Healthcare and Life Sciences
The first formal public health department was established in Mecca in 1925. Since then, significant progress has been made in improving population health and expanding healthcare access, yet hurdles remain. Current reforms target decentralisation of the public sector and increasing private sector participation. At the backbones of all of this reform activity is Vision 2030.
The healthcare and life sciences sector is one of the most significant sectors for the Kingdom of Saudi Arabia and is a key focus area of Saudi Vision 2030. Of the SAR 1,251 billion 2024 budget allocation, Healthcare and Social Development expenditures account for SAR 214 billion, and is the third-largest line item after general items and Military. Increasing private sector participation in the healthcare sector from 25 to 35 per cent is part of Vision 2030, which also seeks to provide free and quality healthcare to over 33 million Saudi citizens. The Vision 2030 strategic objectives include a number that are dedicated to healthcare, including targeting the privatisation of 290 hospitals and 2,300 primary health centres by 2030. Through the various Vision 2030 programs, the Kingdom seeks to introduce new strategies to fulfil public health needs through insurance-based financing and increasing private sector participation.
Saudi’s healthcare institutional infrastructure consists mainly of:
Ministry of Health (‘MOH’) – provides healthcare; promotes public health and disease prevention; develops laws and legislations concerning both the government and private sectors; regulates the industry, including monitoring the performance of health institutions; supports and conducts research; and operates healthcare academies.
Saudi Food & Drug Authority (‘SFDA’) – develops and enforces health standards to regulate the food and drug sectors, including the review, registration, classification, pricing, and monitoring of drugs, foods, herbal products, supplements, and medical devices.
Saudi Commission for Health Specialties (‘SCFHS’) – ensures effectiveness of health practitioners’ registration and classification; sets controls and standards for the practice of health professions; promotes medical research and education; and supervises and develops professional development programs through coordination and partnerships with local and international institutions.
Council of Health Insurance (‘CHI’) – oversees the implementation of comprehensive health insurance coverage, while supervising and controlling both insurance companies, and service providers.
Saudi Health Council – liaises between the multiple health sector stakeholders in the Kingdom to: prepare and oversee the healthcare strategy in the Kingdom; issue relevant regulations to ensure that hospitals run by the Ministry of Health and other governmental agencies operate appropriately; and seeks to provide health services efficiently by eliminating duplication and waste, amongst other powers.
Saudi National Institute for Health Research (‘SNIH’): In August 2023, the Saudi Cabinet announced the approval of the SNIH. The SNIH will focus on supervising and promoting the value of translational research – turning basic research into practical results – and clinical trials.
National Unified Procurement Company (‘NUPCO’) - all government health authorities are to purchase medicines and medical supplies exclusively through NUPCO.
As part of Vision 2030 and the MOH’s Healthcare Transformation Strategy, the Saudi Ministry of Health (‘MOH’) plans to migrate all existing MOH public sector providers into healthcare clusters. Originally, it was announced that these clusters would amount to approximately 20 - 30 geographically defined, vertically integrated, “Accountable Care Organisations”, serving around 1-2 million people each. These clusters are proposed to be established as “corporatized” public bodies, with substantial and defined decision rights. This strategy was drawn widely from the NHS experience in corporatizing public healthcare providers. To date, some consolidation of the clusters has been proposed and a revised vision for the cluster’s organisaiton is expected to be detailed this year.
Several health clusters have already been launched across the Kingdom, with some issuing tenders and contracts for private companies to provide consulting services to assist the formation, management, and operation of these clusters and their facilities.
The goals of decentralisation and clustering public health service delivery is to increase competition, transparency, and efficiency as health clusters compete with each other as well as the private sector for clients and health care professionals.
Under these new models of care, it is anticipated that privatisation initiatives will be accelerated as the clusters will be encouraged to transfer the ownership, management and operations of their facilities to private companies, in due course.
Saudi Arabia’s national healthcare system, where the government is responsible for both the financing of health care and its delivery, is largely publicly financed. The MOH is the largest provider of healthcare in the Kingdom, accounting for approximately 60 per cent of healthcare services, delivered at three levels: primary, secondary and tertiary. The other governmental healthcare providers (such as the Saudi Arabian National Guard and the Ministry of Defence and Aviation) provide comprehensive health services to their targeted population, usually employees and their dependents, and represent around 20 per cent of health services. The private sector provides the final 20 per cent of the healthcare services in Saudi Arabia, but we expect this to increase due to a variety of factors discussed in this chapter.
The Saudi government views healthcare as the sector with the best privatisation potential; consequently a restructure of the public sector in underway, through decentralisation and digitalisation initiatives, with the goals of increasing efficiency and reducing costs. Simultaneously, privatisation of public health services is ongoing, aiming to create a more competitive health care environment to attract investment and improve service delivery and outcomes. Saudi is seeking to make increased use of private healthcare provision and develop third sector organisations (such as charities and nongovernmental organizations) to cover gaps in the healthcare system.
