Analysis
Health

More GCC healthcare mergers likely as competition hots up

April 4, 2023, 10:23 AM

Public-private partnerships to transform GCC market
Healthcare sector is being disrupted by tech innovation
Challenges include heavy reliance on imports

The GCC healthcare market is set to witness more mergers, acquisitions and consolidation as competition increases, say experts.

As the sector continues to mature, public-private partnerships (PPPs) are bringing about a shift in care delivery that is likely to be transformative, according to Dubai-based investment banking advisory firm Alpen Capital.

Its research predicts that healthcare spending in the region is set to reach $135.5 billion in 2027, implying an annual growth rate of 5.4 percent from $104.1 billion last year.

“This is likely to drive competition and require organisations to establish strategic plans for value-creating opportunities, leading to the industry witnessing increased mergers, acquisitions and consolidation,” said Krishna Dhanak, managing director at Alpen Capital.

In December, Dubai-listed Amanat Holdings, a healthcare and education investment company, announced the creation of the largest pan-GCC post-acute care platform with the merger of Sukoon International Holding Company with Cambridge Medical & Rehabilitation Center.

In October G42, the UAE-based technology company, and sovereign investor Mubadala merged their respective healthcare businesses.

Jan Schmitz-Hubsch, a partner with consultancy firm Strategy& and leader of its healthcare practice in the Middle East, told AGBI: “The healthcare sector is undergoing rapid transformation and consolidation, with an increasing number of mergers and acquisitions taking place.

“This trend is driven by several factors, including the need for cost efficiencies and better access to new technologies and capabilities.

“As healthcare continues to become more digital and patient-centric, health tech innovation presents significant opportunities for growth and disruption in the industry.”

Alpen Capital said growth in the GCC healthcare sector will be driven by a rise in the region’s ageing population, improving economic activity, increased focus on preventive care and mandatory health insurance.

“While digitisation and public-private collaborations have made an impact, the resurgence in demand for elective surgeries, a burgeoning medical tourism industry, and an intrinsic demand for treatment of non-communicable diseases are likely to support growth,” said Sameena Ahmad, Alpen Capital’s corporate affairs managing director.

“We anticipate that the region will offer an array of investment opportunities on the back of privatisation initiatives and increasing adoption of technology.”

However, the industry faces challenges as it remains reliant on foreign workers while the region’s dependence on imports exposes it to global price fluctuations in cases of supply chain disruptions – one of the reasons why the cost of healthcare services in the GCC has continued to rise.

The sector is undergoing significant digital transformation and is a key focus area for GCC governments.

Regulatory authorities, in collaboration with private institutions, are investing in smart technologies to diversify the provision of healthcare services.

Future focus is likely to be directed towards value-creating opportunities, with larger players targeting small to mid-sized players as well as tech-enabled service providers, said Dhanak.

Schmitz-Hubsch said: “Telemedicine, digital health platforms, and AI-enabled diagnostic tools have the potential to revolutionise how healthcare is delivered and accessed.

“Additionally, emerging technologies like blockchain and genomics offer exciting possibilities for enhancing healthcare quality and outcomes.”

According to Alpen Capital, the UAE is likely to witness the highest growth rate in healthcare spending of 7.4 percent.

The UAE and Saudi Arabia are the two biggest markets in the GCC, set to make up nearly 80 percent of its spending in 2027.

Between 2020 and 2022, the GCC is estimated to have added 1,846 hospital beds but is likely to require 12,207 more beds by 2027 on top of the 2022 total capacity of 133,731.

Again, Saudi Arabia and the UAE are set to see the greatest demand of 8,197 and 1,584 new hospital beds respectively.

Alpen’s research found sizeable infrastructure investment programmes by GCC nations and increased purchasing power are expected to further drive growth.

Governments are also encouraging the involvement of private players through the PPP model as part of their long-term strategies aimed at capacity expansion.

Five GCC healthcare trends to watch

By Dr Rishi Pathak, global director, healthcare & life sciences, Frost & Sullivan

MedTech domestic manufacturing will gradually expand in the GCC region, driving the diagnostic and patient monitoring devices market growth to 9-10 percent.
GCC countries will witness 30 percent of hospital investments in digital health infrastructure over the next decade.
Focus on localisation alongside expedited drug approval in the GCC will attract greater investments from pharma multi-nationals.
Further bolstering of the use of artificial intelligence in precision imaging for diagnostics and therapeutics.
As in vitro diagnostics moves towards decentralised testing, there will be an increasing demand for respiratory pathogen panel testing, which involves screening numerous bacteria and viruses from a single sample.