including greater focus on promotive health.

Under this model, one or more family medicine organisations and their branches will provide preventative, diagnostic and curative services for a population of about 20,000. District health offices will lead health promotion.

This model will need an increase in physical facilities to reach the 2020 goal of:
- 2,000 family medicine organisations
- 100 general hospital organisations
- 20 tertiary services organisations

Under this proposed model, the health workforce of around 340,000 would be developed to counteract the current lack of skilled personnel. The population of Iraq is projected to reach 40 million by 2020/21 and the new service model reflects the need to serve such a demographic.

The next level of care will be delivered by General Hospital Organisations (GHOs), who will provide 24/7 emergency and referral services to a minimum of 400,000 people/GHO.

Iraq stands at 165 in the World Banks’ global ranking of 183 economies on the ease of doing business. While this ranking is indicative of the current business environment in the country, it is not entirely conclusive on the regulatory regime defining Iraq’s health care and pharmaceuticals industry in terms of registration, licensing, inspection, promotion and clinical trials, as well as selection, procurement and distribution of supplies, according to the report.

While the government is actively promoting foreign direct investment (FDI) through a set of benefits set out under the Investment Law No. 13 (2006) and its 2009 amendment, regulatory constraints, state-sanctioned monopoly in the pharmaceutical sub-sector, bias towards local providers, perceptions of corruption, political instability and unreliable national health data continue to constrain both Greenfield and Brownfield FDI. However, the progressive liberalization of the trade regime towards WTO standards and greater openness of public procurement options and processes indicates the beginning of a more open healthcare market and national trading regime, with substantial implications for competition.

Adapted from the 2013 Iraq Healthcare Sector Outlook report by Geopolicity

Source: Middle East Health