We have also seen a shift towards public-private partnerships (‘PPP’) and build-operate-transfer (‘BOT’) contracts. PPP’s are one of the main pillars for driving reform in the Kingdom. An array of regulatory and legal reforms have been made in recent years to accommodate more foreign investment and PPPs.
Of particular highlight is the 2019 Private Health Institutions Law, which newly permitted foreign investors to own, operate, and manage hospitals and health centres in the Kingdom through PPPs and BOT models. While private sector contribution to publicly funded projects is not new within Saudi, it had traditionally been largely restricted to certain sectors, and not permitted in healthcare. Further, the MOH now permits foreign ownership of hospitals and medical centres, if certain foreign investment requirements are met. Additionally, the SFDA now permits foreign ownership in certain pharmaceutical establishments, excluding pharmacies; ownership of a pharmacy continues to be restricted to Saudi nationals, unless an exemption is granted.
Additionally, in March 2021 the National Center for Privatization & PPP (‘NCP’) issued the regulatory base for private sector participation and PPPs in KSA - the Private Sector Participation Law and its implementing regulations (‘PSP Law’). The PSP Law aims to increase private sector participation in infrastructure projects and in the provision of public services to citizens and residents, through PPPs and the privatization of public sector assets. All contractual relationships between the public and private sector that relate to infrastructure or the delivery of public services are covered by the PSP Law, if they meet certain parameters set out in the law.
Another highlight of the PSP Law is that it permits international arbitration as a dispute resolution forum. One of the challenges to foreign direct investment in Saudi Arabia was typically that foreign parties were unable to subject their government contract disputes to binding international arbitration. The PSP Law allows PPP contracts to specify that disputes arising out of such contracts will be referred to arbitration. The Board of Directors of the NCP is specifically provided authority to: approve the inclusion of an arbitration clause in the PPP contract; enter into an arbitration agreement to settle an existing dispute arising from the PPP project; or approve the inclusion of an arbitration agreement or clause specifying a foreign law to be the governing law for the subject matter of the dispute.
The MOH has issued a number of opportunities through its PPP program, charged with increasing private sector involvement in eight strategic areas: primary care; hospital commissioning; the construction of medical cities; rehabilitation; radiology; long-term care; home care; and laboratories.
Falling under Vision 2030, Saudi’s Privatization Program was launched in 2018 in order to identify government assets and services that can be privatized in a number of sectors, including healthcare. The Privatization Program identified nine different areas that would benefit from privatization and/or a PPP, including: the development of health centres; hospital operations; new medical cities; radiology services; rehabilitation and extended care; home care; laboratories; pharmacies; and health care logistics.
The NCP is responsible for enabling the Privatization Program, including issuing regulations, creating the strategic framework for privatisation, and advancing the government assets and services earmarked for privatisation. As discussed above, the NCP issued the regulatory base for private sector participation and PPPs in KSA - the PSP Law.
Other responsibilities of the NCP include tendering various privatization initiatives including those for: the Saudi MOH; the Saudi Health Council; and the King Faisal Specialist Hospital and Research Center. Below we highlight some of the recent tenders.
Launched in 2021 and established under the Kingdom’s Vision 2030, the Health Sector Transformation Program (‘HSTP’) was originally under the VRO of the MOH. Now, it has been established as a national program (with the healthcare related objectives of the National Transformation Program (‘NTP’) transferred to HSTP) with the goals of restructuring the Saudi health sector, ensuring continued development of healthcare services in the Kingdom, founded on the principle of value-based care.
The program also aims to facilitate citizen’s access to free health and healthcare services and insurance by guaranteeing fair and comprehensive geographical coverage across all regions of the Kingdom, expanding e-health services and digital solutions, and improving the quality of healthcare delivery. Under its priority initiatives built upon the lessons learned from the pandemic is the national e-health initiative.
Through the MOH’s Vision Realization Office (‘VRO’), the following key programs are underway:
Corporatisation of healthcare facilities – the transformation process intends to separate the service provider from the regulator. The vision is to provide healthcare services through a group of independent integrated healthcare enterprises. Each enterprise will provide comprehensive and integrated health services to certain population (Health Communities), against certain prices, and accountable based on specific indicators. Under the new system, independent state-owned enterprises would provide healthcare services, with the goal of then allowing MOH to focus on its core role of supervising, monitoring, and designing health policies;
Private sector participation – this initiative aims to establish partnerships with the private sector for the financing of capital and operational projects and increase the role it plays in the development and management of health units. Current projects include one related to medical cities and another to radiology, as elaborated, below;
Health insurance and purchasing of healthcare services – with the primary objective of achieving universal health coverage, this new strategy for the health financing system in the KSA aims to introduce a Health Insurance and Health Service Procurement Program for: 1) strategic purchase of health care services; 2) evaluation of health cost-based risks; and 3) facilitating a restructuring of KSA’s network of healthcare providers.
Health sector governance – as a result of these transformation programs, MoH will have a redefined role as the sole policymaking / regulatory body in KSA and an opportunity to review the current governance arrangements across the healthcare system and design the future model. The initiative aims to develop a comprehensive healthcare governance system that would in turn improve sustainability, accountability, and transparency within the health sector.
Workforce – the strategic planning under this initiative focuses on building the capacity and capability of the healthcare manpower and service providers in the Kingdom
a.) There is a recognised need for qualified Saudi healthcare practitioners and support staff. The increased education and training needs will be catered for domestically and internationally, potentially with links to world-renowned institutions and public-private partnerships. Furthermore, this increased need could also be addressed through management and operational arrangements with internationally recognised service providers.
E-health – the strategy aims to improve the efficiency and effectiveness of healthcare sector through information technology and digital transformation. Plans include setting up an e-health governance framework, a national health IT infrastructure, a Saudi network of telemedicine, adopting modern digital technologies to improve healthcare services, expand use of the Saudi e-Health Information Exchange, and others.
Expanding e-health services and digital solutions has be integral to the Kingdom’s digital transformation spurred forward by the pandemic. Telehealth and telemedicine service providers require a licence from the MOH prior to commencing such services. Telehealth is permitted to be provided for: a) the purpose of screening, b) medical regulation (triage), c) consultation, d) diagnostics, e) the requirement of a medical opinion, f) support of the provision of treatment, and g) monitoring a medical condition.
Influenced the rapid deployment of telemedicine services during the pandemic, in 2020 CHI announced changes in the minimum insurance policies, requiring that telemedicine services are covered by insurance companies. This mandate was extended and then formally placed into the CHI updated Basic Health Insurance Policy (Dhaman Essential) enforced as of 01.07.2022, which represents the basic level of insurance cover to be granted to the insured individual.
The Public Investment Fund (“PIF) is considered Saudi Arabia’s Sovereign Wealth Fund, a pivotal factor in achieving the Kingdom’s Vision 2030. PIF established the National Unified Procurement Company (“NUPCO”) in order to aid in localizing the pharma industry in Saudi Arabia by mandating that NUPCO is the strategic purchasing unit in the medical field. It provides procurement and logistics services to secure pharmaceutical supplies and medical devices for the Kingdom’s public health sector, with the goal of boosting the efficiency of government spending in the health sector. Only prequalified companies are invited to submit bids for NUPCO tenders. To become prequalified, foreign companies must register their company with NUPCO in addition to registering their medical products – both pharmaceuticals and medical devices – with the SFDA.
Saudi Arabia is mostly dependent on imports for its pharmaceutical requirements and there is a desire for pharmaceuticals to be manufactured locally to ensure an adequate supply. Foreign pharmaceutical manufacturers are being actively encouraged to establish plants in Saudi Arabia through public-private partnerships and joint ventures with local entities. Incentives are being offered in the form of preferential treatment in future volume tenders. As an additional incentive, foreign owned manufacturers within Saudi Arabia are able to distribute and sell pharmaceuticals within the country, whereas imported pharmaceuticals can only be distributed through a Saudi distributor.
The manufacture of medical devices and equipment is an investment opportunity for foreign investors. Currently, the majority of medical devices and equipment is manufactured abroad and imported into the country. The MOH is supporting local manufacturing by partnering multinationals with Saudi companies with the incentive of guaranteed volumes for MOH purchases and preferential treatment in future volume tenders.
As mentioned, the SFDA now permits foreign ownership in certain pharmaceutical establishments, excluding pharmacies; ownership of a pharmacy continues to be restricted to Saudi nationals, unless an exemption is granted.
Medical insurance is already compulsory for expatriates and Saudi nationals (and their dependents) working within the private sector. Citizens working within the public sector currently receive free coverage in government health care centres and public hospitals. Further, the comprehensive pilgrim’s health insurance project provides comprehensive insurance coverage in the case of accident, disaster or health emergency. Of note is that the MOH is aiming to put in place a system of universal health insurance coverage.
In 2022, gross written premiums for the insurance sector reached $14.1 billion (being SAR 53 billion, up from SAR 42 billion the year prior). Health insurance, including the compulsory and noncompulsory, remained the largest line of business with a growth rate of 26.8 per cent, according to the Saudi Central Bank.
These reforms have opened the door to privatisation across the sector and we expect a rapid increase in private sector investment in Saudi Arabia. In the short term, PPP opportunities are likely to be focused on consultancies, construction, and operation of new facilities, with the privatisation of existing public facilities following later in the coming decade. Joint ventures in the private sector are also on the rise, with a number setting their sights on acquiring and developing facilities.
